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VOLUME 4 No. 23 - 2007
S ERVICES
JOURNAL
NAVIGATING
DANGEROUS
WATERS
Hedge fund technology
in a risk averse world
HARD COPY
JOURNAL
VOL 4 No. 23 - 2007
H on the financial markets is a
topic that is rarely out of the
press at the moment. The recent news
the cat amongst the regulatory pigeons.
But it is not all bad news, especially for
the vendor community. Due to the
that the Securities and Exchange increased focus on due diligence, hedge
Commission (SEC) may provide tougher fund managers are spending more on
qualification standards for investing in technology. Our cover feature deals with
hedge funds and other alternative this very issue (see page 16).
investments, for example, has proved Derivatives have also been a sticking
particularly controversial. The move is point for the industry over the last few
part of a new anti-fraud rule under the years and it took the Federal Reserve
Investment Advisors Act, which applies setting specific targets for the reduction
to all pooled investment funds, of outstanding trade confirmations for
including hedge funds, private equity any progress to be made. We explore the
funds and mutual funds. successes achieved and the evolution of
The proposal, made in December, equity derivatives processing in our
would require “accredited investors” in feature on page 42.
private investment pools to have at least We also examine the renaissance that
USD2.5 million in assets, excluding the is happening in the French custody
value of their primary residence. market, the development of the Middle
Currently, investors need USD1 million Eastern funds market, the future of
in assets, including the value of their offshore outsourcing and the securities
home, to invest in private pools. The lending market in the Asian region.
legislation would therefore further Finally, Peter Randall, director of
restrict the eligibility of those able to Instinet’s pan-European equities
invest in these assets and comes as a alternative trading system Chi-x, took
dramatic blow to hedge fund managers. the time out to speak to ISJ about his
It seems that it was only a matter of career highlights so far.
time before the SEC got involved in the
lightly regulated world of hedge funds.
There have been numerous discussions
about the possibility of hedge funds
being mandated to register with the
SEC, but these were dismissed earlier in
the year. The meltdown of Bear Stearns’
hedge funds has also heightened the
concern about the impact of these funds
in a climate of financial instability –
would they have the potential to cause a Virginie O’Shea
serious market crash? Editor
INVESTOR SERVICES JOURNAL
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TOTAL NET CIRCULATION 11,188 Chairman: Mark Latham (Mark@isjnews.com)
Analysis for the Audit Issue Vol 3, No 14 distributed June 2006.
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ISJ23 pp1-19 Final.qxd 23/7/07 1:16 pm Page 2
CONTENTS
24 Domiciles reports
The Bahamas and Guernsey
26 Fund profile
SWIP’s Islamic fund
Healthy prospects? 56
■ Custody
50 Sibos 2007
28 France A short guide to Boston and the
Has the new presidency set a key vendors exhibiting
16 precedent for change?
54 US Payments
32 Panel discussion Part of the process
This Month’s ISJ A focus on Nordic custody
■ Securities lending
Hedge fund technology: ■ Technology
How to retain that competitive
56 Securities lending in Asia
edge and survive 39 EMS vs OMS State of the nations
Are traditional OMSs cutting the
mustard? 60 Yield plus funds
Securities lending and cash
1 Hard copy 42 Derivatives processing management
Editor’s letter The state of the industry’s back
office OTC backlogs
■ Legal
4 Letters
Points of view 46 Offshore outsourcing
Is it really dead? 62 MiFID
Future imperfect?
■ News
6 Global snapshots
■ Regulars
Round up of securities services
63 Analyse this
headlines from isjnews.com
Reference data
10 News analysis
66 Mandates
Reading between the lines
68 Statistics
14 CEO profile
Peter Randall of Instinet’s
ATS Chi-x ■ ISJ Directory
Client Servicing
Operational Compliance
Security & Audit
Performance Measurement
Marketing
Reporting
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ISJ23 pp1-19 Final.qxd 23/7/07 1:17 pm Page 4
C effective integration of
communication technology are
key areas for development within the
become key objectives for the future.
