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September 2009

Volume 6 No. 42
GBP 25 - UK, ROW
USD 45 - America

Europe - Spanish Custody

Collateral - Longevity Swaps
Asia - Hedge Fund Services, Settlement

Risk, liquidity and legacy
in transaction banking
CEO Profile: Pierre Francotte, Euroclear
Panel: Fund Administration in Emerging Markets
Shareholders: Corporate Actions

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Heads up ISJ Investor Services Journal

P.14 CEO Profile P.17 Payments P.30 Custody interview P.36 Panel Debate

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

P.06 News

Editor’s letter
have been as intriguing as figures in payments optimistic
Feel good factor the last two. As the People’s about the region, in amongst
Republic continues to take a wider discussion of legacy
What better place and centre stage, and Asian countries systems, new technology and
time for this year’s Sibos increasingly use each other as the little known size of the
conference: in the middle of a trading partners, there is still profits that banks derive from its
cautious global recovery in the an argument for the gradual transaction banking.
Editor: region that is leading the world decoupling of the continent Corporate accountability
Ben Roberts for growth prospects. It has from the US and Europe. will continue to be a heavily
been estimated that the average In this issue, ISJ gains debated issue up to the end of
Contributing editor: annualised growth of Asian significant insight into key areas this year, and as the composition
Anthony Harrington
markets is around the 10% of investor services and the of boardrooms change, the
Reporters: mark. middle and back office world. issuance and processing of
Kimberley Ferguson
This is as defiant an estimate Craig McGlashan finds corporate actions is vital.
as any seen in the second hedge funds already on top of Turn to page 18 to learn of the
Craig McGlashan quarter of this year, showing the the newest demands seen in significant challenges in this
cumulative effect of confidence the rest of the world, such as space.
Account manager: that has allowed the exporting third-party administration. Challenges abound too
Tarik Rekiouak countries – unhampered by the Anthony Harrington explores in Spain, where the custody
strife of toxic balance sheets and the difficulty of a pan-Asian market remains heavily weighted
Senior account manager:
Patricia De La Grange
shaky confidence – to make a settlement, despite the market towards local providers. significant global statement for will to this end, and guest On the theme of custody,
the future. columnists describe tive of the early mover advantage
their SEB’s Ulf BSENoren
and underlines
fact that it
Business development manager: still plays an important role in the Indian equity markets. But what is
James Olweny Emerging market equities approach to regional demands. ISJ’s questions about succeeding
worrying is that when it comes to new business segments such as debt have been a popular stock Our lead feature sees top
or equity in new markets.
and currency derivatives, ■ NSE in terms of
BSE is far behind
Website design: allocation for US money service providers and banking
innovation Ben
and marketing. ThisRoberts,
does not bodeEditor
well for its standing in
Peter Ainsworth managers and the region’s the market in the long run.
IPO levels for this year to date
STATS-SNAP The Figure 5: Market Capitalization of Leading Indian Stock Exchanges
Operations manager: – according to Dealogic - are Ahead of the pack: Market capitalisation of leading
graph shows the
Nicolette Whittaker steaming ahead. Indian stock exchanges (USD billion) SOURCE: BSE, NSE, Celent strong rebound Market Capitalization (US$Billion)
Hong Kong sits nicely in made by India’s
Commercial director: the middle of the Western the Bombay Stock
Jon Hewson and Eastern worlds that have Exchange and
increasingly converged. National Stock
CEO: Mark Latham
For centuries an Asian Exchange and 1150
1000 NSE
outpost for European banks and forecasts see this 900
805 761
2i Media plc the centre of Pacific capitalism trend continuing. 675
UK 16-17 Little Portland Street, 566 528
London W1W 8BP, UK along with Japan, few of the 2009 figures are 379 355
T: +44 (0) 20 7299 7700 twelve years that China has had already expected to
F: +44 (0) 20 7636 6044
sovereignty over the region beat 2006 levels. 2004 2005 2006 2007 2008 2009 E

USA 410 Park Avenue, 15th Floor

Source: BSE, NSE, Celent
New York, NY 10022
T: +1 212 231 8421 Latest mandates
F: +1 212 231 8121
© 2009 2i Media plc
All rights reserved. No part of this Month Winner Client Location Assignment Mandate size
publication may be reproduced, in whole
or in part, without
prior written August Northern Trust Hermes London Trade management n/a
permission from the ..................................................................................................................................................................................
July RBC Dexia HSBC Bank Australia Sydney International services n/a
ISSN 1744-151X.
July BNP Paribas WestLB Group Hungary/Poland Investor services n/a

1-17 ISJ42.indd 2 19/08/2009 14:24

1-17 ISJ42.indd 3 20/08/2009 15:21
Contents ISJ Investor Services Journal
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Letter to editor
Dear ISJ

As with all regulation, Misys has

been monitoring and analysing
In this issue SEPA and discussing it with our
clients for many years now.
To date, the uptake of SEPA
COVER STORY solutions is very low - this is not
George Ravich, Fundtech,
17 Analyse This - a big surprise, but it is certainly
page 14 disappointing.
Payments - Industry
Most of Misys’ banking
comment on CLS and standards.
clients are domestic, regional or
international operations of large
18 Votes in -Corporate banks. SEPA was devised by the
actions - Anthony Harrington European Payments Council
highlights the new innovations (EPC) as a forerunner to EU’s
and contentious issues for Payment Services Directive.
financial institutions surrounding The EPC is made up of the
shareholder voting. largest European banks, and
many of these have been actively
24 The quest for pan-Asian using SEPA as a reason to build
large payments processing
settlement - Equities factories, since payments is a
Interaction and bonds core business for them and they
An update on the initiatives and want to offer outsourced services
challenges to creating a cross- Sowing the seeds for hedge
to the smaller banks.
People continent settlement entity. growth, page 32
Therefore, most European
banks have had little to do with
06 News and mandates Custody
SEPA, or as is the case with some
The last month of updates in
custody, clearing and settlement, 26 Tough nut to crack - Misys clients, it’s taken care of by
securities lending, legal and Spanish custody Kimberley their head office.
compliance and technology. Ferguson assesses the custody I think we are all aware that
landscape in Spain and gains the problem with the EPC’s
insight into structure and approach, agreed with the EU
08 News analysis - regulation. Commission, is that it has not
Longevity swaps been inclusive of smaller banks,
Plus, one year in brief. 30 The custody interview vendors or the users of the
payment services.
- SEB’s Ulf Noren ISJ asks
12 A decade on - CEO the head of client relations for
Because of this, plus the fact
Profile SEPA is not mandatory, it is
sub-custody about the market
Ben Roberts talks to Pierre challenges and expanding into
based on complex new message
Francotte, CEO of Euroclear. new countries. standards and it has no hard
Stuart Feffer, panel debate
deadline, it is proving too
page 36
Payments Fund Administration
expensive for most banks, there
is no client demand and no
14 Interaction - 32 Sowing the seeds for regulatory stick - so why bother?
Transaction banking hedge growth - Hedge The PSD comes into force in
Investment in payment and fund services in Asia November 2009, which is the
transcation systems has increased Craig McGlashan sees growing official regulation from the EU
in many global firms. Ben Roberts demand for a wider breadth of but it is coming very late, is
explores the issues and the risk services. overly complex, with potential
and regulatory context of this variations in each country, and
core activity. all countries may not even be
36 ISJ Panel - Fund
ready. Considering all this, it is
administration in not a surprise that the majority
emerging markets of banks have done very little
ISJ quizzes three leading about SEPA or the PSD.
MEMBER - periodical companies.
publishers association
to renew your subscription
Colin Lunn, HSBC page 32 Barry Kislingbury
please telephone: 40 Directory - List of Solutions Manager for
+44 (0)20 7299 7700
service providers Payments and Messaging,
or visit... Misys. n

1-17 ISJ42.indd 4 21/08/2009 10:17

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1-17 ISJ42.indd 5 20/08/2009 15:22

News ISJ Investor Services Journal

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

fund management and sales, reconciliation service via SWIFT.

Custody according to Horst Küpker, Existing SWIFT customers can Chi-X, the high-speed trading
a Postbank board member reuse their SWIFT infrastructure platform, and the Singapore
responsible for financial markets. to use SmartStream’s service, Stock Exchange are to develop
LONDON - The Bank of New York reducing transaction breaks, and launch the first exchange-
Mellon Corporation acquired Legal operational risk and time to backed dark pool in the Asia
Insight Investment Management process transactions, while Pacific region.
Limited from Lloyds Banking maximizing their return on
Group plc for GBP235 million. BERMUDA - International investment and minimizing total
financial offshore law firm cost of ownership (TCO). Regulation
RBC Dexia Investor Services Conyers, Dill & Pearman
won a mandate to provide supported the alterations to the
international investor services legal framework surrounding Securities Lending
for HSBC Global Investments, mergers and acquisitions The UK’s shadow chancellor,
the institutional wealth business involving Cayman-domiciled George Osbourne, has postulated
of HSBC Bank Australia Limited. companies. The Companies MOSCOW – VTB Capital, the that the Bank of England would
(Amendment) Law, 2009 came investment business of VTB be given sweeping powers
ConvergEX now offers its into force on 11th May 2009 and Group, has become one of the over City institutions under a
transition management services sought to introduce simpler and ‘top 5’ operators in the equity Conservative UK government. The
to clients of BNP Paribas, more cost-effective mechanism market for the first time on a FSA would effectively be reduced
following a deal recently for mergers and consolidations special index from MICEX, the to a consumer protection agency.
revealed by the two companies. between domestic companies indices and market data provider.
and between Cayman-based and The division also became a leader The City has reacted angrily to
More risk and quant managers foreign companies.   in bond repo transactions with a government-supported proposals
are being consulted by RUR 125 billion turnover – a 15- for greater controls and
colleagues in the wake of the Clearing fold increase on June. disclosure over executive pay.
financial crisis, according to
a survey by 7city Learning, LONDON - The International The Walker Report, authored by
a financial services training MOSCOW – The National Securities Lending Association Sir David Walker, ex-chairman of
company. Of the alumni of Depository Center and the (ISLA), the trade body Morgan Stanley International,
its Certificate in Quantitative MICEX Settlement House representing lenders and recommended caps on executive
Finance (CQF) course, 61% of achieved the very first foreign borrowers of securities in the pay, as well as disclosures of
those working as quant or risk currency Delivery Versus Payment international markets, appointed salaries that are over boardroom
managers were being asked transaction, settled on the 31st Kevin McNulty as CEO. This levels, among other measures.
more questions than previously July. This was achieved using follows the resignation of David
about their validation or an Euroclear Bank - an international Rule to take up a position at the London bankers claimed such
explanation of their techniques. central depository. Financial Services Authority. measures would be overly-
Mr McNulty was formerly a bureaucratic and a populist move
Thirty-six per cent of The NDC has also adopted an managing director at Barclays in an anti-bank sentiment.
respondents felt that risk electronic data interchange Global Investors and a previous
management was the dominant system with the specialist chairman of ISLA. Plans to readjust US financial
element of their role. registrar, Vedeniye Reyestrov regulation are on track and Wall
Kompaniy, for all their Street banks will not be able to
HSBC and Barclays reported information interactions. Technology revert to old bad habits despite
solid results for the first half a return to profits, according to
of the year, backed by their Eurex Clearing, the clearing BATS Global Markets, the the US Treasury Secretary Tim
investment banking divisions house, has partnered with the holding company of BATS Trading Geithner last month.
– while rival Lloyds revealed a financial technology provider and BATS Europe, is to launch
large loss. HSBC achieved overall Calypso, for operational support a US equity options exchange In an interview with the Wall
pre-tax earnings of US5 billion, for Eurex Credit Clear- its new - BATS Options - in early 2010. Street Journal, Mr Geithner
while Barclays Capital achieved a central clearing platform for over Jeromee Johnson, hired by BATS insisted that a “clean up” of the
profit of GBP2.9 billion. the counter credit default swaps. Exchange as vice president of system has already seen balance
The new OTC derivatives clearing market development in April sheets shrink, with less leverage
Fund Administration service improves market stability 2009, has been brought in as an and more conservative liquidity
on a global scale – enhancing integral part of the operations of cushions.
transparency and regulatory the new platform.
KAS Bank N.V. acquired reporting as well as reducing There have been concerns of
Deutsche Postbank systemic risk for the financial Raiffeisen Zentralbank “business as usual” within banks
Private Investment market as a whole. Österreich AG (RZB) has on the back of recent profits and
Kapitalanlagegesellschaft mbH implemented SmartStream’s TLM a new round of pay incentives
(PPI), the fund administration SWIFT and SmartStream have Corona SWIFTNet E&I solution so soon after the return of
business of Deutsche Postbank joined to enable financial to decrease operational risk and government bail out money. n
Group. The sale enables institutions to communicate with improve customer service across
Postbank to concentrate SmartStream’s TLM OnDemand its payments operations. For more news, visit
on its core competences of

1-17 ISJ42.indd 6 21/08/2009 10:20

1-17 ISJ42.indd 7 20/08/2009 15:22
ISJ 26

News Analysis ISJ Investor Services Journal

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Longevity swaps: One

new collateral? year
price on longevity. It can’t be
Will it be ‘love actuary’ for this little- marked-to-market on a daily
covered financial product? basis, for example, and there is
scope for huge disagreements
To anyone not either an as it would if all the scheme’s between the scheme actuary
actuary or intimately involved members (specifically those and the swap provider as to 12 months of
with final salary based pension
schemes, longevity is one of
already receiving benefits) lived
to an agreed average span.
what the scheme’s “actual” (ie,
currently estimated) longevity financial drama...
those ‘out there’ topics. To the extent that they live position really is.
We all “know” that we tend beyond this span, the provider The scheme actuary is 7th September, 2008: Mortgage
to be living longer, on average, takes over paying the benefits. responsible for giving the lenders Fannie Mae and
than previous generations and The clear benefit here is trustees a view on longevity. Freddie Mac are rescued by the
that many companies with that the scheme’s liability to But the swap provider will be US government.
final salary schemes have huge members is capped. Effectively, working off its own model of
deficits, which means that they the uncertainty over longevity longevity, based on work it has 15th September: Lehman
don’t have sufficient assets to is ‘swapped’ out of the scheme. done on mortality statistics Brothers files for bankruptcy.
meet their obligation to pay Trustees can sleep easy refined by post codes, work US bank Merrill Lynch is taken
out pensions for the full life at night knowing that they types etc. What both sides need over by Bank of America.
spans of their members. are not going to have to go is an agreed way, in advance, of
However, for the most cap-in-hand to the sponsor resolving any potential conflict 17th September: Lloyds TSB
part, we tend to think that this for more funding every time in the scale of collateral that announced its USD12 billion
deficit has been caused by the the scheme actuary tells them needs to be put up. take over mortgage lender
global financial equity market that longevity has gone up by So far there is some HBOS, a deal apparently
meltdown. It has, but longevity another year (from an average evidence from the few strongly influenced by the UK
creep – the fact that people “lifespan” in retirement of 22 deals done to date that this government.
are living longer, and that the years, say, to 23 years, then 24 agreement is hard to reach.
rate at which they are living years and so on). Moreover, the issue of who 3rd October: The US House
longer seems to be increasing So where does is going to manage the of Representatives passes a
– is making a very significant collateralisation come in? collateralisation of the deal USD700 billion government
contribution to scheme It comes in because of the is something the pensions plan to rescue the US financial
deficits. duration of these swap industry and the parties sector, splitting political
This realisation is now arrangements. Clearly, if you involved have not yet solved, opinion and becoming a
concerning, both to companies are writing an indefinite or 60- even though it looks to be a central issue in the presidential
sponsoring final salary year longevity swap, there is a classic for tri-party collateral candidate race.
schemes and to pension fund risk that your counterparty will management.
trustees - creating interest in not be around to back up their In fact, as Olivier 8th October: The UK
the possibility of longevity promises. Grimonpont, Director of government announces details
swaps. Basically, whoever is “out Collateral Services at Euroclear of a rescue package for the
Jerome Melcer, a partner the money” in the swap points out, there is no necessity banking system worth GBP50
with Lane, Clark & Peacock arrangement (either the for a collateralised longevity billion (USD88 billion).
explains that in a longevity pension scheme or the swap swap to be put into the hands In addition, it offers up to
swap, the provider, (who provider), puts up collateral to of a tri-party manager from GBP200 billion (USD350
will be either an insurance the value of the longevity swap day one. Given the fact that billion) in short-term lending.
company, a bank or a money based on current longevity there is no mechanism (or
market player), takes the risk expectations. The collateral requirement) to mark to 13th October: Royal Bank of
that the scheme’s members will be a mixture, generally, market a longevity swap on a Scotland (RBS), Lloyds TSB
will live longer than a specified of cash, government bonds day to day basis, the collateral and HBOS receive a total of
average span. and possibly some corporate will probably only need to USD37 billion in taxpayer
In exchange, instead investment grade bonds. reflect changed realities in the money, though Barclays seeks
of paying benefits to the However, one of the longevity market after a few to broker a GBP7 billion deal
members, the scheme pays difficulties for the emerging years. It will be sufficiently from Abu Dhabi and Qatar to
an equivalent revenue stream market of longevity swaps timely at that stage for the escape government influence.
to the swap provider and, is the absence of any market parties to seek the services of a US bank Wachovia is taken
basically, pays out as much making mechanism to set a triparty agent, he suggests. n over by Well Fargo.

