Press release
European Commission decision on temporary equivalence for Ireland’s Central Securities Depository welcome
Published on
Last updated on
Published on
Last updated on
Move will reassure the market that Ireland continues to be a well-connected and stable environment for investment and trading
The Minister for Finance, Paschal Donohoe T.D. and Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Seán Fleming T.D., today welcomed the decision of the European Commission to extend temporary equivalence to facilitate the continued operation of UK based Central Securities Depositories (CSDs) for European Union entities until 30 June 2021.
Today’s decision will allow the European Securities and Markets Authority (ESMA) to begin a formal recognition process of Euroclear UK & Ireland which serves Euronext Dublin (formerly the Irish Stock Exchange). ESMA recognition will allow Irish securities to continue to be settled through Euroclear UK & Ireland until this market transfers to Euroclear Bank Belgium in the first quarter of next year. The migration of Irish securities from Euroclear UK & Ireland to Euroclear Bank Belgium is a complex technical and legal project involving Irish market participants and stakeholders.
Commenting on today’s announcement, Minister Donohoe said:
“I welcome today’s announcement from the European Commission. The extension of temporary equivalence to 30 June 2021, and a recognition decision by the European Securities and Markets Authority, will now allow contingency for market participants, Euronext and Euroclear, as they aim, and are expected, to complete the remaining critical elements of their work in the first quarter of 2021 so as to ensure a successful migration of the Irish market to Belgium in the time provided.”
“With today’s added clarity on equivalence from the European Commission, it is now vital that those engaged in the CSD migration work swiftly to complete the migration project in the first quarter of 2021 as previously expected, thus allowing sufficient time for the full orderly migration of the market. Along with the various legislative actions already delivered by Government, swift action is now required from industry to reduce uncertainty and to show that the market can continue to function in even these most unprecedented of times.”
Commenting on today’s announcement, Minister of State Fleming said:
“Today’s announcement from the European Commission is welcome news for our capital market. The timing of the temporary equivalence will allow industry ample time to complete its vital work early in 2021 and bring reassurance to the market that Ireland continues to be a well-connected and stable environment for investment and trading.”
ENDS
Note to Editors:
Central Securities Depositories (CSDs) are specialist financial institutions that hold securities and facilitate trading between financial market operators. CSDs are a vital and systemic part of market infrastructure that enable the effective functioning of settlement systems for stock exchanges.
Most countries have a domestically located CSD traditionally associated with their stock exchange. However, due to the close historic links between the Dublin and London Exchanges, Ireland does not. The Irish market instead uses a UK based CSD called Euroclear UK & Ireland which operates the CREST settlement system to settle Irish listed equities and Exchange Traded Funds (while Irish Government debt and corporate debt securities use Euroclear Belgium to settle).
The UK will become a ‘third country’ as a result of Brexit and the knock-on effects for settlement is a market issue that requires a market led solution as ultimately CSDs are private market operators. Euronext Dublin (formerly the Irish Stock Exchange) announced in October 2018 that it would transfer the settlement of trades in Irish equities and other exchange traded instruments from the current UK operation to Euroclear Bank Belgium.
This project to migrate the Irish market has been an industry led project with Euroclear and Euronext central partners in its delivery. A range of legislative and non-legislative issues were identified and the Department of Finance and the Central Bank of Ireland have been actively involved with all stakeholders since the issue of migration was identified. In relation to today’s announcement, the Department of Finance has been working with the market participants, the European Commission and other stakeholders to support this important migration project. The Government has already put in place dedicated legislation such as the Migration of Participating Securities Act 2019 and there are further provisions in the 2020 Brexit Omnibus Bill and Finance Bill to support the migration.
Today’s announcement from the European Commission will now allow the European Securities and Markets Authority (ESMA) to begin a formal recognition process of Euroclear UK & Ireland. ESMA recognition will allow Irish securities continue to be settled through Euroclear UK & Ireland until the market transfers to Euroclear Bank Belgium in 2021.