However, financial institutions have to
ensure these don’t become mere
industry buzzwords and that a unified
on best practice. If these were all
paper-based documents, managing
the transition would be a tedious
process. In the age of virtual
financial services market and when communication strategy is agreements and automated policies it
embraced, can provide institutions implemented if they are to gain seems reasonable to assume the use
with a competitive advantage. additional market share. of electronic signatures is quickly
Integration across various trade becoming a necessity for business
communication tools is recognised by Tim Furmidge, head of product, practices. The implementation of
financial institutions as being crucial BT Global Financial Services MiFID presents a timely opportunity
to driving productivity, improving to save administration hours and
paper (think of the carbon footprint)
by having virtual policies and
Voice and instant messaging tools are being used electronic signatures in place.
An example of how implementing
in tandem to support the entire lifecycle of a electronic signatures could help make
trade and firms require a flexible approach that compliance with MiFID a less onerous
task is with regards to client
supports dynamic market conditions classification. This strict requirement
could be better handled by having all
parties classify clients online and
client service and increasing trader obtain confirmation in the form of an
effectiveness. However, it has yet to CLASSIFICATION WOES electronic agreement.
be adopted fully across the board. When updating conflict of interest
ith less than six months left
Technology tools used in the trade
cycle are constantly developing to
deliver maximum efficiency, and
financial institutions need to keep
W to prepare for MiFID, many
financial firms are pulling out
all the stops to be compliant. In the
policies, it is key for traders to
understand and adhere to policies to
build customer trust. The distribution
and acceptance of such policies
pace in order to deliver the most wealth management sector, where
individual private clients are could be easily handled via
competitive trading environment. automated policy management
Voice and instant messaging tools are numerous, the regulatory impact of
client classification is particularly software, reducing the amount of
being used in tandem to support the administration costs.
entire lifecycle of a trade and firms time consuming. Validating all
require a flexible approach that contact details with current clients
and ensuring that contracts are Dominic Saunders, operations
supports dynamic market conditions. director, NETconsent
However, the collaboration tools
currently available often operate
independently and use separate Many of the changes surrounding MiFID require
networked technology that could have
ongoing cost and time implications
signed acknowledgments and policies on best
for financial institutions. Adopting a practice. If these were all paper-based
unified communications approach to
encompass the use of voice, data, documents, managing the transition would be a
instant messaging, video and email
on one platform can help answer this
tedious process
challenge.
A large proportion of the market signed and returned is only a small
also recognises that integrating these part of MiFID compliance. While the If you are affected
tools will not only help drive Financial Services Authority (FSA) by, or have an
efficiencies, but can be critical in has invested heavily in educating the opinion
maintaining relationships with clients sector about what needs to be done, on, any aspect of
and counterparties. This will there still seems to be a lack of investor services please
ultimately lead to gaining the all practical advice about how to do it. write to us...
important competitive advantage and Dealing with these challenges can
ensuring future industry success. be a daunting task with all the Virginie@isjnews.com
There is no doubt that the adoption administration and hours spent on
of a unified communications becoming compliant. Many of the
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ISJ23 pp1-19 Final.qxd 23/7/07 1:18 pm Page 8
NEWS
assurances they needed to with a distinctive investment was important for us to high capacity quote platform.
select us as their partner to profile. This opens up new identify a partner who shares Participants in the
enable their continued opportunities to further this philosophy,” said Bhim International Bonds segment
growth." expand successful investment Asdhir, president and chief (the segment including all
concepts.” executive officer of Excel bonds that have been
Funds Management. “CIBC admitted to trading on SWX
London – JPMorgan has
London – Reuters is launching Mellon’s superior that are not denominated in
announced that its Trustee & JRisk On Demand, a tailored technology, and global Swiss francs) will now
Fiduciary (T&F) business risk management solution for service capabilities made this benefit from the vastly
has more than USD1 trillion the hedge fund industry appointment a logical next enhanced functionality of
in assets under trusteeship. delivering real time risk step for us as we move into the quote system, which is
The business, which earlier management tools directly to the next phase of our already being used
this year celebrated its 20th the individual manager’s company’s growth.” successfully for the trading
anniversary, acts in a desktop. The product is of securitised derivatives.