1-17 ISJ42.indd 8 20/08/2009 15:22

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1-17 ISJ42.indd 9 20/08/2009 15:22

News Analysis ISJ Investor Services Journal

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

24th November, 2008: The UK

government cuts VAT from
17.5% to 15%, a move panned
by critics.
Flash in the pan?
25th November, 2008: The US
The regulators get tough on two influential liquidity
Federal Reserve announces it mechanisms: flash trading and dark pools.
will inject another USD800
billion into the economy. The issue of flash trading and But apart from the actually built in anti-gaming
dark pools of liquidity have possibility of creating a two- technology to combat strategies
19th December, 2008: USD17.4 come to the fore of late, with tier system of trading, with which use flash trading and dark
billion of the USD700 billion the US Securities and Exchange those who have the technology pools. However, he does feel
is given to the ‘Big Three’ US Commission revealing it was needed for these practices at that the SEC will bring in new
carmakers: General Motors, considering banning the former the top and everyone else at regulation on the techniques –
Ford and Chrysler. and was investigating the latter. the bottom, what else might but warns that they should tread
US senator Charles Schumer regulators be worried about? carefully.
23rd January, 2009: The UK even said that if the SEC did “One of the concerns with “I think they will ban
officially enters a recession as not ban flash orders he would respect to flash orders and exchanges from implementing
fourth quarter GDP falls by introduce legislation to outlaw indications of interest is that the functionality, but I’m not
1.5%. the technique. But experts the traders, through their convinced that they will ban it
have warned that any new strategies, have the opportunitythroughout the entire market
17th February, 2009: Barack regulations must be carefully to affect riskless transactions structure because there are
Obama approves a USD787 considered. because sometimes the markets other pieces of functionality
billion economic stimulus In the UK, reports had that are similar to flash trading,”
plan. suggested that the Financial
Services Authority was also “One concern Sussman explains, adding
that “all sorts of unintended
12th June: BlackRock buys conducting a review of the
Barclays Global Investors (BGI) practices, which rely on is that traders, consequences could occur” if the
rules are not worded correctly.
for USD13.5 billion, making
through their
supercomputers to gain a “That’s why they need to
it the world’s biggest money trading advantage. An FSA look at it across the board and
manager. The deal included the
highly successful iShares arm,
spokesperson denied that an
“investigation” was taking strategies, come down with a ruling that
doesn’t just address flash trading
which a few months before
was to be purchased by CVC
place, but added: “As part of
our role as a regulator and have the but also issues of indications
of interest and how order
Partners. supervisor of the exchanges we
look at a range of issues in the opportunity to information is communicated
throughout the industry,” he
17th June: The US government
announces a major reform of
equities market, including high
frequency trading.”
affect riskless says.
“They must be very specific
banking regulation to prevent
future financial crises.
So what are flash trading
and dark pools? Flash trading
transactions ” about firm orders versus
non-firm orders and closed
involves members of exchanges networks versus exchanges
14th July: Goldman Sachs buying and selling data on where information is available
reports net profit of USD3.44 trades milliseconds before the to everybody to participate.”
billion for April to June, information is made public. By are locked or they’re crossed While flash trading and
exceeding forecasts. The issue using sophisticated computer and so they can get the rebates dark pools continue to cause
of executive pay again hits the software, these traders are able without exposing themselves controversy, it seems unlikely
agenda. to gain an advantage on their to any risk,” says Edward that the issue will be resolved
rivals by making the trades Pittman, Counsel in the any time soon.
3rd August: Barclays themselves. financial services group at law In mid-August, Singapore
announces an 8% rise in Additionally, some firm Dechert. “So they generate and Chi-X Global announced
first-half profits, boosted by its exchanges can block their transactions without any risk plans to launch a dark pool
investment banking division. competitors by flashing orders and theoretically it’s harming system for investors trading
to traders milliseconds before the marketplace.” stocks in Hong Kong, Japan,
17th August: US Treasury they become available to other Adam Sussman, Director of Australia and Singapore, with
Secretary Tim Geithner I
traders. Research at TABB Group, the the venture expected to begin
claims the plans to reform the Dark pools, on the other financial markets research and operations in the first half of a
financial sector are on track hand, refer to large systems advisory firm, has been looking next year. The future of high u
and there will be no reversion where buyers and sellers can into the various practices and frequency trading may be as s
to old bad habits among Wall be matched up without the adds that many brokerage dark as the pools of liquidity t
Street firms, despite new trading data falling into the firms have been one step ahead n
themselves. n
profits. n public domain. of the regulators and have y

1-17 ISJ42.indd 10 19/08/2009 11:22 EQ9

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ISJ42.indd 11 1 20/08/2009
24-07-2009 15:22
CEO Profile ISJ Investor Services Journal

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

A decade on
Pierre Francotte, CEO of Euroclear, talks to Ben Roberts about the
resilience of post-trade systems and making decisions in a crisis.
Pierre Francotte will step down from Euroclear group.
the role of CEO at Euroclear in a few Francotte explains: “We are firm
months after 10 years at the helm. The last believers in seamless interoperability
year, as with the heads of many industry between CCPs and CSDs - or an ICSD like
leading firms, he believes has been among Euroclear Bank. (I)CSDs should be able to
the most dramatic. Of significance, it has freely compete for settlement and collateral
been a time to not only demonstrate the management business opportunities by
proven resilience of post-trade operations offering the market a choice of provider,
during a financial crisis, but also an particularly in markets where there are no
opportunity to deliver innovation. alternatives today. This is the spirit of the
In particular, there is the ongoing European Commission’s Code of Conduct
unification of the processing platforms for Clearing and Settlement.”
operated by the Euroclear group central In addition to the benefits of choice
securities depositories (CSDs) – including and competition, Francotte points out
Euroclear Bank and the group’s national the efficiency and business growth
CSDs – to create a single platform for potential advantages too. By providing an
seven EU domestic markets including environment where clients can centralise
the UK, Ireland, the Euronext markets their settlement, custody and collateral
and the Nordics for bonds, equities and management needs in the venue(s) of their
other asset classes. It began in 2006 with choice, volume discounts will mean lower
the Single Settlement Engine (SSE), a unit costs, fewer but larger asset pools will
consolidation of the current group (I)CSD mean greater collateral optimisation and
core settlement applications, which already opportunities for clients to rationalise
improved settlement efficiency. their own back offices will mean internal
Using the SSE as its foundation, cost savings. As a result, he says, firms can
Euroclear delivered the Euroclear trade more, and more cost effectively.
Settlement of Euronext-zone Securities Euroclear.” Francotte explains that a familiar brace
(ESES) system in January 2009, which It means that Euroclear Bank of subjects are top priorities during client
is effectively a single platform for the customers, for example, collectively meetings: reducing risks and reducing
Belgian, Dutch and French markets. have access to as much as EUR 9 trillion costs.
The Single Platform programme will of assets held in Euroclear Bank today; He says there are two immediate ways
be completed in 2011 at which time the the pooling of assets across the entire that Euroclear tackles these issues: first,
Finnish and Swedish markets will migrate Euroclear group would increase the pool by continuing to provide a risk-averse
immediately thereafter. of collateral to around EUR18 trillion. environment in which clients can process
The Single Platform harmonises market Francotte adds that the increased their transactions and by continuing to
practices across the seven CSD markets desire to collateralise transactions is reduce tariffs to make post-trade services
and provides a single access point to both due to the shift from unsecured to cheaper; second, by delivering the Single
the national and international depositories secured transactions, largely as a result Platform to reduce market fragmentation
of the group. One particular benefit of the of the recent financial crisis. Calls from and help eliminate the high costs and risks
Single Platform is that customers will have regulators, such as the SEC, to trade of cross-border transaction processing.
access to their entire pool of assets they derivatives on exchanges and clear The move to process all custody-related
safekeep with Euroclear, which will be very these trades through a single central transactions, such as corporate actions,
useful when collateralising trade exposures counterparty, will result in additional across Euroclear’s markets on the Single
across markets. demand for collateral solutions. Platform is due to be implemented by
Francotte points out that the explosion “When trades are cleared and netted the end of 2010 – the next milestone in
in derivatives, such as credit default swaps, through a CCP, the net exposure is Euroclear’s programme, which is more
has made such access to collateral vital. reduced, but the CCP still requires the than 80% completed.
“There is a desire on the part of clients - exposure to be collateralised. As we “It’s an objective worth pursuing,”
encouraged by the authorities - to be able already have in place for equity trades, we he begins. “Trading firms need to invest
to use the assets they safekeep in Euroclear have the prospect of working with CCPs in different technologies, maintain
to collateralise exposures arising from as for derivatives trades, helping clients relationships with multiple intermediaries
many types of transactions as possible, collateralise exposures in a straight- and market infrastructure service
including derivatives, even though through processing fashion from their providers in order to access different
derivatives transactions settle outside pool of assets held anywhere within the


1-17 ISJ42.indd 12 20/08/2009 15:22

ISJ Investor Services Journal CEO Profile

“The more we can rationalise,
like Lehmans are typically not taken by
the CEO; they need to be taken by the “The more we
streamline and harmonise access to
multiple markets, the more business they
people who are closely involved with the
day-to-day business. Obviously, there is no can rationalise,
will be able to transact while saving money
in their back offices.”
time to properly train them at the start of
a crisis, so being well prepared in advance
streamline and
Talk of market-practice harmonisation
and post-trade processing is a far cry from
is vital. That’s one of the major strengths
of Euroclear – depth of management and
harmonise access to
Francotte’s career origins – a Belgium
native - who first practiced as a lawyer.
quality of people.”
He says that the authorities publicly
multiple markets,
In 1993, while working in the US for the acknowledged the strong performance of
the post-trade systems during the crisis.
the more business
International Monetary Fund, Francotte
was head-hunted by JP Morgan to work “They – including the central banks – trading firms will
recognised the operational resilience of
be able to transact
in a legal capacity at Euroclear – then
still operated by the New York bank - in the payment and securities infrastructures

while saving money

Brussels. in 2008. We are what has been called in
He recalls that he did not expect to be another context ‘the dog that didn’t bark’,
able to fulfil his dream of a career with
an international scope by returning to his
because if we had had problems processing
payment or securities transactions, the in their back offices”
home country, and he had not previously markets would have been unable to
heard of Euroclear and its role in the function normally. And, that did not
international capital markets. happen.” important drivers of securities market
However, he says that it quickly became The legacy of 2008 can be remembered integration in Europe and perhaps beyond.
apparent that Euroclear was one of the as a period of significant volatility, for “It’s a challenge to work on so many
“jewels in the crown” of JP Morgan, with example, transactions in the UK alone different initiatives at the same time, but
an unusually diverse team of employees leaped from around 300,000 transactions with a strong discipline of execution, good
taking on different roles at Euroclear a day on average, with peaks of around results emerge. The CEO of a company is
during their careers. “Euroclear was 600,000, to a spike of 1.6 million like the conductor of an orchestra, leading
independent from the activities of JP transactions in one day. He says this teams of experts towards a harmonious
Morgan, and rightly so. One of the most systems resilience challenge had been met result.” n
attractive features at Euroclear was the without issue due to the fact that Euroclear
opportunity accorded to senior and mid- had decided to invest in systems capacity
level people to rotate jobs and learn new enhancements well before the crisis
skills within the same company.”
Francotte also appreciates Euroclear’s The introduction and growth of multi- Biography
user ownership and governance, which lateral trading facilities and new CCPs - Chief Executive Officer and Chair-
allows Euroclear to invest in business were other significant developments for man of the Management Committee
safeguards that do not necessarily the post-trade providers to manage, having of Euroclear SA/NV (2005 – present)
generate short-term profits. For example, an impact on both trading and settlement
- Member of the Board of Directors,
its business continuity arrangements volumes.
Euroclear SA/NV (2009)
are second to none. Francotte reveals Francotte believes that despite the
- First Chief Executive Officer of
that - purely coincidentally – Euroclear proliferation of MTFs, “I’m not convinced
Euroclear Bank upon its creation
simulated a ‘stress test’ scenario where one there’s room for so many in Europe. The
MTFs are forcing the exchanges to rethink (2001-2005).
of its major liquidity providers defaulted,
their business models and change their - Chief Operating Officer and Gen-
just one month before the collapse of
pricing structures. As always, liquidity is eral Manager (2000-2001)
Lehman Brothers in mid-2008. This type
of rehearsal helped Euroclear manage the an important determinant of success at - Managing Director and head of
crisis with no market disruption and no the trading level, so price is not the only the Transaction Processing division
losses on its exposure to Lehman. factor.” 1997-2000)
“The theme of the test was ‘One of our When asked to consider the biggest - Managing Director and head of the
biggest counterparties goes bust – what achievement of the Euroclear group during Legal division (1994-1997)
do we do?’ As we went through the lessons his time in charge, Francotte points to the - Joined Euroclear’s Legal division
and exercises, we took careful note of the firm’s ability to integrate two of the three in 1993
procedures we would improve for the next biggest securities markets in Europe: the - Assistant General Counsel at
time we do an exercise like this. It was French and the UK markets. None of the the International Monetary Fund
very useful that we had done this when the other market infrastructures – exchanges (1982-1993.
Lehman crisis occurred.” or CCPs – have achieved the same level of - Bachelor’s degree in Law and a
Francotte says he is proud of how integration, he adds. Master’s degree in Financial and
well his colleagues handled the event, “The hard part of a merger or Economic Law from the Université
continuing to operate the rest of the acquisition is the integration process, but Libre de Bruxelles (Belgium).
business as normal, despite working “days that’s where the true value is derived. It is - Diploma in Comparative Legal
and nights” in the wake of the collapse. partly because of this ability that I believe Studies from Cambridge University
“Decisions about how to handle a crisis Euroclear will remain one of the most (UK).


1-17 ISJ42.indd 13 20/08/2009 15:22

Payments ISJ Investor Services Journal

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Pays to invest
Transaction banking has climbed the agenda for banks, though legacy sys-
tems and stop-start legislation need to be addressed, finds Ben Roberts.
Some aspects of finance are so
fundamental they are typically
The interbank lending market only
really showed its true influence on the
activities of financial institutions – and
wider economies - when it came to a near
standstill from mid 2007. But it operates
as part of perhaps the most fundamental
investor service, perhaps the core of
banking itself historically: payments
Compared to the faster changing arms
of investment banking and commercial
banking, payments and transaction
banking is the pragmatic machine
of money movement, though many
would still be surprised by the revenues
generated. HSBC last year saw revenues
of more than USD9 billion in transaction
banking, according to Andrew Long,
group general manager and head of global
transaction banking at the firm. and asset management through to more their liquidity better.”
But it is an area of a bank in which general corporate clients and retail – can Fundtech’s key product to enable this
internal systems typically change less be processed and distributed. is called Global PAYPlus, which features
frequently, and if delivery is on time it is a “The credit crisis certainly has made a core engine from which a variety
key functions that is taken for granted. it more important [to] move towards of payments services, including mass
But as George Ravich, EVP at payments a consolidated payments hub where a payments and high-value payments, can
technology developer Fundtech points be installed. The framework for these
out to ISJ, the ripple effect of the credit consolidated payment services is achieved
crisis has made the status of payments
and transaction banking climb the
“The credit crisis through what it has called a service-
oriented architecture (SOA).
priority list for banks’ infrastructure
spend. In particular, issues of risk,
has certainly “SOA relates to how easy it is to deploy

made it more
different functionality and how they can

security, high transaction volumes, interoperate,” explains Ravich.
liquidity management – subjects that
have dominated discussions in the more important to move He adds that this deployment may vary
depending on the size of the institutions.
eye-catching areas of trading and portfolio
management – have their implication for to a consolidated “Like any situation, bigger banks will have
more money to spend on development f
payments hub”
payments operations, and more CFOs are they’re usually the ones who will invest
taking note. sooner in SOA and hubs. The smaller
A key issue is the disparate nature banks would need to use this technology,
of payments within the banks. Multiple as it will not only provide benefits to the
systems can exist, often from very different
decades, overlapping with each other and George Ravich, banks but also the end customer. The ease
of sending a bank a file saying ‘take care of
creating the kind of ‘silos’ also present in
the post-trade processing of different asset Fundtech my payments’ - rather than having to have
different systems for payments.”
classes. Andrew Long at HSBC adds that
It can mean high maintenance cost and bank could see its risk across all kinds of the bank has been reducing its multiple
decreasing efficiency. Fundtech’s answer payments,” says Ravich. “Banks with a payment platforms two key payments
to the market has been the creation of a payments hubs can see their risk better, systems – high and low value payments –
centralised payments ‘hub’ by which all their risk-by-customer better and manage and there is still discussion as to whether
types of payments – from custodian arms


