Central securities depositories

Central securities depositories Providing efficient and reliable recording and safekeeping of cash and securities

Central securities depositories ensure seamless post-trading


Settlement is the process whereby securities and cash holdings are transferred (previously physically, nowadays electronically) between sellers and buyers. This normally takes place on a delivery-versus-payment basis.

A shareholder decides to buy or sell securities and sends the buy or sell orders to their bank. The bank forwards those orders to the exchange, which executes them successfully. However, this does not mean that the securities in question have now changed hands. For this is where post-trading comes into play.

In post-trading, securities are actually transferred to the securities account at the client’s bank in return for payment. This task is carried out by the central securities depository (CSD).


Custody is the safekeeping of (settled) securities – either in intangible form (without any related certificates), as a book entry (with one or more global certificates), or in physical form (and immobilised).

A CSD, acting as a “bank vault”, is therefore respon­­sible for the safekeeping (custody) of securities and ensures that securities are assigned to their rightful owners. CSDs play an active role in ensuring that securities are settled and held in custody in the proper manner. They are therefore of fundamental im­por­tance to the stability and reliability of the financial system.

Besides their activities in securities settlement and custody, CSDs also act as a notary on the markets; whenever a new security is issued, they keep a precise record of when a security belongs to whom and when it changes hands.

The infrastructure of the securities business

Copyright: Deutsche Börse AG


Companies that are keen to obtain financing for new investments on the capital market can do so by issuing securities in the form of shares or bonds. CSDs ensure that newly issued securities are register­ed correctly and subsequently contribute to the integrity of the issue throughout the secu­rities’ life cycle.

Example 1: securities administration for the company issuing securities

CSDs are usually the first point of contact for com­panies wishing to issue new securities. They also offer their clients a wide range of additional services spanning a security’s entire life cycle: from the provision of liquidity pools through to large investor networks around the globe that assist with the clients’ financing requirements.

Copyright: Deutsche Börse AG

Special example: Xetra-Gold

Xetra-Gold® is a security that can be easily traded like an equity and allows the investor to share in the performance of the gold price
at a rate of one to one – with the option of physical delivery. The CSD responsible holds the physical gold in safe custody in its vaults.

Example 2: securities settlement for the small investor buying a security

Even if it is not immediately obvious, CSDs also safeguard the transaction for small investors by ensuring that it is administered correctly and effi­ciently in post-trading. A typical example: a private individual buys ten Volkswagen shares from their local bank at €150 per share. Once the company shares have been purchased through the principal bank, the trade has to be settled – that is to say, cash and securities change hands. CSDs ensure precisely that.

Example 3: securities settlement for the sovereign issuing a bond

A sovereign may also decide to issue bonds, termed “sovereign bonds”. This is usually to finance the budget or to carry out a specifically government-funded project. In this case too, CSDs are impor­tant, as they assist with the sovereign bond issue by acting as a notary. Subsequently, they also offer a safe place to store the bonds and support their efficient use, for instance in collateral management.

In addition, CSDs maintain very close links with central banks. A CSD’s securities holdings may be pledged as collateral for monetary policy operations at central banks, for instance.

Harmonisation throughout the European Union

The examples show that the post-trade services provided by CSDs contribute to the stability and efficiency of capital market transactions.

At the same time, however, European post-trading and in particular the securities settlement and custody system are still decentralised, as both CSDs and banks (global custodians) operate within nationally distinct legal frameworks and on different platforms.

This has always been a serious hurdle for cross-border securities settlement and generally entails higher costs.

In 2008, following years of market consultations, the European Central Bank (ECB) therefore launched the TARGET2-Securities (T2S) project, which it then concluded at the end of 2017. The aim was to create a common technical platform for securities settlement in central bank money within the European single market. In addition, in Sep­tem­ber 2014, the CSD Regulation (CSDR) created an EU-wide legal framework for central securities de­posi­tories. Together with T2S, this contributes to stronger harmonisation of European securities settle­ment systems. In future, this will lead to yet more reliability and solidity in the post-trade sector.

Clearstream – Deutsche Börse Group’s central securities depository

Clearstream, Deutsche Börse Group’s CSD, operates as a central securities depository for Germany and Luxembourg. Like other CSDs, Clearstream primari­ly ensures that cash and securities change hands
in the proper manner once a trade has been com­pleted; it is also responsible for securities issuance, administration and custody.

But Clearstream’s product range does not end there: services for investment funds, for example, are gain­ing increasing ground and clients can now have their entire fund portfolio settled, held in custody and adapted for process optimisation via Clear­stream. In light of new regulatory requirements, risk and liquidity management solutions are also becom­ing ever more important. To enable financial insti­tu­tions to handle this reliably and efficiently, Clear­stream offers its clients securities financing and lending services and collateral management services. And worldwide too.

What’s more, Clearstream is one of only two inter­national CSDs (ICSDs). Its post-trade infrastructure covers the Eurobond market and securities from more than 50 markets and almost 100 currencies. Over 14,000 issuers from more than 130 countries are part of the OneClearstream network, which provides access to investors from around the globe.

Deutsche Börse Group 

Headquartered in Frankfurt/Main, Deutsche Börse Group is one of the largest exchange organisations worldwide. It operates markets that provide inte­gri­ty, transparency and security for investors wishing to invest capital and for issuers wishing to raise capital. On these markets, institutional traders buy and sell shares, derivatives and other financial instruments in accordance with clear rules and under strict supervision.

Deutsche Börse Group is now more than just a trading venue or exchange – it is a provider of financial market infrastructure. Its products and services span the entire finance value chain – its business areas range from pre-IPO services and the admission of securities, through trading, clearing, settlement and custody of securities and other financial instruments to collateral management. It also offers IT services, indices and market data worldwide.

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