fiduciary capacity for hosted in partnership with LEGAL & COMPLIANCE Ueli Goldener, Product and
European collective GlobeOp Risk Services using London – Five leading trade Services Management, noted
investment schemes and is a established Reuters JRisk associations are jointly in this regard that: “Five
technology which can be releasing a set of non- market makers are providing
provider of services in
quickly deployed with binding principles relating to liquidity in the international
Dublin, Frankfurt, Jersey, retail structured products.
minimal upfront investment bonds segment of the quote
Luxembourg and the UK. and the ability to work They focus particularly on system. As a result, a
Tim Gandy, global head of across any IT infrastructure. the management of the significant improvement in
JPMorgan’s T&F business, As a hosted solution, users relationship between the bid and ask prices, as
said: “Many factors play into benefit from the validated, providers and distributors, well as a noticeable increase
our tremendous growth. pricing and reference data from the perspectives of in the size on both sides of
Amongst these are the provided by Reuters. Andrew firms performing either the market, has been
quality and calibre of our White, global head of function. The principles seek observed. In order to foster
staff, our proactive approach, Reuters Trade and Risk to address issues that an even more liquid market
industry thought leadership Management, said: “JRisk On financial services firms have for international bonds on
Demand marks a major in practice found helpful to SWX, trading in those
and our geographic reach.”
milestone by providing consider when performing instruments will incur no
tailored risk management to these roles in connection exchange fees for the period
the hedge fund industry. We with the process of between 1 August 2007 and
FUNDS & ADMINISTRATION
are meeting the demand for delivering structured 31 January 2008. SWX
Amsterdam – Delta Lloyd Group,
real time, cross asset risk products to retail investors. anticipates that the new
is to acquire the management
management coupled with They are intended to be trading system, combined
company Cyrte Investments
the reliability synonymous sufficiently broad in their with this fee waiver, will add
that manages the Cyrte Fund
with Reuters. As a hosted applicability to provide a to the dynamic of trading
I and Cyrte Fund II. Cyrte
solution it makes state of the reference framework for international bonds on
Investments’ ambition is to
art risk management an easy retail structured products SWX.”
grow the two existing funds
and immediate reality for markets globally. The
into a broad investment
hedge funds.” chairman of the trade Paris – Telekurs and Fininfo
platform with focus on
associations’ working group, have signed an agreement
several current and
Toronto – CIBC Mellon has Timothy Hailes, noted: whereby Telekurs undertakes
developing themes. Delta
announced its appointment "These Principles have to acquire Fininfo’s financial
Lloyd Group’s acquisition of
by Excel Funds Management to arisen from the practical information activities. Marc
Cyrte Investments increases
act as custodian for the experiences of firms active Carletti, chief executive
Cyrte’s power to accelerate
company’s family of mutual in this growing product area, officer, Telekurs, comments:
that growth. Alex Otto,
funds and the Excel India and will also be of great "The motivation of Telekurs
director of investments at
Trust - a closed end value in dialogue with for such a deal was based on
Delta Lloyd Asset
investment trust investing in regulators around the the fact that we share
Management, is enthusiastic
India. “Excel Funds world." entirely the same analysis of
about the opportunities
created by the combination Management offers a series the market, we have the same
of Cyrte Investments and of growth oriented mutual speciality and are confronted
funds, which are designed to MARKET INFRASTRUCTURE by the same challenges. On
Delta Lloyd Asset Geneva – The SWX Swiss
Management: “Cyrte fits take advantage of the fast the side of Telekurs, it is a
paced growth of the world's Exchange has completed the very great opportunity to
perfectly with Delta Lloyd’s migration of trading in
successful strategy of developing markets. We are enlarge our products and
managing profitable funds an innovative company and it international bonds to its services and to diversify." ■
Take
Control with Transaction Lifecycle Management ®
NEWS ANALYSIS
T
a string of events takes place that sweetened their original bid for ABN
restores one’s faith in the timelessness of AMRO, far outstripping Barclay’s (FSA), the UK’s statutory
this editorial gem. The last few weeks original USD80 billion bid. Barclays’ regulator for the financial
have been just such an occasion – a dream chief executive officer, John Varley, services industry, has awarded a GBP6.5
time, in fact, for a journalist who is responded by pointing out that the million contract to design and build its
simply too lazy to dig for a story. First consortium’s deal, which would split new Mandatory Electronic Reporting
the Bank of New York Mellon ABN AMRO’s businesses among (MER) system to Capgemini. This move
announced the completion of its mega separate banks, posed significant continues the relationship started last
merger. Then Mellon agreed to purchase regulatory risk. August, when the FSA awarded
ABN AMRO’s share of ABN AMRO The chief executive officer of BNP Capgemini a four year framework
Mellon. And then France’s Les Echos Paribas, meanwhile, has repeated his contract for the development of new and
newspaper reported that Société opposition to the BNP/Société Générale enhanced IT systems.