1-17 ISJ42.indd 14 19/08/2009 11:16

ISJ Investor Services Journal Payments

about 80% of the high value traffic will have jumped into the ring and created receiving collections has been the focus,
be on the systems, with an even higher situations in which those comfortable it was a processing ‘play’ with liquidity
percentage 12 months later. “These arrangements no longer apply. Plus, there’s second.”
new systems increase straight through less money in the pool anyway in terms of The effect of lower economic activity
processing rates, improve data handling fees if firms are reducing interchange fees.” the collapse of Lehman Brothers and
rates and facilitate data reconciliation Aston says the continued use of siloed the difficulty suffered by some financial
and forecasting,” he says. “But they’re not systems hampers the ability to assess risk institutions spurred this increased focus
cheap, that’s why the newer players that and liquidity controls. on systemic and corporate liquidity, he
want to come into this space might not be Traditional ‘batch’ processing systems adds, leading to increased scrutiny from
able to afford to be that sophisticated.” entailed a kind of black box effect: regulators.
Distra is a Sydney based provider of payment information would go in at the “One of the drivers of this is that
payments solutions that among other beginning and banks would not know working capital has reduced as an industry,
things offers a unified framework so that their net position until the batch process and a key reason for this is the implication
banks can replace the different payment had finished. “Any traditional ACH system of the Basel II regulation. Basel II –
systems that have been built and added would not know the settlement position,” because the way the cycle has worked – has
over decades. he explains, “so in liquidity management meant banks need to put up more capital
Mike Aston, Distra’s CEO, explained terms therefore, they would have to assume in a declining environment for the same
to ISJ that each of these legacy systems that today would be no different to today level of assets. If you’re not making money
– themselves created to facilitate best or the same day last week.” you can’t raise that capital internally and
performance for clients – have limitations, This lack of feedback as to the progress raising externally has become harder.
particularly as they only service one type and overall liquidity status outs firms at a Banks have had to reduce their need for
of payment, but because they have become disadvantage. capital by shrinking the balance sheet.
so “mission critical” to daily operations Long at HSBC says that liquidity So it’s easier to cut a short-term working
there has been a tendency to cling to them. management has climbed the agenda for capital loan than a 10-year property loan.”
In the past, he adds, banks and major banks. “There is increased focus on cash To better assess the status of balance
parties ran the payment networks. If there and the availability of cash – where your sheets and liquidity levels for customers
were a specific operational issue, they’d cash sits in the transaction flows of a Aston says Distra has attempted to provide
find their own private solution. But over customer has always been important,” he a solution - chiefly embodied in its UK
the last few years, he explains, “regulators says. “In the past, making payments and Faster Payments Service - whereby firms

• Securities processing solutions

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1-17 ISJ42.indd 15 20/08/2009 15:22

Payments ISJ Investor Services Journal

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“The reality is that has a payments hub available to a service

bureau basis. So we see service bureaux
the lack of set deadline, means there is
little momentum for the legislation on the
modern technology growing more going forward.”
Colin Kerr, industry manager, core
part of market practitioners.
Mike Aston at Distra takes a different
means that it is banking and payments, Worldwide
Financial Services at Microsoft
view to the claim that SEPA’s creation
solely benefited the large organisations,
much lower cost Corporation, says that the upcoming
legislation has been one of the drivers for
and argues that new technology – correctly
deployed, helps pluralise the market.
- you don’t need the increase in budget for upgrades to
banks’ payments systems.
“It’s an argument that to some extent
is somewhat believable and has ‘legs’,
complex systems, “The projects are fairly long running
and very much driven by regulation as
but there are a lot of myths existing in
this whole area - that to do anything in
you don’t need well. If you think about all the events payments is extremely expensive and only
happening in Europe with SEPA and UK the largest organisations can do that.
expensive people to Faster Payments they have almost been “That is legacy thinking to a large
regulatory drivers as much as business
install and run it”
extent… because your required things,
drivers. So treasury services have not really like main frame computers - together with
slowed considerably.” a lot of expensive proprietary software -
He adds that new regulation gives firms [it seemed that] unless you really had a
Mike Aston, Distra the opportunity to “rethink” some of the
technology architecture.
significant volume, it was very difficult to
get a business case together, and thus the
Worldwide Financial Services does not tendency for the smaller organisations
build applications like Fundtech. Instead to outsource. The reality is that modern
can instead constantly monitor how a technology provider would create the technology means that it’s much lower
much is owed to which party. “In Faster application and Microsoft underpins it cost - you don’t need complex systems, you
Payments we’re providing a real time with both its own technology stack along don’t need highly expensive people to help
view of net settlement positions between with the necessary integration layer which you install and run it.”
the parties, something traditionally not can provide a framework for connecting SEPA remains a quintessentially
available.” those applications together in the bank European initiative, facilitated by a
The first step to tackling the problem of offices and linking it to the various clearing number of countries with a single currency
disparate systems, he says, is to realise that and settlement systems. The primary and a similar level of development. Asia,
the different payments themselves are not service is called BIZTALK and is certified with one currency per county and a greater
really that different. The payments may be by SWIFT and can connect to SWIFT disparity between country developments,
different lengths, he says, but if you build through AllianceGateway. has a different outlook.
the systems right operators can overcome Though some e-banking technology But at time of interview, market
these issues. firms such as Equens and CoCoNet seem practitioners were looking forward to
The Single Euro Payments System to be relishing the business opportunity, the Sibos conference in Hong Kong, and
(SEPA), the staggered legislation for a pan- some see the next stage – and SEPA itself - some western payments service providers
European marketplace that would level the as a significant challenge to smaller firms. have had some recent success in the
cost of cross-border electronic payments, Barry Kislingbury, solutions manager region. Fundtech, forexample, in July sold
is one such form of transaction that a for payments and messaging at Misys, its GlobalCASH Plus system to United
payment hub can incorporate, rather than who writes in this issue of ISJ, points out Overseas Bank, Thailand’s leading bank.
developing specific new technology. SEPA that SEPA benefits the largest banks and “Asia’s an interesting market, says
itself is still a work-in-progress. In January may have excluded the smaller majority Aston. “In some respects its very different
2008 banks and technology providers of institutions. He says that the European to Europe in that rather than one unified
were preparing for SEPA credit transfers. Payments Council, the consortium of the region it’s made up of a lot of different
The long awaited follow up – SEPA Direct biggest European banks that created the relationships and different alliances. I
Debit – is scheduled for the beginning of legislation, were able to use SEPA to build think a SEPA-like environment in Asia
November. large payments processing factories to take would be difficult to imagine. Certainly
Some smaller clients may be tempted advantage of their scale and outsourcing the idea of a greater efficiency and
to outsource their payments processing, offering to smaller firms. standardisation is something those
another aspect that Ravich says Fundtech The EPC’s approach, he says, “has not markets understand well.
is working on with clients and another been inclusive of smaller banks, vendors “The other thing is they do look at
area more commonly associated with other or the users of the payment services. the developments, one of the things
investor services. “There are a number Because of this, plus the fact SEPA is not we’re seeing is a keen interest in real time
of facilities already – we’re very involved mandatory, it is based on complex new settlement, and they do look at what’s
in outsourcing for a smaller bank that message standards and it has no hard happening in the UK with faster payments.
does not want to invest in the technology deadline, it is proving too expensive for the “We see other countries, particularly
needed. majority of banks.” in Asia, look at it as something instinctive
“They will more readily want to This, along with the emphasis on and intuitive – why wouldn’t you settle
outsource to a specialist to someone who “complex new messaging standards” and something in real time if you could?” n


1-17 ISJ42.indd 16 20/08/2009 15:22

ISJ Investor Services Journal Pension Funds

Analyse This: payments efficiency for the exchange of data.

What are the - Greater operational efficiency
- Expand into new asset classes
Beyond that, perhaps there are
additional reasons why industry-wide
benefits of - Centralise cross-border trading activity standards, or models, are necessary for
the architectural renewal of financial
The best way to take advantage of all the
continuous benefits CLS has to offer is through a institutions.
link settle- dedicated back office CLS system that is
optimized to fully exploit its capabilities.
Banks face a myriad of internal
applications and systems that have been
ment? Moti Sophisticated vendor products installed developed over the past 30 to 35 years
in-house to connect to CLS, for example, and spread across different technology
Porath, executive vice let institutions use liquidity and other platforms.
president, business de- tools available through CLS to engage
in cutting-edge strategies, such as ring-
These systems were often implemented
to fulfil a new product need, and few of
velopment, Fundtech fencing, to better understand and manage these systems resulted in the replacement
Lehman Brothers’ collapse last year and their positions. of older systems.
the financial crisis have highlighted the In selecting a vendor product, As a result, they were integrated
systemic risks in the business of settlement banks will also gain greatly in the without regard to enterprise architecture
of complex financial transactions. At the implementation expertise of their new in an ad-hoc manner. Each of those
same time, the business is not getting any partner for their CLS project. They systems processes banking transactions
simpler. More asset classes are becoming immediately gain the insights and in different ways, using different formats,
part of the trading mix and, with them, the knowledge acquired during the experiences and requires different levels of support by
domain of settlement schemes is becoming of other CLS projects. This gives the bank auxiliary processes, such as compliance
more and more complex and risk prone. confidence they will be entering into CLS screening.
There has therefore never been a better operations in the most efficient and cost Mergers, acquisitions, and different
time for firms to seek out the stability and effective manner. n national banking schemes, further
efficiency of systems designed to mitigate complicate matters - it is easy to see
the risks of participating in CLS. how the environment has become
Squashing Settlement Risk Why does the quite unmanageable, and potentially
In addition to removing settlement risk,
CLS offers many operational and liquidity
banking in- unreliable. For these reasons, banks seek
a blueprint for developing an architecture
benefits, leading to significant cost savings. dustry need model that will enable them to gradually
replace components of their current IT
For example, CLS members base their
daily funding requirements on a multi-
standards? infrastructures over time as business cases
lateral net position, rather than gross Colin Kerr, permit. Developing standards that improve
interoperability and reduce costs must be
transaction-by-transaction funding, which
reduces necessary daily funding by 95%. Industry viewed as a major enabler of efficiencies.
Accordingly, CLS members have to
fund less than USD50 billion a day for
Manager, Payments and The work of BIAN (Banking Industry
Architecture Network
every USD1 trillion of value settled. Core Banking World- aims to address this challenge, and is
complementary to the message level
CLS members also enjoy the benefits
of straight-through processing, lowered
wide Financial Services, specifications for ISO20022.
payment volumes and fewer failed Microsoft Corp. BIAN recognises that although no
two banks are the same, the development
This is actually a fair question.  of industry architecture models and
Similar benefits can be offered by a
In fact, it can be said that the banking standards for specific banking services can
settlement member to its third parties
industry has always had standards, and provide this foundational blueprint.
through their CLS back office solutions. A
that the last thing it needs is yet more. Adopting these models will enable
comprehensive CLS back office will offer
But the reality is that the type of banks to implement a consistent service
Service Level Agreements with several
standards employed to date, particularly oriented architecture (SOA) across all
payment schedules and funding options
in the area of payments processing, have technology platforms, whether they decide
that can dynamically execute best practice
been generally designed to be an enabler to build or buy software components.
STP rules that meet the needs and risk
of communication among industry Leveraging architecture and message-
profile of a particular CLS third party.
participants – but less so a model for how based standards will enable banks to
Get More Out of CLS: Key Considerations
a bank could or should operate. become more efficient via streamlined
- Offer third-party services
Certainly the formation of standards integration of systems and processes.
- Streamline risk management
at the transactional level is important, as As a result, the delivery of such
- Improve compliance
evidenced by the initiatives mandated by standards will help the banking industry
- Participate in a growing community of
the Single Euro Payments Area (SEPA) address the key market imperative to drive
and the development of ISO20022, but the cost reductions through greater efficiencies
- Enhance treasury functions
primary purpose is to allow structure and and organisational flexibility. n
- Optimise central bank relationships


1-17 ISJ42.indd 17 20/08/2009 15:22


Corporate actions ISJ Investor Services Journal

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Votes are in Corporate actions remain a significant pro-

cessing task, finds Anthony Harrington.
There is no doubt that the
administration of corporate events is one very clear picture of the issues that the
the most demanding responsibilities for client might have with that particular
any custodian to deal with. company. “The kind of thing we highlight
There are many facets and aspects to might be the issue of the separation
dealing accurately with custody events of chairman and chief executive roles,
on behalf of beneficial owners. Accessing in companies where the two roles are
corporate actions information off, say, a combined in a single individual. The
real time feed from a provider like SWIFT, options for the client, if they object to this
is only the first part of the challenge and are looking to improve governance in
Providing a full service for beneficial their holdings, might be to vote against the
owners involves adding value across a appointment of the individual concerned,
number of fronts. or to take an even stronger line and oppose
The tasks involved range from the approval of the report and accounts,”
switching dividends from a pool of Hewitt says.
domestic and international securities to Undoubtedly one of the hottest
a common currency to ensuring that all voting topics at the moment is the issue
holders have the chance to exercise their of executive and Board remuneration
full voting rights on all the securities they and bonuses, particularly in the financial
own. services sector. “Shareholders here have the
Paul Hewitt is business development obvious tool of the remuneration report,
Manager at Manifest, which specialises in which has to go to a shareholder vote, and
proxy voting. they also have an advisory vote on the
As he explains, processing voting
instructions for clients is probably the
One of the hottest remuneration practices and structures,”
Hewitt says.
most demanding of all the corporate
actions to which an administrator has
voting topics at the In addition, there is the election of

moment is the issue

directors involved with the remuneration
to react. Manifest’s client base are fund committee, particularly if the chairman
managers, pension funds and some
sovereign wealth funds. of executive and of the remuneration committee is up for
board remuneration
Their clients, by the nature of their Risk management is another hot topic
activities, hold large equity portfolios right now, particularly if there are links
and Manifest provides a voting platform
which allows them to specify their voting and bonuses, with how executives below board level
are incentivised to deliver performance.
instructions, with the service acting as
the back office instruction fulfilment particularly in “It is becoming increasingly clear that
investors are taking an interest in the
That is easy to say, but as Hewitt financial services internal controls within a company, so
Board responsibility for internal control
explains, proxy voting is tough to stay and the individual or individuals on the
on top of in practice without a very will be voted for them.
At a stroke, this puts the beneficial Board responsible for overseeing this could
sophisticated electronic platform. become the focus of investor concern with
Moreover, institutional fund managers owner of the shares in intellectual control
of their assets while sparing them the need respect to their re-election,” Hewitt says.
are busy folk. They can’t spend time All of this makes for a very complex
pondering which way they want to vote to get involved in the actual administration
of voting practices. picture. However, Manifest stays clear of
across a share portfolio that might contain one major area of shareholder interest and
anything up to 200 or more equities per “When they log on to our system, they
can see historic research reports written on that is M&A activity.
fund and multiple funds. “These are essentially financial
The way it works in practice, Hewitt the company. They can view their historic
voting record with the company, together investment decisions although there
says, is that his fund manager clients will are inevitably corporate governance
specify their voting policies, based on their with their voting policies and they will
have the issues that we have highlighted issues bound up with them. One thinks
reading of their end clients’ preferences in particular about the issue of which
and their own concerns as large investors. with regard to the particular company they
are looking at,” he says. directors in the two Boards will make
Manifest generates bespoke voting up the new Board. But on M&A work
recommendations for each corporate event The voting advice that Manifest
provides is triggered by aspects of the generally, when it comes to the voting
requiring a vote and all the client has to decision at the AGM or an Extraordinary
do is to accept the recommendation (or governance of the company that are of
interest to the investor. This provides a General Meeting, we take the view as a
provide further guidance) and the shares voting agency that this is an area for the


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FAX_Fullw_ISJ_081309.qxd 8/13/09 3:06 PM Page 1

Powerful corporate actions solutions

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marketplace for more than 10 years.

Leveraging our unparalleled expertise, technology

and service, we offer solutions that source, enhance, compare and
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highest degree of control over their global event information.

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For more information contact us at 877.777.5838

18-29 ISJ42.indd 19 20/08/2009 10:01

Corporate Actions ISJ Investor Services Journal
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professional financial investors to take any sale or dealing in those shares until
a set number of days after the meeting if Peters’ words involves the identification
responsibility,” Hewitt says.
the shareholder chooses to register their of a security’s ultimate beneficial owner. F
shares to vote. As Hewitt points out, fund “In the Netherlands, there will be new
Commenting on the “big picture” view legislation expected in early 2010 which Eu
of proxy voting, Hewitt says that one has managers hate this since it leaves them
powerless to act if a company in which will make it mandatory for end investors 9
to remember that voting, as an activity, to disclose their identity to issuers. Once
is not something the investor gets paid
to do. “There are aspects of fiduciary
they have a stake crashes during that
blocked period. As a consequence, they this happens, investors can communicate
directly with issuers when it comes
responsibility about exercising one’s voting
rights, but it costs money and time to
will quite often opt not to vote if there is a
share blocking mechanism in place. to voting and they will then be in a
position to get voting and other relevant
vote,” he points out. Many global custodian banks and
infrastructure providers like Euroclear and information directly from the issuer,” says
This means that some investors will Peters. At present, it is possible for an
only vote a certain proportion of their
equities. Overseas equities in which they
Clearstream have been working on beefing
up their corporate action/corporate event objecting beneficial owner to be totally
anonymous to the issuer in some markets,
have a small holding, where their vote will services and some have been lending
their weight to cross-border initiatives to such as in the UK and the US.
get submerged in the general vote, often Another issue where there is as yet little
hold few attractions. However, demand for harmonise practices around corporate
events. Denis Peters, Communications harmonisation is tax collection practices.
proxy voting services in general is growing There is no equivalent, for example, of the
hugely, he says. Director at Euroclear, for example, says
that Euroclear has been doing a good deal UK’s stamp duty in other markets.
“Even before last year’s crash, the “There are clearly improvements to
popularity of exercising shareholder rights
was growing enormously. There has been “Investors are be made with issuers communicating
corporate action event information to
a marked increase in socially responsible
investment practices and fund managers taking an interest beneficial owners and intermediaries.
SWIFT plays a key role as the gateway
generally will have a very keen sense of
what their end clients expect them to do by in the internal for most ISO standards and messages,
particularly within the interbank
way of voting,” he says.
In fact the stream of investor queries in
controls within a community.
However, Euroclear has become one
to fund managers via emails and suchlike
makes it plain to managers that they need
company” of the first entities other than SWIFT
to receive approval for a new set of ISO
to be voting their shares where possible. 20022 messages to be used between issuer-
Even fund managers running passive
investment portfolios should feel the need
to be active shareholders (as opposed to
Paul Hewitt, appointed agents and central securities
depositories when communicating
being “shareholder activists, ie someone Manifest both corporate action information and
instructions between them,” he says.
who sets out to force through changes to In 2010, Euroclear intends to launch a
company policy through voting pressure). single platform for custody across five of
On 3 August this year, the European of work to harmonise corporate action
rules and procedures across markets. its seven EU markets, and the international
Shareholder Rights Directive became law CSD, Euroclear Bank, which will process
across the EU. This directive has had a “In the three Euronext markets,
Belgium, France and the Netherlands, all domestic and cross-border custody
particularly positive impact on corporate and corporate events for securities held by
actions as far as beneficial owners are where we recently launched a single
platform, we have delivered Europe’s those entities.
concerned. “Our take on the Directive Sweden and Finland will come onto
is that it has been a very good thing. It frist group of markets working with
harmonised market rules and practices,” the platform in 2012. “This will comprise
has highlighted the need for minimum corporate actions covering more than 60%
common standards around corporate says Peters.
Euroclear identified more than 250 of the blue-chip equities in Europe and
events across Europe,” Hewitt says. more than 50% of domestic fixed-income
One of the changes introduced has different market practices across its five
markets and has worked with market securities in Europe,” Peters says.
been the setting of a minimum of 21 days Laura Pollard, Executive Vice President
notice before the calling of a shareholder participants, step by step, to harmonise
each of these disparate practices. at Fidelity ActionsXchange says that the
meeting, and the establishment of a riskiest and most complex corporate
record date, which is the date on which One example Peters gives is the record
date. In the French market, for example, event tasks for any custody service are
the shareholdings in the company are those involving any voluntary or elective
essentially established by the registrar for there was no such concept, so Euroclear
worked with the French market and corporate actions. “A miscalculation of the
the issuer, and the voting rights pertaining due dates, time frames or payout options
to each shareholder. authorities to introduce a record date to
French securities to determine when, for can cost the client firm millions here,”
“The practice of share blocking, in she says. Fidelity ActionsXchange looks
particular was a concern for us,” says example, a security is traded and settled
ex-dividend. This is now a common to combine its analytical expertise, data
Hewitt. This is where beneficial owners validation capabilities and technology
had to have all their shares registered at a measure across the seven Euroclear group
markets. to provide comprehensive, timely and
certain bank by a certain deadline before accurate information, along with tools
the meeting. Moreover there could not be Another initiative that is still patchy, in


