Hungary has moved closer to a unified, regulated European capital market with KELER Ltd., provider of central securities depository services, submitting a licence application for operation in compliance with CSDR (Central Securities Depositories Regulation) to the Central Bank of Hungary. The European Union level CSD Regulations will create an even safer, more efficient and transparent situation in the capital markets for financial service providers, including banks and brokerage firms, as well as for people with savings.
The Hungarian capital market and within that, KELER Ltd., the central securities depository services provider, reached a milestone when, on 29 September, the company submitted its licence application for operation in compliance with the CSDR to the Central Bank of Hungary. Following a formal review the authority has 6 months to assess the application, thus the acquisition of KELER's authorization is expected in spring 2018.
The CSDR was brought to life due to the deepening financial crisis in 2008, so that the capital markets may operate more safely, efficiently and transparently. This is one of the most important post-crisis EU regulations concerning the operation of central securities depositories and a significant step towards the creation of a unified European capital market.
All financial market participants are affected
“CSDR is an important milestone in the operation of the European capital market, as the regulation defines in detail, among other things, how a central securities depository acquires authorisation, and the rules that govern its operation. KELER must renew its authorisation for its central depository activities as well as for its banking-type ancillary services.” - said Attila Mónus, CEO of the company. As the only central securities depository of the Hungarian capital market, KELER is the most important background organisation for the issuance of securities and settlement of securities transactions.
The Chief Executive Officer added: “CSDR does not only affect KELER, but all the participants who are connected to it either directly or indirectly, such as the financial service providers, including banks and brokerage firms. Indirectly they are also important to those, who have any type of account with the affected companies.”
Putting an end to delayed performance
One of the most important steps within CSDR will be the specification regarding settlement discipline that is likely to enter into force from 2019. This will make it compulsory for a given securities depository to impose a fine in case of delays in delivery, to the service providers concerned, which may be followed by a compulsory buy-in. “The aim of this specification is for the financial service providers to complete their transactions by the contractual settlement date, thus driving the service providers towards less and less delayed performance” - stated Attila Mónus.
One of the most important provisions of CSDR is compulsory dematerialisation or immobilization, which in practice means that from 2023 all transferable securities will have to be recorded on a securities account. One of the significant measures associated with CSDR is the one which provides for uniform prudential rules to ensure the functioning of the securities depositories.
“Operating in compliance with CSDR is not only a mandatory need for KELER and for the organisations affected on the Hungarian market, but is the pillar of the future network of securities depositories, and hence of the functioning of the European capital market, which thereby will become more flexible, transparent and secure, and will simultaneously support KELER's strategy to become a dominant international securities depository.” - added Attila Mónus, Chief Executive Officer.
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KELER Group
The owners of KELER Central Securities Depository Ltd. (KELER), founded in 1993, are the Central Bank of Hungary and the Budapest Stock Exchange. With its subsidiary, KELER CCP Ltd. (together as: KELER Group), it provides and operates infrastructure to ensure the smooth operation of domestic and many European capital and energy markets. As the only central securities depository of the Hungarian capital market, KELER is the central support organisation for issuance of Hungarian securities and settlement of securities transactions. At the same time, KELER CCP acts as a clearing house and ensures the transparent and secure settlement of transactions, in essence replacing clients involved in contracts concluded on one or more financial markets. It acts as a buyer towards sellers and as a seller towards clients by acting as an exclusive contracting party to each of them and guarantees the performance of the transactions. KELER CCP provides clearing services acting as a clearing house for the Budapest Stock Exchange, MTS Hungary government securities trading platform, CEEGEX Central Eastern European Gas Exchange and the Hungarian balancing gas market, while offering general clearing member services to the HUPX Hungarian organized power trading market, the German, French, Czech and Serbian energy markets, and the Austrian gas market.
The KELER Group is such an innovative service provider that bases the service of its clients on a sound professional and IT background, in accordance with international practice, and in compliance with domestic and international legal regulations, taking into account the current and future needs of market actors, and with a combination of stable ownership and capital positions. Its aim is to become a dominant market actor at regional and European level based on market and service innovation.