Générale was looking to purchase their merger, saying: “This is not on the In theory, this new MER system will
larger rival, BNP Paribas. agenda. I have done lots of mergers and enable the FSA and every business it
Let’s take a look at the Bank of New this is one that I don't want to do. It regulates to operate a clear, consolidated
York Mellon merger, if only to see what would destroy value.” Whether Société reporting schedule – a required upgrade,
kind of precedent it’s setting. Currently Générale is making an offer for BNP as the FSA has a regulatory remit of
ranked as one of the largest global asset Paribas or not, they are clearly looking to approximately 28,000 businesses. The
managers in the world, it is also the merge with someone. It came out last new system will also aim to replace the
world’s leading asset servicer, with more month that they had made contact with a various legacy systems that the FSA has
than USD18 trillion in assets under handful of investment banks to talk inherited from its various predecessor
custody. The immensity of the merger about a possible merger. The question regulators.
speaks for itself, but chief executive remains: who is it likely to be? Recent relations between government
officer of the company, Robert Kelly, More consolidation is evidently on the bodies and IT suppliers have not been the
described it in the following terms: horizon, inspired by the Bank of New most efficient. The former Inland
“Today we are establishing a global York Mellon merger, but what kind of Revenue attempted to switch IT supplier
financial services growth company institutional peer group will this flurry of in 2005 after it had rebranded itself to
without peer.” activity produce? One can only wonder. HM Revenue and Customs (HMRC).
These two, seemingly innocuous words Worried that not enough competition
was forthcoming from the private sector,
HMRC spent GBP53 million, creating
the Acquiring Strategic Partners for the
Inland Revenue project. Eventually,
Capgemini won the deal and aims to
make profits of around GBP1.1 billion.
Profits of such magnitude bring into
question the necessity of outsourcing on
such a large scale. Undoubtedly, the
systems that need to be put in place in
such an important body as the FSA have
to be some of the best the industry can
offer. But with Liberal Democrat
Treasury spokesperson Vince Cable
stating that costs at HMRC were
“spiralling out of control” and “a
worrying picture of failure and
incompetence [was] being painted, with
NEWS ANALYSIS
Are we
sailing?
Project Boat has been
causing ripples across
the exchange market
NEWS ANALYSIS
Jersey
Guernsey
Isle of Man
with its offering of global custody services,
fund administration and corporate trustee services
to fund managers and to managers of private
wealth clients.
BNP Paribas Securities Services and its subsidiaries shall not be liable for any errors, omissions or
opinions contained within this document. This material is not intended as an offer or solicitation for the
purchase or sale of any financial instrument. Additional information is available on request.
BNP Paribas Securities Services is a French entity regulated by the AMF and the Banking Commission;
each of its foreign branches and subsidiaries are regulated by the country where it performs the activity.
BNP Paribas Securities Services is authorised by the Banque de France and regulated by the Financial
Services Authority for the conduct of its UK business.
www.securities.bnpparibas.com
ISJ23 pp1-19 Final.qxd 23/7/07 1:18 pm Page 14
Instinet. He remained with Instinet for a set timeframe.” was 10 milliseconds. Over 95% of
couple of years, before starting up his own When asked to describe the most messages sent to the ATS were responded
business as a consultant, advising sell side challenging aspect of his current role, to in an average of 10 milliseconds,
players in the fields of electronic Randall focuses on the importance of including client side infrastructure
connectivity and automated trading expanding his team to ensure that latency involved on either side of the
strategies. He also served as executive participating firms can connect to Chi-x’s transaction. The fastest response time
director of FIX Protocol. In 2005, he liquidity. The team grew in March this was recorded at four milliseconds.