18-29 ISJ42.indd 20 20/08/2009 10:01 5313 A

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18-29 ISJ42.indd
5313 Advert 21
210x276mm.indd 1 20/08/2009 10:01
14/8/09 16:59:35
Corporate Actions ISJ |ISJ Investor
Investor Services
Services Journal
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already complicated information. “Because

to help automate manually intensive
processes. of this, firms are increasingly turning “Both investors
and regulatory
Proxy voting has been the subject of to providers with the market expertise
much increased scrutiny recently, she says. to act as partners in managing risk who
“Both investors and regulatory bodies
are pushing for greater transparency into
can provide guidance and support to
transform their data into actionable bodies are pushing
investment strategies, corporate actions
and related corporate announcements.
intelligence,” she says.
Payment too, is not without its for greater
“Investors want insight into the
entire voting lifecycle and value highly
complexity. “Payment of dividends in the
currency of choice is highly dependent on transparency
transparent processes that can track,
control and account for election decisions
the timing of the dividend, actual terms of
the declaration and current FX rates. It is
into investment
across all stages,” she adds.
ActionsXchange provides proxy meeting
an area where data validation and careful
analyst review is paramount.
notices and supporting regulatory filings “We consistently work closely with
as part of its offering and Pollard says our clients to understand their evolving
that it is currently exploring technology needs. As such, currency options are
something we have identified as being a
Laura Pollard,
to support a more robust and compliant
downstream event management lifecycle. top priority and will be included in our
upcoming release,” Pollard concludes.
There is no doubt that for investors
trading across multiple borders, the Fidelity ActionsXchange provides
different regulatory, legal and data rules flexible, technology-driven global event
that apply from market to market really do management solutions for many of the
add an additional layer of complexity to world’s financial industry leaders. n

Why is vote confirmation important?

Elizabeth Maiellano, Senior Director, Institutional Product and
Strategy at Broadridge Financial Solutions
Those outside the world of record date, or entitlement confidence in the process. because the entity that has
corporate governance may could be determined based on However, the time has come the information provides it
ask why vote confirmation the shareholder’s position as for the industry to deliver on directly to the voting party.
is important, while those of the meeting date. vote confirmation, rather than In most markets, Broadridge
involved would instead Voting entitlement relying on individual record and other proxy processors
ask why it must be so calculations are made based keeping and reporting. are dependent on the various
problematic. on settled shares held in It is a matter of confidence entities in the chain to
The term “vote an account that are not and integrity. The obstacle provide their processing
confirmation” seems to define pledged, on loan or otherwise to implementing vote status of the instruction.
itself: a vote instruction is hypothecated. confirmation is the active Broadridge recognises that
attested to by the receiver. Institutional investors involvement of every all parties in the industry
However, in the world of continue to have a growing organisation involved in the must be involved in the
proxy, the act of authorising concern: are all of their process. confirmation process in order
someone to vote on matters eligible shares, or those Today, Broadridge Financial for it to be effective.
of corporate governance on shares earmarked for Solutions, Inc. is able to Partnering with Yale’s
behalf of someone else can voting, and the associated confirm voting in the US Millstein Center, Broadridge
be complex and fragmented, vote instructions actually where it acts as tabulator. will co-host an industry
making confirmation of that represented at shareholder In 2007, Broadridge conference to examine ways
action even more difficult. meetings? implemented a vote to achieve complete vote
Defining vote entitlement In 2004, The Myner’s Report confirmation process through confirmation.
is the first step in the proxy outlined a comprehensive its ProxyEdge® system for Today, commitment to
voting process. action program to remove those US corporate issuers the process varies. There
An investor’s entitlement to obstacles to casting votes by for which it provides direct are obstacles to overcome:
vote at a shareholder meeting institutional investors at UK tabulation services. Users cost, transparency of data,
is dependent on the class of company meetings. of the platform are able to and automation. Issuers,
shares held, a determination One step included urging receive confirmation that investors, custodians and
based on the records of the institutional investors to their vote instructions were intermediaries must work
company shareholder register annually review a sampling recorded at these shareholder together to ensure that vote
or custodial records. of shareholder meetings in meetings. In this case, confirmation is the accepted
Markets may establish a order to provide a level of transparency is possible standard. n


18-29 ISJ42.indd 22 20/08/2009 10:01

ISJ Investor Services Journal Sibos

Clear2Pay is an innovative financial technology Building on over 23 years of successful presence

company focused on delivering globally in capital markets with over 160 clients and
applicable solutions for secure, timely electronic 32,000 users worldwide, Murex has developed
payments. Headquartered in Belgium, the an unmatched competence in the design and
company facilitates banks and financial implementation of cross-asset trading, risk
organisations in their provision of payments management and processing solutions for
services. Clear2Pay’s technology helps to reduce the world’s top buy- and sell-side financial
transactions processing costs, and to deliver new, institutions, corporations and utilities.
compelling payment services in a competitive MXpress™, the latest Murex implementation
way. methodology, leverages the wealth of business content accumulated through a
The Open Payment Framework is built entirely on a Service Oriented combination of pre-packaging of best practices and client-tailored approach
Architecture (SOA) delivering common, reusable services consisting of a enabling an accelerated process of delivery. A team of over 1150 specialists,
comprehensive data model, choreographed payment business processes located in Asia, Europe and America are dedicated to providing clients with the
and configurable services including parsing, validation, cost based routing, best support in the industry. Key Services: Featuring unrivalled product coverage
warehousing security, auditing and many more. From this core framework, and leading functionality in each asset class (interest rates, foreign exchange,
Clear2Pay has created pre-defined solutions including the Bank Payment equity, credit, securities and commodity instruments), the platform delivers
Hub, Imaged Check Processing, SEPA, International Payments, EBPP, superior power and flexibility, from high volume trading to exotic product
Remittance and eBanking. In addition Clear2Pay offers a wide range of card structuring. MX Risk Manager provides cutting edge tools for the management
related payments products and testing tools. At Sibos 2009 Clear2Pay will and control of credit risk, market risk & liquidity risk and MX Collateral
also demonstrate its set of payment solutions for the Chinese market and the Manager enables enterprise-wide collateral management and margin trading –
new ‘SEPA in a box’ solution for fast track compliance, as well as the newly both solutions are available as stand-alone offerings. Any industry process can
launched iPhone mobile banking solution. Clients include global and major be implemented and extended as needed through addition of external tasks or
regional financial institutions such as ING, Banco Santander, Crédit Agricole, by integration into enterprise-level workflows. Highly customisable, our fully
Nordea, Abbey National, Bank of East Asia, Shenzhen Ping An Bank, United fledged workflows are available pre-packaged or tailor-made in order to fulfil
Arab Bank, ANZ and Commonwealth Bank. Clear2Pay operates out of 13 your business requirements. Pre-and post-trade compliance are provided on a
offices and currently employs over 450 staff. wide variety of rule types. The solution introduces a benchmark in scalability
through its innovative multi-business, multi-entity architecture.
Contact detail: – booth 1-D18 Key Locations:
Regional Offices: Paris, France (Headquarters) – Singapore, Singapore – New
Clear2Pay NV SA York, United States of America
Schaliënhoevedreef 20A Other Offices: Beijing (China) - Beirut (Lebanon) – Dublin (Ireland) – London
2800 Mechelen (United Kingdom) – Luxembourg (Luxembourg) – Sydney (Australia)
Belgium Key Contacts (incl. telephone numbers and email)
T: +32 15 79 52 00 Paris, France (Headquarters) – Telephone: +33 1 44 05 32 00 –
Mark Hartley, VP Strategy and Business Development/CMO email:; Singapore, Singapore – Telephone: +65 621 602 88 –
E: email:
New York, United States of America – Telephone: +1 212 381 4300 –

eSecLending is a leading full-service

securities lending agent. Its program
has been adopted by some of the
world’s largest and most sophisticated
institutional investors including pension funds, mutual funds, investment
managers and insurance companies. eSecLending has introduced investment With an extensive network that spans over 70 countries, well-positioned in the
management practices to the securities lending industry, offering beneficial emerging trade and investment corridors across Asia, Africa and the Middle
owners an alternative to the custodial lending model. Their philosophy is East, Standard Chartered’s Wholesale Banking business combines global
focused on providing clients with comprehensive risk management, high touch capabilities with local expertise to develop innovative products and services to
client service, program customization and optimal returns. These themes are meet the diverse needs of our corporate and institutional clients in some of the
executed through their approach, which is to begin each lending program world’s most dynamic markets.
with a competitive blind auction to determine the optimal route to market
whether it is via exclusives or discretionary lending. Having built their business Building on a rich banking heritage, Standard Chartered is noted for a client-
to incorporate investment practices such as the use of specialists, multiple- focused approach to business, unmatched on-the-ground expertise and a
managers, unbundling, price transparency, and competition, their approach solid track record of innovative, award-winning financial services solutions,
ensures best execution and also provides clients with greater control over their reflecting our continued commitment to power our clients’ ambitions.
programs, allowing them to more effectively monitor and mitigate risks and
counterparty relationships. As one of Asia’s leading custodians, Standard Chartered serves global, regional
Key Locations: and local custodians and broker-dealers, as well as local and regional fund
Boston managers. The Bank plays a key role in promoting the development of these
175 Federal Street, 11th Floor, Boston, MA 02110, United States of America markets and keeping the international investor community informed of
+1 617 204 4500 industry developments across the region.
10 King William Street, 1st Floor, London, EC4N 7TW United Kingdom
+44 (0) 20 7469 6000 C: Giles Elliott, Global Head, Securities Services
Sydney P: +65 6517 0134
60 Castlereagh Street, 17th Floor, Sydney, NSW 2000, Australia E:
+61 (0) 2 9220 3610 W:
Key Contacts:
Christopher Jaynes, Co-Chief Executive Officer,
+1 617 204 4500
Karen O’Connor, Co-Chief Executive Officer,
+1 617 204 4500

18-29 ISJ42.indd 23 20/08/2009 10:01

Settlement ISJ |ISJ Investor
Investor Services
Services Journal
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The quest for pan-Asian settlement

continues to play the role of the world’s
Market enthusiasm doesn’t diminish the post- reserve currency,” he says. Discussions are
taking place about whether Asian countries
trade task in the bond and equity markets. would like to move away from the US
dollar towards an alternative reserve
For some time now Asian governments around as to where to locate the proposed currency based on some kind of a basket of
have realised that the fragmented state of pan-Asian ICSD, it rapidly becomes currencies, but these ideas are still in their
the Asian bond market and equity market obvious that the Japanese expect it to be infancy. So currency harmonisation and
settlement infrastructure is putting the in Tokyo, the Chinese think it should be openness remains a stumbling block.
region at a serious global disadvantage. in Shanghai and so on, with every country “Today, Hong Kong has some freedom
Many initiatives are under way, including arguing that it is the “natural” home for to trade the Renminbi, which has been
the Asian Bond Markets Initiative (ABMI). any pan-Asian infrastructure entity. allowed to appreciate gradually against
However, despite political and market However, Chan argues that one should the dollar. There is a clear awareness on
willingness, building a trans-border not let the inevitable national politicking the part of the Chinese government that
settlement infrastructure that unites cloud the fact that there is a real desire people who trade with China need to be
independent markets in various stages of across the region, both from investors able to pay in an efficient way and if you
development is a mammoth task. and at national government levels to can get access to the Renminbi for trade,
The ABMI was the prime focus of harmonise and standardise the bond and then you have begun to establish the
the Asian Bond Clearing and Settlement equity markets in the region – however infrastructure that can show how things
Conference on 23 June this year, held Herculean that task might look at present. can move forward quite rapidly in the
under the auspices of the Hong Kong Philip Reichardt, director and head of region,” he says.
Monetary Authority. The initiative itself Euroclear’s International Collaboration However, Jonathan Butterfield,
was launched two years ago by the finance Department says that one of the major executive vice-president, marketing, for
ministers of the ASEAN + 3 group of problems is that while some of the CLS Bank International, cautions that any
countries (South East Asia plus China, participating countries, such as Japan, pan-Asian settlement system is hugely
Japan and Korea). Its aim was to develop have very mature, open structures, ambitious and it is by no means clear that
efficient and liquid bond markets in the others are in various stages of opening everyone in the region wants one. Many
region, and to foster a high degree of up. “The clearest example is mainland local CSDs for example, he points out,
financial independence in Asia. The project China, where if foreign investors want would lose lucrative, high margin revenues
was given to a Group of Experts (GoE) in to buy securities, they have to do it around the edges of their operation to
December 2007, who were asked to come through a Qualified Financial Investment such a system. “The most obvious place to
up with proposals. Intermediary in China. Plus, of course, the start is the bond market, but even there,
As Alton Chan, Executive Director of Chinese currency is still not a freely traded a linking system, which isn’t a grandiose
Relationship Management, Asia/Pacific at currency, though there are signs that it is scheme to “boil the ocean”, would be
Clearstream explains, the Group of Experts opening up little by little,” he says. much more sensible than an all singing,
is now set to present two alternatives to the The drive for harmonisation and a all dancing, all-Asia owned independent
ASEAN + 3 finance ministers in January pan Asian settlement system goes back entity,” he says.
2010. “The two options on the table are the to the 1997 crisis, which started with Butterfield warns that what really
creation of an Asian International Central the Thai baht. Securities denominated matters to investors is pricing and liquidity
Securities Depository (ICSD) or a CSD in baht and held as collateral plunged in so that they can trade in and out. If
link up that would embrace a number value and with a knock-on effect which settlement were so expensive that it knocks
of existing country specific CSDs, much propagated through the banks of the a few basis points off a trade, then that
along the lines of the European model, and region. This led the drive for pan-Asian will be a big issue for investors. But for
would be a kind of virtual integration of settlement, particularly as analysis of the the most part settlement and clearing
existing CSDs in the region,” he says. 1997 crisis showed that one of the causes costs will be a fractional part of any deal.
These are two radically different was undoubtedly the lack of an Asian bond “You have to remember that while a pan-
options - creating a new ICSD would cost market, Reichardt says. Asian bond market looks the obvious
hundreds of millions of dollars and the However, he points out that there place to start, many Asian bonds are still
cost will take some visionary thinking to is more than one group of countries denominated in distant currencies and
justify in the early years. There are also discussing their own initiatives, so there the dollar still dominates. This annoys
huge challenges, Chan says, with forging is no one, single pan-Asian initiative people in Asia since New York is asleep in
links between national CSDs. “Every dominating play right now. “Today a the middle of the Asian trading day, but
country in the region at present has a fully great deal of the capital raising by Asian what do you get if you bring it all back to
functioning CSD, but it is relatively new in companies ends up with international Asia? You probably fracture your dollar
most of them and is considered a national bonds denominated in US dollars. Because flows, since the bulk will still go through
asset. So merging it with other nations’ there is no one standard dominant New York. I think the jury is still out on
CSDs is a real political challenge,” he says. currency in Asia, the pivot currency whether a pan-Asian settlement systems
In a similar vein, as soon as talk gets always ends up being the US dollar, which infrastructure is inevitable,” he says. n


18-29 ISJ42.indd 24 19/08/2009 10:47
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18-29 ISJ42.indd 25 20/08/2009 10:01
Custody ISJ | ISJ Investor
Investor Services
Services Journal
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Providing custody in Spain is

