What is a Central Securities Depository?

What is a Central Securities Depository?

Peter Eisenhardt

30 years: Capital markets & investment banking

Central Securities Depositories, or CSDs, were developed in the 1960s from a crisis built on excessive trading volumes which threatened to swamp settlement systems. In this short video, Peter explains how CSDs function and their uses.

Central Securities Depositories, or CSDs, were developed in the 1960s from a crisis built on excessive trading volumes which threatened to swamp settlement systems. In this short video, Peter explains how CSDs function and their uses.

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What is a Central Securities Depository?

1 min 38 secs

Overview

Central Securities Depositories (CSDs) were developed so that the securities industry could move towards “dematerialisation” and avoid swamping the settlement systems.

Key learning objectives:

  • Describe the scope and additional features CSDs provide

  • Understand why CSDs were developed

  • Outline the examples of major CSDs

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Summary

Why were Central Securities Depositories developed?

Central Securities Depositories (CSDs) were developed so that securities remained in a single place. This is often called “immobilisation”, which eliminates the need for delivery and endless movements of paper certificates through messengers.  Ownership records are simply kept in the form of electronic book-entry.

Who holds the accounts at CSDs?

Custodians hold accounts at CSDs.

What is the scope of countries embracing CSDs and dematerialisation?

More than 25 countries across the world have moved to full dematerialisation - where paper certificates are eliminated altogether.

In the U.S., government and municipal bonds and mutual funds are dematerialised. In some countries, legal and regulatory changes are needed before physical certificates can finally be replaced.

Do CSDs provide services other than electronic book-entry?

Yes, CSDs can also provide a range of additional services including data, securities lending, custody, collateral management, and payments.

What are some examples of CSDs?

Major CSDs include:
  • DTCC - the U.S.
  • Euroclear and Clearstream - Europe
  • NSDL - India
  • CSDC - China
  • JASDEC - Japan

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Peter Eisenhardt

Peter Eisenhardt

Peter has over 30 years experience working in banking. He has held several senior positions in international investment banks. Peter is now the Secretary General of the International Council of Securities Associations

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