rejoined Instinet, with the specific remit of year, when Michael Bundy was hired to For high volume throughput testing, in
Any analytical experience is highly valuable when scoping out the requirements
necessary to addressing a changing marketplace. I combined this with my experience
at Instinet, a firm that has pioneered electronic trading for nearly 40 years
launching Europe’s first order driven pan- fill the position of chief technology which five million messages were
European ATS, the aforementioned Chi-x. officer. Another ex-Instinet member, generated in total, Chi-x maintained an
A variety of experience has been key to Bundy oversaw the complete average roundtrip latency of 18
Randall’s success. He states: “Any redevelopment of Instinet CBX, an milliseconds while handling 16,000
analytical experience is highly valuable upstairs matching system, or dark pool, messages per second. Furthermore, the
when scoping out the requirements whose underlying technology serves as system’s internal latency, which is a
necessary to addressing a changing the foundation for all Instinet’s matching measure of message processing in the
marketplace. I combined this with my engines, including Chi-x. system’s core, was recorded at 890
experience at Instinet, a firm that has A strong team, with significant microseconds.
pioneered electronic trading for nearly 40 experience in the right areas, is a must for “Based on Instinet’s internal system
years. I also drew on my experience in a paradigm shifting operation such as performance measurement statistics for
South East Asia, dealing with the complex Chi-x. Furthermore, it is encouraging to average direct market access order routing
market and regulatory challenges. I am note that the biggest issue that concerns speed to the incumbent European stock
certainly grateful that I have these Randall is the massive inefficiencies that exchanges, we believe Chi-x is more than
experiences under my belt.” exist in many parts of the European 10 times faster, when compared to
It is the experience that Randall gained infrastructure. It will be interesting to see TransactTools’ results,” comments
in Asia that seems to have been most whether Chi-x (which finds itself in a Randall.
invaluable to his career development. “At similar position to Island’s in the US in When scoping the requirements for
that particular time, the South East Asian the late 1990s) will be able to Chi-x, Randall and his colleagues
markets were enveloped by regulatory fundamentally change the rather examined the success criteria behind the
requirements that presented many overpriced and sometimes ponderous US Electronic Communication Networks
challenges for Instinet. Introducing new European market. and identified two key components:
technology in this environment Randall is very positive about the future standardised connectivity and rebate
(remember, these were pre-internet days) of Chi-x in the post-MiFID market: “The pricing. Chi-x will, in fact, reward
required us to be nimble and pick our way total cost of trading equities in Europe is participants for their liquidity through
through the many regulatory hurdles that significantly higher than other major rebates, says Randall. Market data will be
governed domestic and international markets competing for investor capital. available free of charge and a flat fee will
trading,” he explains. Europe needs competition, not be charged for transaction reporting.
The introduction of new technology, consolidation as this leads to innovation, Apart from the evolving exchange
however, will perhaps be the deciding more liquidity and lower costs. Chi-x will landscape, the most innovative and
factor in the establishment of Chi-x as a provide institutions with a true high groundbreaking change that Randall has
dominant force in the European market speed, low cost alternative for trading seen in his time in the financial services
sphere. Randall’s experience of European equities, and our partnership industry is the introduction and evolution
establishing new technology systems with Fortis, who offer compression, of the FIX protocol. Randall sees FIX as
within complex environments must come netting and significantly lower costs, will the new lingua franca for front office
as great help in the running of the ATS. ensure competition throughout the entire communications, enabling electronic
He comments: “It is easy to underestimate equities trading process.” trading to dominate the global trading
the impact of regulatory change and of A series of latency and throughput industry. FIX, in turn, has provided a level
commercial challenges when designing tests were carried out by software vendor of standardisation and connectivity that
and launching a trading destination to TransactTools earlier this year and allows for market innovation, such as the
challenge market inefficiencies all within a indicated that Chi-x’s roundtrip latency development of Chi-x itself.■
& Co was the single best performing Funds in Fund Services, UBS, feels that independence between the hedge fund
fund, rising 39.9% after fees in June. the influence of public pressure on hedge and the administrators. Self
Moreover, testament to the faith in the funds is not the prime motivating factor administration is currently very tough to
performance of hedge funds is the fact for the renewed focus on risk. “The more sell to investors,” he notes.