Tough nut to crack still difficult for foreign firms,
finds Kimberley Ferguson
Internationally, assets in custody
exceed USD65 trillion, with USD23 trillion
of this belonging to the world’s biggest worldwide investment funds by number,
global custody player, BNY Mellon Asset but only 2% of Assets Under Management
Servicing. It is a big market, and in Spain, (AUM). The balance sheets of most of
one that is dominated by four main firms: the Spanish asset managers are very weak,
BNP Paribas, Citibank, and two major with one in four currently in severe deficit.
Spanish banks, Banco Santander and José María Alonso-Gamo, managing
BBVA. director of RBC Dexia, Spain, suggests that
However, the Spanish custody market a restructuring of the industry is a must.
itself is one very closely protected by “Asset managers with less than �500 million
stringent legislation - particularly when it in AUM may need to explore mergers to
comes to the entry of a foreign custodian. survive,” he explains. “Due to the increase
For example, only commercial and in costs and income reductions, mergers
savings banks, stockbroker entities and between funds and asset managers are how
credit co-operatives can act as custodian we foresee the industry in the short term.”
entities in Spain. And this industry has no plans to open up
What is more, their corporate domicile to more foreign custodians any time soon.
and central administration must always main source of trouble for non-resident Alvaro Camunas, Head of BNP Paribas
be local, and prior authorisation from the investors. However, this has also become Securities Services in Spain, commented
Spanish Securities Regulator, the omisión an opportunity for domestic players to that “during the last twelve months, the
Nacional del Mercado de Valores (CNMV), enhance their service and product offering local regulators have been strengthening
is required. Marta de Alba, Executive to non-resident investors to facilitate their requirements, and we feel that the
Director Securities Services from BBVA, operating in the Spanish market and current domestic environment is now even
Spain believes that the tightly controlled allowing domestic players to take part of less accessible to foreign service providers,
market is what makes Spain distinctive. the pre-settlement functions out of the in particular, areas of the Depositary Bank
“Whilst it has probably acted as a barrier non-resident client’s flow and into our and Fund Administration services”.
to the development of business in the years When mentioning the recent
of growth, we now see it as an advantage in
the face of the current crisis,” he says.
“Asset managers strengthening of local regulatory
A senior member of Banco Santander’s with less than requirements, Mr Camunas is specifically
referring to those published in 2008 and
Securities and Listed Derivatives Services
team explained that “Spanish legislation EUR500 million 2009 by the CNMV. Examples of these
circulars which impact the depository
may need to explore
covering the equities world is complex and entities acting as custodians of Spanish
makes the custody and settlement process funds include C 3/2008 on the accounting
something for experts only. Not knowing
the market and its peculiarities can prove mergers to survive” rules of funds, C 4 /2008 on the public
information to be prepared by funds, and
costly and many a client has had their C 3/2009 on the reports to be provided by
fingers burnt. Depository Bank entities.
However, the Spanish market has been
probably the most attractive market in Jose Maria Alonso- Mr Camunas goes on to explain: “We
believe that this legal framework reinforces
Europe over the past 10 years due to the
high returns offered by the companies Gamo, RBC Dexia local regulatory requirements making the
access to foreign custodians more difficult
included in the IBEX-35 index and this has own back-office flows and procedures. than ever. The fact that UCITS IV does not
made the “risk” of trading in Spain worth This has greatly helped our clients to contemplate the European passport for
while for all. reduce headcount and risk exposure and depository entities is, of course, a further
The most notorious aspect of the has allowed us to add significant value drawback for these entities.”
custody and settlement process and to our clients and expand our product In regards to the confidence Spanish
legislation is the technical references (or offering reaching beyond run of the mill investors have on funds, Mr Camunas
RR’s as they are commonly know) as custody and settlement services”. believes that the latest financial events
well as the need for the registration of The Spanish fund market itself is have reinforced their already conservative
securities as part of the settlement process. characterised by extreme fragmentation. profile.
These are the two key points that make With more than 6,000 investment funds “This, linked with the slow recovery
the Spanish market different from most and SICAVs (open-ended collective of the main financial indexes and the
other European venues as well as the investment schemes), it represents 10% of reinforcement of regulatory requirements,


18-29 ISJ42.indd 26 20/08/2009 10:01

ISJ Investor Services Journal Custody

does create a very challenging equities to fixed income assets,” explains organisational impact on our teams, as
environment for all the domestic fund Mr Camunas. well as tightening our margins.”
industry,” he says. However, this is not For RBC Dexia, Mr Alonso-Gamo Another change of note is the
all bad news. “We believe this presents a describes a different experience. “The surging of interest in the process of
good opportunity to reinforce the level of rising stars within the underlying assets outsourcing. “This is driven by three key
professionalism in the market, as only the of local investment funds are public debt points,” explains de Alba.
custodians showing the adequate level of and bank deposits. On the other side, “Firstly, it is due the increasing
recourses, expertise and commitment will fund managers are still very reluctant to complexity of the assets held in clients’
be able to subsist.” trade in high yield fixed income, equities, portfolios, making them more difficult
The Spanish market itself has also collateralised debt obligations and other to administrate and settle. Secondly,
undergone significant change over structured vehicles. Volumes traded on communication has vastly improved
the last twelve months. For example, the stock exchange are still at relatively at a global level, and finally, due to the
many asset managers owned by banks low levels, even though some innovative necessary reductions and concentration of
have now been vertically integrated, products such as exchange-traded funds efforts in core business areas, outsourcing
making them accountable for not and reverse exchange-traded funds are is now more pertinent.” Mr Camunas
only the asset management, but the gaining market share.” believes this incremental increase in
associated administration, risk control So how do these changes impact the outsourcing presents room for potential.
and compliance issues. According to Mr custodian? “Most of these assets, mainly “Entities that were not even considering
Alonso-Gamo, this process was “possible public debt and bank deposits, are less outsourcing some of their non-core
with buoyant markets, when analytical profitable for custodian banks,” Mr activities some months ago are now
accountancy was not a priority”. He added: Alonso-Gamo states. “The fees charged for knocking on our door to ask what
“Since the last quarter of 2008 the main custody of public debt are not significant, solutions we could provide. This includes
aims are no longer growth at any cost, but and interest rates worldwide are at depository, private and retail banking
a more logical focus on company profit their lowest level, so margins are being back-office services, and is probably the
and loss. The market trends change so squeezed.” area of fastest growth in our business
rapidly, meaning that new regulatory rules For BNP Paribas, Mr Camunas currently.”
have to be implemented at short notice, mentioned the impact that the The close scrutiny of the CNMV
and as a result, the P&L has turned red.” redemptions carried-out on both and the typically conservative nature of
For custodians specifically, change has traditional funds and, more significantly, Spanish investors, plans to open up to
occurred in the asset mix of client funds. on alternative funds. “This has had, more foreign custodians are not set to
“Last year, we saw a significant shift from of course, a relevant operational and materialise any time soon. n

The leading provider of Custody and Clearing Services in Norway

DnB NOR proactive, adding value, delivering quality

Offering: Commitment, Knowledge, Experience and Excellent Service

For further information please contact:
Head of Securities Services - Jan B. Penne:
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e-mail: •

18-29 ISJ42.indd 27 20/08/2009 10:01

38032_DnBNOR_nordicpartner_tgs.indd 1 26-09-08 14:55:18
Looking to Asia ISJ | ISJ Investor
Investor Services
Services Journal
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

On the spot: Investor Services, Asia

The global credit meltdown will result in of their risk management strategy – a
What does the tightening of financial regulations. relatively new development for Asia.
Asia want Investors are also being forced back to
basics, rediscovering the fundamental
For many, a data-centric model is being
explored that centralises all their securities,
next? Re- risk-reward theorem and adopting new accounting, analytic and performance data
approaches to assessing and mitigating in an effort to not only provide greater
sponse by counterparty, market and business risk. transparency within their portfolios, but to
Francis Braekvelt, Transformational changes like these create
opportunities and challenges alike for
meet the anticipated regulatory oversight.
We have seen a clear flight to strength
head of planning and market participants and service providers. trend sweep across Asia as they look for
The recent market disruptions have trusted partners and apply stringent due
development, Asia Pa- brought home to many institutions that diligence processes to counterparty and
cific, at BNY Mellon they are perhaps not as well equipped to
handle post-trade processing and related
service provider selection.
In response, service providers will have
From where I sit, the future for Asia activities in-house as they might have to introduce customised, automated and
appears brighter than for any other thought. Factor in the cost of upgrading innovative solutions focusing on data
region around the world. The lessons and maintaining in-house solutions, and management and transfer protocols, and
learned from the 1997 Asian financial we expect to see more firms partnering other value added services.
crisis – the need for stronger regulation with providers like ourselves to take With renewed investor realism and
of the financial sector as well as advantage of sophisticated valuation and given the vibrant markets, emerging
improved governance through increased monitoring solutions we offer to enhance sectors (such as pensions) and increasingly
transparency and accountability – transparency and mitigate operational risk. sophisticated and affluent investors in
cushioned our region from some of the Many institutions are also placing Asia, we are optimistic about the region’s
killer punches that hit home elsewhere. considerable attention on data future opportunities and its role as a
However, we have not been untouched. management as a central component growth engine. n

How do changing markets affect the valuation challenge?

Response by Nick Quin, director sales and marketing, Asia,
SimCorp Asia Pty. Ltd information are then fed back into risk
With the increasing complexity of valuation processes. Does lack of liquidity and performance systems separately with
Asian jurisdictions, instrument types, affect market price validity? How do you data replication across multiple systems,
fund structures and investment price new and sophisticated instruments - leading to data disparity and more
opportunities, valuation has become can your TPA handle them? reconciliation and auditing costs. Asian
a key issue. Arguably, asset managers Instrument price data is received from regions require sophisticated investor
have less information on underlying the broker by the portfolio manager and regulatory reporting aggregated
investment risks when greater access to through order execution processes, regionally then broken down by country
data supporting their strategies, asset onto the TPA/custody operations, then and individual tax requirements.
allocation and instrument coverage is posted into accounting and valuation This requires transparency and timely
required, especially as Asian regulators systems. With a traditional investment access to consistent information during
tighten rules around emerging markets management system this would be handled valuation - only be achieved through
and structured products. by a series of disparate systems, linked a seamless processing system based on
As market sophistication has together with middleware or other form a single core database. Information is
increased, it has been possible to obtain of interfacing. Each system would have its entered once and is accessible enterprise-
prices only from the selling broker, own database. wide, providing transparency and
which leads to inherent counterparty Pricing validation control is thus immediate accessibility. The fund
risks affecting the valuation of the entire limited as the data enters the unit manager has a reliable view across assets
fund/unit price. pricing system, which impacts investors’ classes, portfolios and holdings across the
The falling market makes us question results. Valuations, cash and holdings region. n


18-29 ISJ42.indd 28 20/08/2009 10:01


18-29 ISJ42.indd 29 20/08/2009 10:01

Custody ISJ Investor Services Journal

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

The custody interview: SEB

ISJ asks Ulf Norén (pictured below), global head of sub-custody client
relations, SEB, Custody Services, Merchant Banking, about expanding
a custody business and today’s market challenges.
or acquisitive growth? How do you select 10 years later has lead us to a market
1. How do you approach and overcome
local partners? leading position. The three Baltic banks
issues in managing the geographical
where a combination of acquisition
diversity across all your markets?
It is of great importance to obtain and organic growth where a very strong
intelligence and go for a detailed market position was in place in Lithuania while
SEB’s regional model saw the light of
analysis. Here one must think thoroughly Estonia and Latvia was weaker from a
day in 1999 when Denmark, Finland and
to define where you would like to start and market share standpoint.
Norway was opened up as greenfielding
what the medium term objectives are. Assimilating business into the regional
The approach is different depending on model has lead to organic growth and we
The first obstacle to deal with is
the level of maturity, how crowded the are now the leader in this region, having
the realisation that also neighbouring
market is and its complexity. Basically, you also helped us to offer a seven-market
countries are very different and the
have four options: geographical and trading environmental
further away from home turf you get, the
region for offering. Germany was in place
more diversity issues you are bound to
1) Grow organically with substantial banking operations
2) Grow by way of acquisition through the acquisition of BfG Bank.
You need to organise in a way where
3) Enter into a joint venture The reason for the addition of custody
objectives of consistency, same ‘touch
4) Keep out was to secure organisational and business
and feel’ and overall corporate and client
model assimilation of the global custody
objectives are set first but without ignoring
SEB’s main strategy is to follow the business and to make substantial savings
cultural differences, language differences,
bank - only when we have a SEB banking on our own German portfolio.
the historical reasons for given market
operations structure in place are we in The sub-custody part did therefore
structures, interacting with local major
total control of the custody set up and lead a fairly quiet life until we started to
players, habits, level of authority respect,
delivery. market it to Nordic/Baltic institutions
politics, side plays, influencing and
That means that alternative 1, 2 and and lately also to a wider array of
lobbying etc.
4 are available to us and only in very international banks.
This need to be constantly managed
special circumstances would we explore We set up in Ukraine as we saw an
as differences will not go away but can be
the joint venture alternative as they are opportunity to grab a position in one of
used to the organisations advantage. In
hard to manage and most are deemed to the largest nations in Europe when we
the sub-custody business, a number of
an unsuccessful ending - we know of a acquired Bank Agio, and this trip has
house rules have helped us in achieving
very limited few that has had any strong been really interesting with boosting
success. market shares in the most likely most
- Direct reporting to the global head of
Our Nordic custody set up was a fully difficult, unpredictable and complex
organic growth starting in 1999 and now custody market in Europe.
- equal representation in management
- Centralisation where it makes sense
(Product management, Global Relations,
Finance) but NEVER on local operations
“Of the BRIC nations
- harmonise fee structure, IT environment,
reporting, high level product offering and
we are already in
documentation framework. With that in
place, much is done. However, things will
the ‘R’ but have no
remain different and some markets can
not be highly harmonised in a foreseeable
plans for B, I or C!”
future, f ex Ukraine. Finally, no matter
how well you become in running a
regional model, you must be outstanding
in each and every market you provide
services in.

2. How do you go about infiltrating

foreign markets: is it through organic


30-39 ISJ42.indd 30 20/08/2009 13:57

ISJ Investor Services Journal Custody

market where we intend to win more. A lot

“We are starting to regulatory mass invasion and a global need
to shrink balance sheet. If that is not a more.

see a new realism gloomy picture, then I don’t know what is.
It is important to realise that this 6. SEB has won many plaudits recently,
including ‘best Nordic sub-custodian’
among clients that business will remain, that SEB has absolute
intentions to keep playing a significant role and ‘best custodian in Sweden’. How
have you differentiated yourselves from
you get what you and that new business ideas will emerge
from the changed European playfield. your competitors?

pay for” The most obvious response to reduce

cost and increase safety has been to The first level of differentiation is in
replace bi-lateral settlement regimes for terms of coverage. After establishing a
trustworthy Nordic solution, the three
The latest on our list is Russia where we on-exchange trading for CCP-clearing Baltic subsidiaries were integrated and
started in August of last year. Russia is true - EMCF +2 in Denmark, Finland and after that expansion has happened in
greenfielding and only for sub-custody. It Sweden and Oslo Clearing + ? in Norway.
The emergence of the numerous MTFs is Germany, Ukraine and Russia.
has been our most structured market set- This means that SEB can provide a
up so far and also this is beginning to pay a response to the MiFID directive but it is recognisable SEB quality in the core area
off. already changing the trading environment
and the fragmentation of trading models of the seven Nordic/Baltic countries which
When markets are highly competitive no other competitor does on the ground.
or does not fit into strategic models you must be managed - yet another a business
opportunity. Furthermore, the very outspoken
might decide to keep out. So far, this has objective of delivering consistency,
been our strategy for UK, France and manifested on the agreement framework
Poland. 5. In Sweden, Estonia, Latvia, Lithuania
and Germany, SEB offers universal and by using one and the same
banking services, but SEB aims to be system across the Nordics is a definite
3. How do you deal with all the differentiator and will become more and
regulatory requirements of the a universal bank also in Ukraine. Why
Ukraine, and how are you going about more meaningful the closer we will come
different countries? to true marginal pricing. SEB as sub-
custodian do not mix interests but lobby
A key question, especially in the aftermath very visibly running a client agenda.
of what happened in 2008, coming on top SEB acquired Bank Agio in 2004 and This has been much appreciated as
of all the ongoing European initiatives. followed up by the 2007 acquisition of the
Kharkov based bank, Factorial Bank. This it becomes clear that the agenda is not
This is more than a handful for any hidden. We are for real, are outspoken
organisation and I believe you find the gave SEB access to nearly all important
regional and local centres of Ukraine.
answer in the first question.
We have refined the regional/local SEB is big and among the four leading “We have refined
Custodians in Ukraine but in terms of
model to an extent that we do not miss
out on initiatives and can employ an SEB traditional banking activity we are really the regional model
opinion on regulatory initiatives that
reminds of each other even in cases where When entering 2009, SEB had 1329 to an extent that we
employees in the country and a market
they are strictly local.
This means that we have a number of share of 0.43% in lending and 0.41% do not miss out on
in deposits. SEB provides service to
cases where the wheel doesn’t need to be
re-invented saving us a lot of time and approximately 15000 corporate clients and initiatives”
resources. The issue we often face is the 85000 retail clients and runs about 100
need for a large legal work force in markets branch offices in the country. and do not run much of a crap marketing
where that resource is scarce. That must Our operations in the Ukraine include
Retail Banking, Corporate Banking, agenda claiming that we ‘’are the only
be bridged by external consulting and by Nordic Custodian’’ as we are not.
putting parts of the legal and compliance Custody and Life and Asset Management.
Our fans claim that we are the best one
burden onto the management of the local The ambition is to provide banking but we have no problems realising that we
operation. services and financial solutions to
corporate clients and to meet the have one very strong competitor in the
increasing demands for broad and shape of Nordea. Both of us will continue
4. What has been the impact ofthe to win business and the sharp competition
market conditions? What are your more sophisticated banking and savings
products among private individuals. will make this a better place to be a client.
response mechanisms?
The extension of business in Ukraine
7. Are you looking to move into any new
It has of course had the immediate impact is in line with SEB’s strategy to strengthen sub- custody markets, for example the
of asset values shrinking, activity level the footprint in Eastern Europe through
organic growth an add on acquisitions. BRIC nations?
coming down somewhat due to some
institutions ceasing (either to exist or There is an ongoing consolidation
of the banking industry in Ukraine Of the BRIC nations we are already in
to drop business lines), interest levels the ‘’R’’ but have no plans for B, I or C!
travelling close to 0% has a severe effect on and despite the very critical situation Let’s see what more will be on the agenda.
revenues from interest net. for the economy it will offer continued
opportunity for further growth. SEB is As of today - no immediate plans to be
In addition you see a sharp increase
in due diligence/compliance activities, the fourth largest custodian and this is a announced though. n


