Central securities depositories
In Finland, a CSD is a Finnish limited liability company that is licensed to operate a book-entry system and to offer issuance, safekeeping and delivery of securities in the book-entry system. There is currently one CSD in Finland, Euroclear Finland Ltd.
Shares, bonds and other cash instruments admitted to trading on the stock exchange must be transferred to a book-entry system before trading begins. In addition, transactions and other transfers of shares of a Finnish limited liability company owned by a Finnish owner must be recorded in the owner’s account in the book-entry system. Transactions in these and other cash instruments are settled in the settlement system of the CSD or internally by a bank.
The core services of a CSD are:
- first registration of securities in a book-entry system (‘notarial services’), i.e. issuance in a book-entry system,
- provision and maintenance of securities accounts at the highest level (‘centralised account management service’), i.e. the provision of book-entry accounts, and
- maintenance of a securities settlement system (the ‘securities settlement service’)
In addition to core services, a CSD may provide ancillary services related to core services, such as collateral management, maintenance of a share register or services related to corporate transactions. Ancillary services such as banking services require a special licence. There are currently no CSDs in Finland that are licensed to provide these banking services.
A bank or other service provider can also deliver securities in its own system. Internalised settlement is only possible if the securities of both the transferor and the transferee are registered in the same omnibus account with the CSD or a custodian.
Securities transactions shall have a statutory or contractual intended settlement date by which the transaction must be paid for and the securities delivered. For transactions in transferable securities executed on a trading venue this is generally two days from the trade date. To ensure timely delivery, a specific settlement discipline regime is applied, under which the failing party must pay a specific penalty fee for delays.