that the largest US pension fund, the likely cause is the investment manager’s Bhagesh Malde, head of JPMorgan
USD245 billion California Public desire to tightly control risks and Hedge Fund Services in EMEA and Asia
Employees’ Retirement System exposures, given that the pursuit of Pacific, agrees that the demand for
(Calpers), has approved plans which alpha can lead to potentially difficult increased information and transparency
could see it double investment in hedge waters without the right information at from investors is driving the increase in
funds as it seeks to reduce market risk. hand,” he explains. technology spend. This requirement for
The fund has indicated that it will Despite the somewhat negative press, more information translates to more
increase allocations to corporate hedge funds continue to proliferate. frequent valuations, for example the
governance and hedge funds from USD5 According to recent estimates, hedge move from monthly to weekly and daily
billion to more than USD10 billion. fund managers have launched 40% more valuations, and the use of more
Calpers established its hedge fund funds in the US in the first half of this independent pricing sources. “Hedge
programme in 2002, when it invested year than in the same period in 2006. fund managers, partly driven by their
USD50 million in five hedge funds. The biggest US launch in the first half investors and regulators, do require
Regardless of whether the dire of 2007 was Carlyle Group's Carlyle more timely risk management
predictions come to fruition in the long Bluewave, a multi-strategy fund that information. A number are increasingly
term or the future is rosy, all of this began trading with an estimated USD2 relying on third party services for risk
means that hedge funds are faced with billion. analysis. Service providers, like
the short term problem: how to assure However, it is becoming increasingly JPMorgan Hedge Fund Services, are
investors that their money is safe. This difficult to set up a hedge fund due to the designing their systems to output
problem is compounded by the fact that barriers imposed by higher legal and information in a variety of formats for
larger hedge funds are also becoming compliance costs. Furthermore, due to different risk management services and
more institutionalised and the boundary the focus on risk, it seems that investors tools,” Malde says.
between traditional asset management may even be spending more time Steve Miller, senior product manager,
and hedge fund management has been analysing hedge funds’ risk controls than SmartStream Technologies, believes that
significantly blurred. The extent to their investment strategies. a proportion of the technology
which transparency should be imposed Smithers explains: “Hedge funds are investment by hedge fund managers has
on hedge funds is up for debate and this no longer regarded as too ‘exotic’ or moved from the front office to the middle
could have a potentially negative impact ultra high risk and the explosion of and back office functions. This is
on the ability of these funds to retain growth of assets proves this fact. particularly apparent in obvious areas
their competitive edge. However, the large institutional investor, such as derivatives, he says: “Major
As Fabian Vandenreydt, acting head of who can invest anywhere from tens to exposures in derivatives, if not
the Securities Industry Division and hundreds of millions in a single fund (if understood sufficiently, can lead to
Laurent Desnouck, market manager, FX not billions in the case of some huge disaster, and one of the biggest and least
and Derivatives, at Swift, explain, global pension funds) has dramatically understood areas of risk in this respect
investors must recognise that the high increased the level of due diligence that is the loss of data quality post-trade that
return potential has a price. Putting too
much pressure on hedge funds to
increase transparency will inhibit their
risk taking and therefore their potential Conversely, as well as being labelled as high risk, hedge
for extraordinary returns. Hedge funds funds are also being touted as the solution to the
are, after all, investment vehicles that are
good for competition and helping to market’s problems
drive growth, Vandenreydt says.
Srikant Sharma, senior director of
Financial Services at Interwoven, adds: is being performed on potential still affects large parts of the derivative
“The scrutiny of the regulators has been investment targets prior to any spectrum.”