30-39 ISJ42.indd 31 20/08/2009 13:57

Hedge Fund Services ISJ Investor Services Journal

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Sowing seeds for hedge growth

finds that the
Asian hedge
fund market is
set on strong
with a widening
array of services
for managers.
something that really got to them, they Morrissey, Head of Business Development
Asia is home to more than half of the
lost their liquidity and they had their and Client Services for EMEA at SEI’S
world’s population and a growing share of
concerns but that could have been out of Investment Manager Services division.
global GDP, with a vast range of languages
lack of experience with that asset class and “Asian investors are interested in getting to
and cultures. Additionally, its hedge
strategy,” he says. Asking the same question know their manager and creating a long-
fund market is relatively immature when
today, or in a month’s time, could yield an term relationship, perhaps more so than in
compared to Europe and North America
entirely different result, Enos suggests. Europe or North America.”
but this has not impacted on the services
In fact, particularly on an institutional Andrew Gordon, Head of Alternative
available to funds and in some ways has
level, there is no difference between what Investment Services for Asia Pacific at
put it ahead of the game.
Asian investors are looking for compared the Bank of New York Mellon, cites the
According to figures from Chicago-
with their counterparts in the rest of the example of a manager who is about to
based Hedge Fund Research, total capital
world – “the things that underline their use his organisation as an administrator
invested the Asian hedge fund industry
priorities right now are independence and and is “very, very focused on structuring
stood at USD65 billion at the end of Q1
transparency,” explains Akshaya Bhargava, the performance fees so that it aligns the
2009 – far less than the USD100 billion
Chief Executive of Butterfield Fulcrum. interest as well as it can between the firm,
invested during Q2 2009 in hedge funds
The Madoff scandal and the wider the manager, the individuals within the
globally, which now have capital totalling
economic downturn over the last two years firm and obviously the investors to make
USD1.43 trillion.
may have originated in the West, but their sure that everyone is pulling in the same
Does this relative immaturity in the
lessons are being applied in Asia too. direction for the benefit of all”.
market mean that Asian investors have
“If you look at the ecosystem of a But in some ways Asia has been ahead
a different attitude towards hedge funds
hedge fund, the administrator is the only of the rest of the world in terms of the
than elsewhere? A survey of investors,
source of independently reconciled data,” use of third-party fund administrators,
consultants and funds by the Bank of New
Bhargava explains. “So if a fund does not suggests Colin Lunn, Head of Business
York Mellon and Casey Quirk labelled The
use third-party administration, I think it Development for Asia-Pacific, Fund
Hedge Fund of Tomorrow: Building an
raises a lot of red flags.” Services, at HSBC Securities Services.
Enduring Firm found that 43% of Asian
In general, Asian investors have often “People don’t realise that Asia is effectively
investors would “never” re-invest with a
been keener than those in the West to 100% outsourced. All managers use third-
manager that had gated them – compared
develop a personal relationship with their party fund administrators. It’s very rare
to just 3% of North Americans and 0%
hedge fund manager and find out how the you come across an Asian-based manager
of Europeans. Is this indicative of a wider
underlying business works. This may go who self-administers. You don’t really have
trend? Not so, according to Gary Enos,
some way to explain why so many in the the same issues out here that you see in the
Executive Vice President of State Street,
Asian sphere were particularly unhappy West, I would argue.” This, Lunn explains,
who was “surprised” by the report.
at being gated. “The further east you is because of the evolution of the market,
“I think in the Asia Pacific region,
go, the more emphasis there is on the which saw a small number of start-
especially where it was a newer strategy
face-to-face relationship,” explains David ups which outsourced in order to keep
to investors, getting gated obviously was
costs down. The fact that Asia has been


30-39 ISJ42.indd 32 20/08/2009 13:57 German

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20/08/2009 17:36
Hedge Fund Services ISJ Investor Services Journal

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

with emerging markets are at the heart some of the limitations”. Under this
design, the risk of capacity constrain is
“People don’t
of the matter, according to Lunn. “You’re
dealing with valuation, pricing, those high and funds of this type often have
difficulties in developing and maintaining
realise that Asia is sorts of challenges out here, perhaps
more than you see in the US and Europe. the organisational balance. Once again,
the report found that issues beyond
effectively 100% Asia is not as developed in terms of data,
particularly say in the credit fixed income investment performance, such as business

outsourced anyway. space - getting market data for those management, distribution and operations,
types of instruments is quite difficult so featured highly on investors’ wish-lists.
All managers valuations can be a bit of a challenge,” he
says. “Obviously you’re also dealing with
However, Gordon has seen a trend in
Hong Kong towards the Multi-Capability
use third-party a multitude of different markets, different
regulations with trading and settlements,
Platform outlined in the report, which
offers a common brand, distribution and
administrators” different languages, a lot more than you
get in the Western world.”
business infrastructure support along
with multiple investment capabilities. This
These cultural differences have led to has been brought on by factors such as
a number of specific funds being created principal retirements or fund withdrawals,
Colin Lunn, HSBC to tailor to particular needs and Asia is no he explains.
“In effect there are a few people out
exception. Many funds in the Middle East
– as well as a growing number in Europe there that are actively consolidating and
and North America – are based on Sharia they’re bringing back the infrastructure
law, which sets out a number of provisions or in many ways the investment skills of
outsourced “from day one” is the main
on what investments can be made by the those other funds into their own umbrella
reason that the region has not seen the
fund. as it were and becoming much more
number of fraud cases that have occurred
But the differences in how the funds like the multi-capability firm that we
in the West, he suggests.
operate do not impact greatly on service described,” he says. “You have an ability to
providers’ underlying model, according share both some of the investment that’s
This outsourcing means that Asian
to Ross Ellis, Vice President of Marketing needed to build the investment side, be it
hedge funds do not have to worry about
and Client Experience at SEI’s Investment technology, access to the right quality of
the relative immaturity of the industry
Manager Services division (IMS). “Our trading systems and information flows,
impacting on the services available. “Good
workflow, data management and processes as well as the other elements of business
quality services are definitely available”
largely remain unchanged regardless of management operations and distribution
in Asia, according to Gordon. He adds
where we are working, the main differences as well. These can be shared among a
that fund managers operating in places as
are on the presentation level, the degree of broader group, so we are seeing some of
diverse as Tokyo and Sydney can expect
transparency and analytics provided and that in Asia already.”
services from Bank of New York Mellon
how we interact with clients,” he explains. At a closer level, perhaps the two most
that are “similar in pretty much every
Additionally, market differences can interesting countries in the region are
respect to that which we would deliver
affect how the funds themselves operate, China and India, both of which have seen
from either the US or from Europe, from
aside from any particular wishes of the their economies continue to grow despite
London or from Dublin, to our clients
client. The dominant strategy in Asia the worldwide downturn. But despite their
is long/short and the securities services similarities – huge economies and large
Enos agrees that the Asian hedge fund
industry has typically been dominated by domestic demand for instance – they are
services industry is strong, citing a number
boutique administrators, Lunn adds, and “very different” from a hedge fund point of
of factors that have grown the standard
there are “still a lot of boutique players” in view, Bhargava explains.
of service and care “considerably” in the
the region, despite a number of mergers in “I think that both represent
last few years. These are the decline in the
the industry. But he adds: “The big players opportunities but China is much less
market, which has opened up capacity
out here that focus on the hedge fund transparent from an investor standpoint.
for firms to “redeploy technology and
space are ourselves, Fortis, Citco – they are India is far more transparent and the
strengthen staff on a local basis”, the
the dominant players.” financial, equity and bond markets are
buying up of smaller administration shops
If Asian investors broadly resemble much better regulated. But if you talk
by institutions which “are able to bring
those in Europe and North America particularly about hedge funds, my
stability and deployment of services off a
and they have access to the same level personal view is that both these markets
global platform” and the fact that Asian
of services, does this mean hedge funds are delivering strong returns on a long-
assets were “roughly 5% of the marketplace
themselves are generally similar globally? only basis due to the high growth of these
even at its high point”. He adds: “I think
The Hedge Fund of Tomorrow report economies.”
those things lend themselves to being able
outlined four models that hedge funds Bhargava “does not anticipate” the same
to catch up in terms of services available to
may take in the future and, according level of hedge fund activity occurring in
the Asia Pacific region.”
to Gordon, most Asian funds fall under these countries that is seen in the West.
But what difficulties do these firms face
the Single-Strategy Boutique model, However, Lunn believes that, despite hedge
when servicing funds in Asia, compared
basically the “classic” hedge fund structure. funds in China operating offshore, the
with more established markets like Europe
Despite this being a “perfectly fine model” industry will open up. “I don’t think we’re
and North America? Asia’s size, diversity
worldwide, Asia “in many ways illustrates that far away from seeing a strong hedge
and the fact that investors are working


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$38.6 billion. Hong Kong is also home to a large share of hedge funds
due to its proximity to high potential emerging markets like China and
India. Since 2005, Singapore has seen significant growth in market
share from 8% to 16%. This is partly due to regulations and tax struc-
Hedge Fund Services tures that make the country attractive to hedge funds. For example, a
ISJ Investor Services Journal

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23number
24 25 26 27 28of Japan-based
29 30 31 32 33 34 35 36 37hedge
38 39 40 41funds
42 43 44 moved
45 46 47 48 their operations to Singa-

pore in order to avoid regulatory scrutiny and take advantage of

favorable tax structures. Japan now has a market share of 16% versus
fund industry developing in China.  It’s
not next year, but I think in the next five to
10 years, I don’t see why not,” he says.
2007 Hedge fund assets under
22% in 2005.

Indeed, with hedge fund activity

picking up in Asia post-credit crunch, as management in APR
Figure 3: 2007 Hedge Fund Assets Under Management in APR

it has in the rest of the world, the industry

in Asia as a whole has a “bright future”, (total: USD 106Fund
2007 Hedge billion, asManagement
Assets Under of June 2007)
in APR
according to Gordon. (Total : $106 bn)
“These are emerging markets and
they are emerging and I certainly believe Australia
that that represents opportunities for 38.6 bn, 36%
hedge fund managers, as well as obviously
opportunities for institutions like the Bank
of New York Mellon that are seeking to Hong Kong
service hedge fund managers or private 28.2 bn, 27%
equity managers or any other participants Other
in the Asian financial markets.” 5.0 bn, 5%
The Asian hedge fund segment may
still be immature with many obstacles to
overcome before it can compete with the Singapore Japan
European and US markets. But whether 16.5 bn, 16% 17.3 bn, 16%
or not it will emerge as a global leader in
the industry or will take a smaller role in
the worldwide number of funds, the range SOURCE: LCA Group
Source: LCA Group
of services available for Asian funds is as As of June 30th, 2007
broad as the continent itself. n

Panel - fund administration in emerging markets

1.Many Asian and Latin Ameri-
As fund industries in emerging markets in Asia and can markets are developing bur-
geoning fund industries. Has
Latin America continue their growth, ISJ asks the the number ‘local’ funds you
administer increased over the
experts about serving local and foreign clients. last few years, and what is the
percentage of local funds com-
pared with the total amount
of funds you work with (for
Copyright 2009 © Oliver Wyman
example, from US and European
fund clients) that are active in
these markets?

BRAEKVELT: Fund penetration in

Asia has traditionally been low
compared to other regions but
a catch up process appears to
be well underway. This process,
however, will be gradual and will
vary between countries/ sectors
and the volatility of fund flows
more significant.
Asset managers in Asia continue
to adopt a combined onshore
and offshore approach to benefit
Francis Braekvelt is head T. Andrew Smith, Executive Stuart Feffer is co-CEO both from the domestic opportu-
of planning and develop- Vice President, Global Busi- of LaCrosse Global Fund nities while also leveraging the
ment, Asia Pacific, at BNY ness Development Head at Services passporting opportunities linked
Mellon Butterfield Fulcrum with offshore structures like the
UCITS funds.
With the beginnings of an


30-39 ISJ42.indd 36 20/08/2009 13:57 Handels

ISJ Investor Services Journal Panel Debate

investor mentality shift towards America). or niche fund providers may gain investor sophistication, the
more long term investing and increasing interest. regulatory disclosure and
more particularly towards fund 2.Are you seeing more or less reporting requirements have
structures, requests for fund business from fund start-ups? SMITH: The first half of this year driven fund managers to look
administration services have was slow in terms of fund start- at outsourcing middle and back
increased accordingly. BRAEKVELT: The global financial ups, but things have definitely office functions to reputable,
turmoil has probably been the picked up in the second half of independent third parties.
SMITH: We have certainly seen largest defining event in recent the year, and we have seen a
an increase in the number of times for the fund industry. significant flurry of new start-ups SMITH: There is certainly a
Asian and Latin American based Where before the slowdown, in the last couple of months. heightened focus on the fidu-
funds that we administer. Overall the introduction of new and ciary aspect of running a hedge
this makes up a small percentage innovative structures as well as FEFFER: More business from fund. On an institutional
of our clients, both in terms of new fund launches were common start-ups recently, after a pause level, there is no difference
assets and total number of funds, place, this momentum almost during the credit crisis. between what Asian/Latin
but it continues to grow. Lately came to a halt recently. American investors are looking
we have been seeing more start- Once the dust settles, however, 3.In developed markets, the for compared with the rest of
ups in Latin America than from we expect Asia to resume its lead- fraud of Bernard Madoff and an the world. The things that
the more mature US market. ing role as a growth engine for emphasis on accountability has underline their priorities right
the fund segment and a centre meant third-party administra- now are independence and
FEFFER: Locally managed funds in of choice for the introduction tion is a high priority for many transparency.
Asia have been a fast-increasing and distribution of on-shore, fund investors. Is there an
segment of the market for us off-shore and alternative fund equivalent drive for this in the FEFFER: Regardless of where
for some time now, although products. emerging markets in which you the fund manager sits, man-
along with the rest of the market Given the increased risk aver- operate? ager accountability is an issue.
growth there slowed during the sion from the investor com- Investors worldwide are asking
first half of 2009. We are once munity, the recent focus has BRAEKVELT: In all regions, questions about administra-
again seeing local launches and been directed more towards well including Asia, in reaction to tion, valuation and custody
are noticing significant investor established domestic and global general macro economic trends arrangements, and are with-
interest. fund companies. as well as to some very specific holding investments when they
Locally managed funds in Latin For asset managers in emerging market events, investors have do not like the answers.
America are far fewer in number, markets, licensing, application been forced back to the basics,
although increasing. and registration of new products rediscovering the fundamental 4.What other demands are
LaCrosse has announced several has proven to be somewhat time risk – reward theorem. made from local/foreign
new clients in both Asia and consuming which has, at times, As a result, new or improved clients in these emerging
Latin America in recent months, limited their ability to introduce practices are introduced into markets?
including Cavenaugh Capital innovative and competitive fund the asset allocation and service Given the more stringent due
(Asia), Flowering Tree Invest- structures or to create a deep provider review processes to diligence and review process-
ment Management (Asia), Tahan brand name recognition. assess and mitigate counter- es, the sales process has been
Capital Management (Asia) and In line with future expectations party, market and business risk extended significantly.
Noctua Asset Management (Latin though, we expect that start up and the increased market and

Flexibility on a solid ground

Handelsbanken Nordic Custody Services is locally
present in all the Nordic markets, and offers a wide product
spectra to a diverse client base. Handelsbanken is one bank
throughout the region and we pride ourselves on being the
most flexible provider of custody and clearing services in the
region. We are also one of the highest rated private banks in

Nordic Custody Services

Annika Larsson - Head of Relationship Management & Sales
Telephone: +46 8 7018141

30-39 ISJ42.inddad.indd
37 1 18/08/2009
19/08/2009 10:24

Panel Debate ISJ Investor Services Journal

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

“Once the dust BRAEKVELT: Recent client de-

mands, trends and opportunities
tion, have legal services and
related advice become part of
the system infrastructure is fo-
cused on and tailor made to meet
settles, we are centered on, amongst others,
an increasingly bi polar investor
the administrative package by
the requirements of the domestic
market, additional investments
expect Asia focus balancing protection con-
cerns with return generating asset BRAEKVELT: Throughout Asia, but
will be required to link those up
with the infrastructure in the
to resume its allocations as well as a growing
need for real time, sophisticated
primarily in the emerging mar-
kets, the authorities and regula-
global markets or its market

leading role data as well as for risk analytics,

investment guideline, exposure
tors continue their cautious
approach to building out the
On the other hand, however,
given the rapid evolution of
as a growth and drill down reporting.
In addition, market participants
domestic capital market. Overall,
the regulators have greatly sup-
the investment community and
markets, some of the emerging
engine for the are looking at leveraging sophis-
ticated distribution strategies,
ported ongoing liberalization
and diversification efforts and
market providers are evaluating
state of the art technology and H
fund segment with banks continuing to be the
main intermediaries and greater
are expected to continue to do
so, once the immediate concerns
data solutions.
The ongoing challenge, how-
and a centre product transparency, for example
the recent interest in ETFs. For
about stabilizing the domestic
markets have been addressed.
ever, will remain for the back
office infrastructure to keep pace
of choice providers in emerging markets, in
turn, this requires an increasingly
From an investors perspective,
many institutions pay consider-
with the speed and extent of the
changes in the front office.
for onshore, tailored product and service offer-
ing around specific client require-
able attention to risk manage-
ment strategies and particularly
If the recent market disrup-
tion has illustrated something,
offshore and ments, pricing or legal needs,
often combining their hedge fund
to data management processes
– a relatively new development
it would be the fact that many
institutions may perhaps not be
alternative and traditional custody and cash
for Asia. as well equipped to handle post-
trade processing and related
fund products” SMITH: Liquidity is quite impor-
SMITH: Our focus continues to
be on administration and related
activities in-house as they might
have thought.
tant to Brazilian based investors value-added services, in order
and therefore we often see funds that we can anticipate our clients’ SMITH: From our perspective, as
Francis allowing monthly redemptions and
sometimes even daily or weekly
needs and invest in new products
and services ahead of regulatory
the administrator who obtains
independent P&L and trad-
Braekvelt, subscriptions. Specific to the
Brazilian market, often a fund will
and investor requirements. We
also work with the industry in its
ing information of a Fund from
its custodian or prime broker, D
BNY Mellon be set up with a single investor – a
local fund – and provide daily NAV
evolution and decision-making
processes, and try to represent
generally speaking the methods
of providing this information

calculations. This set up is to take clients’ views as standards are not comparable to ‘Western’
advantage of the CVM instructions develop. institutions. With a US based
450 and 456 which allow the local bank, logging in through a secure
fund to invest up to 20% of its FEFFER: We do not provide any reporting portal is the common
“Lately we
assets abroad. legal services or advice. method of obtaining this infor-
mation – that level of technology
have seen FEFFER: The primary demand is
familiarity with the local markets
6.Various market surveys have
found lesser levels of technol-
is not yet commonplace in Latin
American banks.
more fund
and expertise in the instruments ogy spending and straight
and market conventions that through processing rates among FEFFER: We use the same technol-
start-ups from are used to access them. Many
emerging markets instruments
emerging market firms. How
would you compare the infra-
ogy and the same administrative
procedures with our emerging
Latin America
than from the
have unusual features and specific
requirements, and working with
a firm that understands this and
has relevant experience can help
structure of emerging markets’
bank technology regarding key
administrative procedures - eg,
investor reporting, P&L report-
markets activities as with major
markets. We operate out of
four major hubs: Minneapolis,
London, Singapore and Buenos
more mature
US market”
avoid problems once a fund is up
and running.
Also, especially with the recent
ing – compared with ‘Western’
Aires, with all of our hubs on
a common, integrated, global
technology platform.nsurance
changes in the prime broker- BRAEKVELT: A key challenge to markets. Again, our presence in
age space, fund managers are growing and servicing fund prod- China is not new — State Street
frequently left to arrange for their ucts in Asia is the fragmented has operated in Hong Kong
T. Andrew own access to markets. Working
with a partner that can either fa-
nature of the region.
As such, ongoing investments
for more than 25 years and we
have been actively involved in

cilitate that access or provide the in people and technology both in the Chinese financial landscape
operational flexibility to pursue good and challenging times are since 1997, working with many
Butterfield multiple options is critical critical to the long term success
of securities servicing providers.
of the country’s leading financial
institutions. n
Fulcrum 5.Amid changing global regula- As in most emerging markets,


30-39 ISJ42.indd 38 19/08/2009 16:18

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30-39 ISJ42.indd 39 20/08/2009 13:57

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C: Stephen Everard or
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SMA Financial is the UK’s premier provider of SWIFT services and a long standing Simon Murby
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Assets under Administration: EUR 270 bn
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Intesa Sanpaolo’s Transaction Services include : Piazza della Scala 6

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Directory ISJ42.indd 40 20/08/2009 10:14

ISJ Investor
ISJ Investor Services
Services Journal
Journal ISJDirectory
ISJ DirectoryofofServices
Nordea is the leading financial services group in the Nordic and Baltic region and operates
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Santander is Spain’s leading financial institution and the largest bank in the euro zone
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Standard Bank has assets under custody to the value of ZAR1.56 trillion and an overall 25 Sauer Street
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We offer a full range of securities services including corporate action and information
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representing assets of EUR 405* billion (as of June 2007). E:


Directory ISJ42.indd 41 20/08/2009 10:14

ISJ Directory of Services ISJISJInvestor

With an extensive network that spans over 70 countries, well-positioned in the emerging trade and
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investors and compliance services.
Rivierstaete Building, Amsteldijk 166,
1079 LH Amsterdam, Netherlands


Directory ISJ42.indd 42 20/08/2009 10:14

ISJ Investor
ISJ Investor Services
Services Journal
Journal ISJDirectory
ISJ DirectoryofofServices

Intesa Sanpaolo’s Transaction Services include : Piazza della Scala 6

• Sub Custody, Derivatives and Remote Membership Clearing
20121 Milan, Italy
• Global Custody and Depository Bank for mutual funds, pension funds, real
T: +39 02 8794 2466
estate funds, private equity funds and hedge funds
• Fund Administration for mutual funds, pension funds, real estate funds, F: +39 02 8794 1519
private equity funds and hedge funds W:
• Paying Agent for foreign funds and sicavs C: Riccardo Lamanna
• Cash and Payment services like swift to checks, mass payments, checks and E: riccardo.lamanna@
cash letters

Société Générale Securities Services offers institutional investors, asset

managers and financial intermediaries a comprehensive range of financial securities Sébastien Danloy
services: Clearing, Liquidity Management, Custody and Trustee, Fund Administration, Global Head of Sales
Asset Servicing, Fund Distribution Services and Issuer Services. SGSS currently ranks 3rd Société Générale Securities Services
European custodian and 7th worldwide T: +33 (0)1 41 42 98 65
custodian (Source: with EUR 2,731* billion in assets held and valuates E:
5,158* funds representing assets of EUR 499* billion (at end March 2008). W:

Swiss Financial Services

Drawing upon an extensive track record of proficiency, dependability and (Ireland) Ltd.
responsiveness, Swiss Financial Services acts as administrator as well as registrar and Block 4B,Cleaboy Business Park,
transfer agent of funds investing in a broad range of financial instruments. These Old Kilmeaden Road,
include futures, foreign exchange, equities, options, bonds and other funds. Waterford, Ireland
T: +353 51 351180
We perform accounting and administration services for diverse fund types domiciled F: +353 51 871595
in, but not limited to, the United States, Bahamas, Cayman Islands, B.V.I. and Ireland.
Adrian Maher

Luxembourg: Jean-Paul Gennari,

tel. +352-44-1010 1
Fund Services is a dedicated fund administrator providing customized and flexible services for Switzerland: Markus Steiner,
traditional and alternative investments. tel. +41-61-288 4910
Our comprehensive range of services for investment funds includes fund set-up, registration and W:
support around the world, fund accounting, NAV calculation, risk control and reporting. We have C: Andre Valente
practical experience with registering funds in 28 jurisdictions. T: + 41 61 288 6269
We provide a flexible offering from the full range of services, including Private Labelling, to selected E:
functions. Through our leading fund administration architecture, multi-source pricing and powerful A:UBS Global Asset Management -
compliance tools, we offer a tailored, cost effective service. Fund Services, Brunngässlein 12,
PO Box CH-4002 Basel, Switzerland

Hedge Fund Administration

Apex Fund Services Ltd is a global hedge fund administration solution for hedge funds C: Peter Hughes
and private equity clients located in 12 separate jurisdictions across the globe. The Group Managing Director
company uses the software solution, PFS PAXUS, which is a fully integrated hedge fund T: +1 441-292-2739
accounting system combined with web-based reporting to allow clients and investors F:+1 441-292-1884
to access their information 24/7 securely online. We will tailor all solutions to meet E:
your needs and our continuing focus on the quality of service and the relationship with John Bohan
each and individual client ensures that we retain our ethos of providing a personalized Group Manager of Operations
service rather than a generic solution. T: +353 21 4633366
Highly qualified and experienced staff, mirrored with top tier technology and F: +353 21 4633377
competitive fee structures make Apex Fund Services Ltd the clear choice for your fund E:
administration needs.

Custom House Administration &

Custom House, which is one of the world’s largest independent alternative investment and
Corporate Services Limited
hedge fund administrators, was awarded a SAS 70 Type I in May 2007 and a SAS 70 Type II in
A: 25 Eden Quay, Dublin 1, Ireland
December 2007.
T: +(353) 1 878 0807
Custom House offers a round-the-world, round-the-clock service from its office in Dublin and F: +(353) 1 878 0827
representative offices in Chicago and Singapore, enabling it to provide, not only complete C: dermot.butler@
global administration services, but also the ability to produce daily dealing NAVs.
Custom House is authorised by the Irish Financial Regulator under Section 10 of the C: david.blair@
Investment Intermediaries Act, 1995, which authorisation does not extend to the Chicago
and Singapore representative offices.


Directory ISJ42.indd 43 20/08/2009 10:14

ISJ Directory of Services ISJISJInvestor

Fund Services holds a leading position in the area of hedge fund administration Cayman Islands: Darren Stainrod,
with specialized teams around the world. We offer a complete range of services tel. +1-345-914 1076
including accounting, NAV calculation, shareholder services, banking and credit Eire: Don McClean, T: +353-1-436 3636
facilities. US: Concetta Mastrangelo,
With specialist expertise in both single manager and fund of hedge fund tel. +1-212-882 5523
administration, services can be provided for both onshore and offshore funds. W:
C: Darren Stainrod, T: ++1-345-914 1076
Through our comprehensive range of services and products, leading edge
technology platforms and superior client service, we work in partnership to offer A: UBS Fund Services (Cayman) Ltd, PO
the solutions you need. Box 852 GT, Grand Cayman, Cayman Is

International Finance Centres

The British Virgin Islands has created a progressive and transparent environment for the
establishment and regulation of mutual/hedge funds and their functionaries. By the end British Virgin Islands
of Q3 2006 the BVI had recognised or registered more than 4,000 funds, and licensed International Finance Centre
some 700 managers and administrators, making the BVI a leading domicile of choice for Haycraft Building
investment business. Benefits of conducting investment business in the BVI include: 1 Pasea Estate
• Fast-track registration and licensing system - funds can be registered in a few days. Road Town
• Presence of qualified, experienced legal, accounting & administration practitioners. Tortola
• A well-developed corporate professional infrastructure. British Virgin Islands
• Modern, robust and cost-effective regulatory and corporate regimes. T: +1 284 494 1509
• BVI private and professional funds fall outside the scope of EU Savings taxation Directive. F: +1 284 494 1260
• Segregated Portfolio Companies - also known as Protected Cell Companies - can now be W:
formed as mutual funds under the BVI Business Companies Act 2004.

Payments & Settlements

VocaLink is the payment transaction specialist. Trusted by the world’s top banks VocaLink
our automated payment system processes over 90 million transactions per day. The Drake House
VocaLink switching platform powers the world’s busiest ATM network and provides Homestead Road
end-to-end management of Europe’s largest ATM estate, while the Real-Time Rickmansworth
Payments platform provides the central infrastructure for the UK Faster Payments Hertfordshire
service. The VocaLink EuroCSM delivers reach for our clients throughout the SEPA WD3 1FX
and beyond with a range of value-added services that leverage our know-how and
technical capabilities. VocaLink is the partner of choice internationally, working T: +44(0)870 1650019
with BGC to process Sweden’s automated payments. F:
Find out how we can help your business at W:

Prime Brokerage
Newedge Global Prime Brokerage Group is a global, multi-disciplinary, solution-
providing team dedicated to delivering superior services to alternative investment Philippe Teilhard de Chardin,
industry participants including hedge funds, commodity trading advisors (CTAs), Global Head of Prime Brokerage
fund of hedge funds, family offices, and institutional investors (insurance companies, T +44 20 7676 8536
banks and pension funds). The Newedge prime brokerage team offers a global range Vincent Tournant, Head of Business
of brokerage services covering a wide range of asset classes including equities, Development T +44 20 7676 8171
bonds, currencies, commodities, and their related listed and OTC derivative products. Duncan Crawford, Head of Capital
We also offer an innovative portfolio-based cross-margining solution, a dedicated Introductions T +44 20 7676 8504
account management desk, hedge fund start up services, quantitative information on E:
the hedge fund industry, capital introductions services, and recently prime brokerage
services to Sharia compliant hedge funds. Newedge is wholly owned by Calyon and
Société Générale, with both companies having 50% ownership.

Securities Lending
Data Explorers (, based in New York and London, is the UK: 2 Seething Lane, London, EC3N 4AT
world’s most complete resource for data, analysis and insight into securities T +44 (0) 20 7264 7600,
lending and short selling. The company’s proprietary data gives an unrivalled, F +44 (0)20 7392 4004
comprehensive view on share lending and short-selling activity. With data sourced US: 75 Rockefeller Plaza, 19th Floor
directly from securities lending desks of over 100 of the top lending firms and New York, 10019, USA
representing most of the global securities lending market, Data Explorers has built T +1 212 710 2210 F + 1 212 710 2212
a reputation with leading financial institutions as the source for short intelligence Julian Pittam T +44 (0) 207 264 7616
that informs their decision-making and their coverage of market sectors and
companies. Please visit our Blog:, Twitter, New York: Ken Read T +212 710 2210
dataexplorers, Video and LinkedIn linkedin. E:
com/companies/data-explorers sites.
EquiLend is a leading provider of trading services for the securities finance EquiLend Europe Ltd.
industry. EquiLend facilitates straight-through processing by using a common 14 Devonshire Square
standards-based protocol and infrastructure, which automates formerly manual London, EC2M 4TE
trading processes. Used by borrowers and lenders throughout the world, the +44 (0) 207 426 4426
T: UK- +44 (0)20 7743 9510
EquiLend platform allows for greater efficiency and enables firms to scale their C: Michelle Lindenberger
business globally. Using EquiLend’s complete end-to-end services, including pre- E:
and post-trade, reduces the risk of potential errors. The platform eliminates the A: 17 State Street, 9th Floor
need to maintain costly point-to-point connections while allowing firms to drive New York, NY, 10004
T: US- +1 212 901 2224
down unit costs, allowing firms to expand business, move into different markets, C: Michelle Lindenberger
increase trading volumes, all without additional spend. This makes the EquiLend E:
platform a cost-efficient choice for all institutions, regardless of size. W:


Directory ISJ42.indd 44 20/08/2009 10:14

ISJ Investor
ISJ Investor Services
Services Journal
Journal ISJDirectory
ISJ DirectoryofofServices
eSecLending is a full service securities lending agent and administrator of
customized securities lending programs. Their program has been adopted by many of
the world’s largest and most sophisticated asset gatherers including pension funds, T: US- +1 617 204 4500
mutual funds, investment managers and insurance companies. They are a third party T: UK- +44 (0)20 7469 6000
industry specialist providing lenders with customized programs, high touch client C: Christopher Jaynes
service, comprehensive risk management, and superior risk adjusted returns. The E:
firm takes a highly consultative approach with their clients by structuring separate, W:
non-pooled programs and utilizing a competitive auction to determine the optimal A: 175 Federal Street, 11th FL, Boston, MA
route to market for their clients’ lendable assets. Having built their business to 02110, US
incorporate investment practices such as the use of specialists, multiple-managers,
unbundling, price transparency, and competition, their approach ensures best A: 1st Floor, 10 King William Street,
execution and also provides clients with greater control over their programs, allowing London EC4N 7TW, UK
them to more effectively monitor and mitigate risks and counterparty relationships.

Eurex is one of the largest derivatives exchanges and the leading clearing house
in Europe. Wherever you are located, we provide you with access to the benchmark
futures and options market for European derivatives. Eurex also offers short term
funding products, such as Eurex Repo. Eurex Repo is among the forerunners in
T: +41 58 854 2066
providing integrated trading and clearing for repo transactions. Eurex’s latest F: +41 58 854 2455
innovative marketplace is called Eurex SecLend. E:
Eurex SecLend. Europe’s leading investment banks participate as borrowers Eurex Zurich Ltd., Selnaustrasse
in the Eurex SecLend marketplace, acting as principal brokers, dealers and 30, 8021 Zurich, Switzerland
intermediaries. They all benefit from Eurex’s leading state-of-the-art trading and
processing services. For Eurex, service and technology innovation is not just a
buzzword. New trends are being transformed into inventions through the adoption
of advanced trading practices. Find out more on

FINACE® is the only fully integrated solution today which supports the future T: +41 (0)44 298 92 00
business model within the area of Securities Finance and Collateral Management. F: +41 (0)44 298 93 00
The architecture of FINACE® is based on a stable, leading edge technology A: COMIT AG, Pflanzschulstrasse 7,
platform, which was developed with performance and robustness as the focus of CH-8004 Zürich, Switzerland
design. With flexibility at its core, customer-driven extensions and modifications W:
can be quickly and easily applied to the standard component set.

JPMorgan’s Securities Lending program is unparalleled due in no small part to New York: William Smith
T: 212-623-5664
the Firm’s breadth of capability, financial strength, professional expertise and
seamless operations. Our program enables investors to access a broad spectrum of
London: Michael Fox
lending markets, with a diverse borrower base, offering a broad indemnification T: 44 207 742 0256
against borrower default, while achieving very competitive bids for their E:
securities - all of this in an environment designed not to compromise the activities Sydney: David Brown
of their fund managers. As one of the founding members of EquiLend, a global T: (61-2)92504606
automated platform for borrowers and lenders, JPMorgan is at the forefront E:
of technology and is ideally placed given its integrated lending, custody and W:
accounting platforms.

Santander is the only Spanish financial institution with a team exclusively

dedicated to securities finance & with the purchase of Abbey in 2004 has W:
expanded its capacity on a Global basis with trading teams in London (UK) & T: (3491) 289 39 42/54
Connecticut (USA). E: securitieslending@
Santander’s leading local capabilities in Spain, Portugal, UK, USA & Latin
America, along with its solid balance sheet & combined with the state-of-the-art
technology, provides its clients with the broadest range of solutions in securities
lending & financing, including availability across all assets classes, as well as
access to uncommon emerging markets.

Around the world, securities financing is managed on SunGard’s Email:

proven solutions for international and U.S. domestic securities lending and
repo for over 250 clients. Through our Loanet, Global One, Martini and Astec Contact:
Analytics products and services, we provide comprehensive business solutions EMEA: +44 (0) 20 8081 2779
and information with worldwide reach for equities or fixed income securities America’s: +1 (646) 445-1179
financing. These solutions – all in an integrated, exception-based processing Asia Pacific: + 62276400
architecture – includes order routing, pre-trade analytics, trading, position Visit:
management, operations, accounting, settlement and reconciliation. securitiesfinance


Directory ISJ42.indd 45 20/08/2009 10:14

ISJ Directory
Technologyof Services ISJISJInvestor

BI-SAM is a leading provider of analytics software, client reporting and data

management solutions to the investment management community.
Our integrated and innovative solutions have already been adopted by many A: BI-SAM Ltd
renowned asset managers in France, Belgium, Luxembourg, UK, Hong Kong and 1 Cornhill
Singapore who have assets under management ranging from 10 to 450 billion Euros. London EC3V 3ND
The B-One suite of products covers: performance measurement, performance T: +44 (0)20 3008 5834
attribution (equities, balanced and fixed income), risk attribution (ex-post and ex- F: + 44 (0)20 3008 5831
ante), as well as multi-lingual client reporting and factsheets. This suite of products E:
can be used either as stand-alone applications or ASP hosted solutions. W:
The Company has approximately 45 employees in offices located in Europe (Paris,
London, Luxembourg). Offices in Asia and North America are under consideration.
The Company is headquartered in Paris.

DST International is the world’s premier vendor of technology solutions to the global investment T: UK +44 (0)20 8390 5000
management community with over 700 clients in 55 countries, and 1500 employees in 19 of the Boston +1 617 482 8800
world’s leading financial centres. Our wide range of asset management solutions meet the needs of Hong Kong +85 225 812 880
fund managers, dealers, settlement staff, custodians and record keepers operating as international F: +44 (0)20 8390 7000
asset managers; from front office simulation, opinion management and modelling functions, E:
through data management, dealing and settlement to custody and corporate actions. The suite of A: DST House, St Mark’s Hill, Surbiton,
products can be used either as stand-alone applications or brought together in flexible combinations Surrey, KT6 4QD
according to specific needs. W:

Eagle Investment Systems LLC is a global provider of financial services technology,

serving the world’s leading financial institutions. Eagle’s Web-based systems support W:
the complex requirements of firms of any size including institutional investment T: +44 (0) 20 7163 5700
managers, mutual funds, hedge funds, brokers, public funds, plan sponsors, and F: +44 (0) 20 7163 5701
insurance companies. Eagle is committed to providing enterprise-wide, leading-edge A: The Bank of New York Mellon
technology and professional services for investment accounting, data management, and Financial Centre
performance measurement. Eagle’s product suite is offered as an installed application or 160 Queen Victoria Street
can be hosted via Eagle ACCESS, Eagle’s application service provider. Eagle Investment London EC4V 4LA
Systems LLC is a division of The Bank of New York Mellon Corporation. To learn more
about Eagle’s solutions, contact or visit

Financial Tradeware provides integrated solutions for medium to small sized Investment
Management firms, Fund Managers and Hedge Funds, covering the full trade life cycle. W:
It is part of the Dharma Group of companies and benefits from the joint contributions T: +44 (0)20 7493 2773
and experiences within the group of market traders, business analysts, financial services F: +44 (0)20 7495 4858
professionals and skilled Microsoft Certified programmers. The company has developed a C: Graham Bright
suite of applications that integrate and Straight Through Process (STP) real-time trading, E:
back office administration, accounting and compliance.®, S-Messenger® and A: 31 Dover Street
H-Fund® arwe the company’s flagship products all based on Microsoft.NET infrastructure. London W1S 4ND UK
The company also offers a Member Concentrator for hosted SWIFT connectivity and Member
Administered Closed User Group (MA-CUG) services for Corporates and Hedge funds.

Isis Financial Systems provides mission critical investment management software and
services to many large and small companies. Our customers perform a broad range of
functions including fund accounting, derivative and hedge funds, wealth management, Contact:
and pension and endowments, etc…. Our integrated solution services the front, middle, Isis Financial Systems
and back offices of these companies with software that accommodates most any security 14 Felton Street
type. Built on a contemporary three tiered architecture our application helps financial Waltham, MA 02453
companies improve operating efficiencies, increase accuracy and reliability and improve
customer service. (00-1) 781-209-0262
IsisFS has the experience and IMS has the tools to improve your operations and save you

SunGard is one of the world’s leading software and IT services companies. SunGard serves
more than 25,000 customers in more than 70 countries, including the world’s 25 largest SunGard Global Trading
financial services companies. 25 Canada Square, London E14 5LQ

Tel +44 (0)20 8081 2000

Dedicated to post trade securities operations, GL RIMS is your comprehensive real time
securities post execution processing solution, covering middle office, settlement and
Fax +44 (0)20 8081 3399
accounting requirements. Its wide use of automation enables global capital markets
organisation to achieve maximum STP. It is a flexible, highly scalable and easy to install
platform with a new Service Oriented Architecture feature that allows smooth and
efficient connections with other third parties within a company. Email:


Directory ISJ42.indd 46 20/08/2009 10:14

ISJ Investor
ISJ Investor Services
Services Journal
Journal ISJDirectory
ISJ DirectoryofofServices

A:IGEFI Group Sàrl - 7, Rue des

IGEFI is the foremost provider of software solutions for international fund promoters, Primeurs,
third-party service providers and fund managers. Its prestigious client-base is testimony L-2361 Strassen
to our commitment, service and quality with more than 200 expert staff supporting T: +352 26 44 211
clients from seven offices worldwide including Bangalore, Boston, Frankfurt, Geneva, F: +352 26 44 21 44
London, Luxembourg and Paris. MultiFonds is operational in more than 20 countries E:
worldwide and support investment funds assets in excess of US$ 2 trillion. MultiFonds W:
Fund Accounting and MultiFonds Transfer Agency are developed on a “one system-one C: Mr. Jesper Steiness - Head of
database” philosophy and provide significant advantages including reduced overhead Business Development
and IT support costs and single look and feel reporting for global clients. Europe & Asia

For more information on Information

Mosaic, please visit our website at
Information Mosaic is a global provider of advanced custody, corporate actions and wealth
management solutions to the global securities industry. Information Mosaic’s business,
professionals leverage decades of financial industry expertise and technical knowledge
to deliver complex projects on time and within budget. Since inception, the company
has utilized the most modern technology to develop solutions to run on a scalable, Europe:
single platform. Today, Information Mosaic supports clients from offices in Boston,
Dublin, London, Luxembourg, New York and Singapore. Currently, six of the top 10 global Asia:
custodians deploy Information Mosaic solutions worldwide.
General Enquires:

For more than a decade, administrators, managers, and advisors have relied
on KOGER for dependable software tools backed by extensive industry T: 001-201-291-7747
experience and expertise. Now, for those who want to reduce costs and streamline F: 001-201-291-7808
business processes, Koger offers Fully Integrated Fund C: Mr Ras Sipko
Administrator, a vertically integrated suite serving the back-office software needs of the E:
fund industry. KOGER USA
Fully Integrated Fund Administrator consists of three core programs: 12 Route 17 North
~ NTAS, the New Transfer-agency System Suite 111
~ E*TAS, Electronic Transfer Agency System Paramus
New Jersey, NJ 07652, USA
~ GRID, Global Reach Interface Daemon
Other programs, such as PTAS, KIT, and KORS available separately, complement the core
competency of Fully Integrated Fund Administrator.

Misys provides integrated, comprehensive solutions that deliver significant results to

over 1,200 financial institutions globally. Our buyside solutions help asset servicers,
asset managers and hedge funds handle the latest complex products, streamline
processes, reduce costs and improve STP. Misys Summit is our award winning,
multi-asset class solution that boasts 18 years OTC derivatives market expertise.
With extensive OTC buyside coverage and the market leading structured products
module, Misys Summit delivers the solution you need for handling the end to end
process for OTC. We also provide a customisable ASP service for fast implementation
and lower costs.

Building on over twenty years of experience in capital markets and cross-asset software
solutions, Murex introduces Mx Asset Manager - a unique cross currency, cross asset fund
management solution capable of handling the full range of products, from plain vanilla to C: Hélène Desbiez
the most complex derivative products. Business Development Manager
Coupled with a high degree of flexibility and customization, Mx Asset Manager T: +33 1 44 05 32 00
features a multifaceted design catering to the needs of both service providers E:
(prime brokers, administrators, asset servicing providers) and direct clients (portfolio W:
managers for mutual, pension or hedge funds, insurance companies).
With so many new challenges presented to buy-side managers when integrating
increasingly-complex derivatives into their portfolios and funds, Mx Asset Manager
represents a strong and reliable ally for dynamic position keeping and multi-dimensional
risk management in a thriving market.

Odyssey Financial Technologies is an industry leader in the global provision of wealth

and asset management solutions and services to the Private Banking, Mass Affluent and
London Office:
Retail Banks as well as Institutional and Fund Managers. Over 200 financial institutions Martin House
in more than 30 countries have chosen Odyssey solutions. Odyssey focuses on providing 5 Martin Lane
a comprehensive range of components for portfolio management (PMS), advisory London EC4R 0DP U.K.
process, customer relationship (CRM), compliance, risk, analytics and Enterprise Data
Management (EDM). The components are deployed on a single scalable wealth and asset T: +44 (0)20 7621 5800
management platform, facilitating the enterprise-wide implementation of solutions F: +44 (0)20 7621 5899
and data management. Founded in Luxembourg in 1995, Odyssey today has offices in
the key financial centers, including London, New York, Singapore, Zurich, Frankfurt, E:
Brussels, Geneva, Madrid, Toronto and Tokyo. Odyssey’s operational head office and main W:
development centre is located in Lausanne, Switzerland. Throughout this knowledgeable
network Odyssey employs over 600 professionals.


Directory ISJ42.indd 47 20/08/2009 10:14

ISJ Directory of Services ISJISJInvestor

peterevans is a leading provider of front to back office solutions for the financial services
sector. With 23 years experience peterevans takes a sophisticated and dynamic approach
to assist customers in reducing costs and witnessing an increase in margins by seamlessly peterevans
replacing costly and restricting legacy platforms. peterevans works in a collaborative New Broad Street House
manner and sees clients as partners to help meet all the demands in today’s marketplace. 35 New Broad Street
The xanite product suite offers a highly configurable, flexible and fully integrated, browser London EC2M 1NH
T: +44 (0) 29 20 402200
based, comprehensive front to back solution that complies with message standardization
and settlement harmonization. Deployed as a single application or integrated as W:
components into your existing platform. Each of the xanite modules can be delivered via an
ASP or self-hosted. Covering: wealth management, custody corporate actions clearing and
settlement private client and on-line stock broking.

Pirum provides a full suite of automated reconciliation and straight through processing
(STP) services supporting Operations within the global securities finance industry. The
company’s on-line SBLREX service encompasses daily contract T: +44 20 7220 0961
compare, monthly billing comparison, mark-to-market & exposure processing, pending F: +44 20 7220 0977
trade comparison, income claims processing and C: Rupert Perry
custody reconciliation. E:
Subscribers to Pirum’s services significantly increase their operational efficiency and A: Pirum Systems Limited
reduce their risk by using Pirum’s solutions, as staff are able to focus on fixing the 37-39 Lime Street
exceptions instead of using their time to check and process routine business. These London, EC3M 7AY
automated processes are more scalable and risk controlled too, allowing W:
significantly higher volumes to be managed without corresponding increases in
operations headcount.

Princeton Financial Systems (PFS), a 100% subsidiary of State Street Corporation, is a leading
provider of portfolio management and accounting systems, investment compliance, data For more information, visit Princeton
management, and reporting solutions to the global investment industry. Our solutions are
used worldwide by over 430 leading investment managers, custodians, insurance companies, Financial’s website at or
pension funds, hedge funds, and banks, which manage combined total assets of over $5
trillion in more than 40 countries.These include ABP, AEGON, AIG, Allianz Global Investors, T: +1 609-987-2400
BNP Paribas, CaIPERS, CACEIS Investor Services, Citi, Commerzbank, Credit Suisse, HSBC F: +1 609-987-9320
Insurance, Metropolitan Life Insurance, Nationwide, Northwestern Mutual, Prudential, RBS, C: Lorne Whitmore, Vice President,
Société Générale Securities Services, and State Street. MIG21, PFS’s award-winning investment Global Sales & Product Management
compliance and risk monitoring solution, optimizes pre-trade and post-trade compliance E:
checking, the administration of regulatory, prospectus, and internal investment guidelines A: 600 College Road East,
along with the consequent resolution workflows. PFS, headquartered in Princeton (NJ), has Princeton, NJ 08540, USA
offices located throughout the United States, Canada, Australia, Singapore, and China as well W:,
as in United Kingdom, the Netherlands, Luxembourg, France, Germany, and Switzerland.

Founded in 2002, Redi2 Technologies is a leading provider of fee billing solutions to the
global financial services industry. Redi2 offers flexible, feature-rich solutions that help
firms streamline operations, improve cash flow, reduce costs, enhance client service and Redi2 Technologies, Inc.
meet compliance obligations. 1771 Broadway St.
Redi2’s flagship fee billing and revenue management solution Redi2 Revenue Manager Oakland, CA 94612
helps financial professionals more easily manage the fee billing process, including client T: +1 (510) 834-7334
setup, multi-currency fee and accrual calculations, invoice and advice generation, E:
accrual reconciliation, adjustments and reversals.
Our open APIs and support for industry-standard relational databases ease integration
with third-party solutions, including accounting, performance measurement and CRM

Netik’s team have spent the past 25 years perfecting the art of bringing
together market, reference, portfolio accounting, performance and risk data For more information please
from disparate sources into a single version of the truth (SVOTTTM). The result visit:
is a highly scalable and sophisticated business data model that has been or email:
designed to process all securities and offers a complete model for traditional
and alternative markets.

SimCorp Dimension is a powerful, comprehensive and truly seamless investment

management system. It can handle NAV and other calculations, with complete related
T: +44 (0)20 7260 1900
accounting, for a huge variety of fund structures and product types, including regional
F: +44 (0)20 7260 1911
C: Elizabeth Gee, sales director
SimCorp Dimension has been designed from scratch as an enterprise-wide system, of SimCorp Dimension
handling all aspects of the investment management process and related administration E:
functions, consistently. Data is recorded once into a core database so that reporting is W:
made easy, there is no reconciliation of data and no duplication of procedures. A: SimCorp, 100 Wood Street,
-By cutting latency in securities processing, our clients are recognising new efficiencies, London EC2V 7AN
reducing costs and increasing throughput
-By streamlining their customer on-boarding processes, our clients are gaining faster
access to fees, increasing customer satisfaction, gaining greater cross-sell opportunities.


Directory ISJ42.indd 48 20/08/2009 10:14

Clever Clogs?

Know your stuff in the Netherlands.

Get the up-to-date facts, trends and opinions
on the Dutch securities lending industry.
Free places available for selected industry
practitioners and beneficial owners,
register at

The Dutch Securities Lending Summit

“Lending for Liquidity” Presented by

• Risk
• Regulation
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NH Grand Hotel Krasnapolsky, Amsterdam
Thursday 8th October ‘09

Limited sponsorship opportunities available, contact

Dutch summit magazine print ad - 16-06-09.indd 40 20/07/2009 10:40

Front Cover Section ISJ42.indd 3 19/10/2009 12:10
Massimo Cotella
SGSS Milano



“As well as the tools we provide for our clients, we have the structures to support their international
development every step of the way. In fact, our organisation is our strength. Our centres of expertise
are distributed throughout the world via international platforms. No matter which country my clients
are based in, I can offer them a complete range of services that best meets their expectations.”
Massimo Cotella, CEO, SGSS S.p.A.

We stand by you

Front Cover Section ISJ42.indd 4 19/10/2009 12:10

SGSSP12_MIL_ISJ_203X267_UK.indd 1 28/07/09 15:40:48