a strong motivating factor for hedge investment being made.” However, one of the other impacts of
funds, as well as for the market as a He believes that the medium sized and the blurring of boundaries between the
whole. No one wants to have regulation larger hedge funds with well established traditional funds and hedge funds is that
imposed upon them, and so the threat of internal controls frameworks are coping a number of hedge funds are now
this alone has, to some extent, spurred admirably with these requirements, but attempting to cut their financing ties
the industry on to look at ways of that some of the smaller players may with prime brokers. This process is
minimising their operational risk struggle in this regard. “It should also be achieved by raising their own permanent
through technology.” noted that due diligence has capital, building in-house reporting and
David Smithers, head of IT for Hedge strengthened the case for complete administration capabilities and running
their own trading platforms. This comments: “This spending is across increased, largely in the front and
decision also inevitably requires a several areas and varies from fund to middle office areas. Large independent
significant investment in technology fund depending on size, strategy and hedge funds have sophisticated and well
platforms and systems. asset classes being traded. For some organised operations and are able to
Don Finucane, vice president of funds, better internal back office handle the entire lifecycle of their trade,
marketing and product management for processing systems is the focus, whereas relying on the prime broker mainly for
Interactive Data Real-Time Services, for others, risk management is the financing purposes, he explains. Among
sees a definite increase in spending in the primary concern. Enhanced derivatives this group, investments are rising and
front office in particular. “I can't speak processing is also on many chief strong efforts are being made to provide
for the industry as a whole, but can say technology officers’ radars.” true front to back office automation. At
that we have seen an increase in Tim Murphy, managing director, Bank the opposite end of the spectrum, small
spending by hedge funds, particularly on of New York Mellon, does not think the and medium hedge funds tend not to
the real time services side over the past amount spent on technology by hedge consider operations as being in the
year, and mostly in the area of the front fund managers has significantly competitive space and will also rely on
office where our low latency data feed is increased over the last year. “I think it’s their prime brokers for all downstream
used in electronic trading applications. a broad category to characterise. The processes.
We believe this increase in business is way hedge funds spend money on their “A substantial and increasing number
directly related to the increase in infrastructure varies from one house to of hedge funds have become part of
demand for low latency data as the another. So I think their spending has large financial consortiums and rely on
Regardless of whether the dire predictions come to fruition in the long term or the future
is rosy, all of this means that hedge funds are faced with the short term problem: how to
assure investors that their money is safe
electronic trading markets have become been probably about the same as it was shared infrastructures to handle their
more competitive and latency sensitive,” last year. I don’t think there is anything post-trade services. Technology
he says. particularly extraordinary going on in investments are made at the group level
Jon Anderson, head of risk and terms of new spend,” he says. and shared throughout the business
operations at BlueMountain Capital, Murphy does acknowledge that there lines. The front office, however, remains
explains: “Technology spend by hedge may be different houses changing their a core competence and specific
funds has been getting higher every focus one year to the next from front to investments will be made to handle the
year. There are two reasons for that. back, but that this depends on which specific requirements from the hedge
Technology has become ever more hedge fund you’re talking about. The funds arm(s) of these finance
important as the volumes and types of funds that have invested are generally supermarkets,” Vandenreydt continues.
trades have been increasing. The real doing it out of a desire to control BlueMountain Capital’s Anderson
growth in the hedge funds is coming not everything in the trade lifecycle from believes that there is a move towards
from the small ‘mom and pop shops’, beginning to end, as opposed to facing building more mature systems and that,
rather the larger hedge funds are regulatory scrutiny. He adds: “It’s all by definition, is taking what might have
achieving economies of scale by creating very individualised so it’s hard to make been systems from the front office and
more efficient processes. This is the general comments, but at the end of the building out back office processing and
same across Europe and the US.” There day, if regulatory scrutiny or risk management platforms. “If you take
is no geographical division in spend but institutional capital comes in, they’ll do a mature market, 20% of the spending
there is a division in terms of the focus one of two things: they’ll either invest in on systems is on the sexiest up-front
of the fund, says Anderson. “Where you their back offices and try to do it part and 80% of it is the back for the
are going to be seeing the most themselves or they’ll go and leverage ‘heavy lifting’ that requires risk
investment, which is reflecting our own their back office providers and look for calculations or transaction processing.
biases, is in the credit and interest rate more service. Those are the two ways As hedge funds are maturing and
managers, as it is the most expanding they’re going to react, and of course becoming more business-like entities, as
area,” he adds. there’s going to be some combination in opposed to trader expertise focused
This increasing technology spend was the middle.” shops, they become more like multi-
highlighted by a recent Datamonitor Swift’s Vandenreydt agrees that purpose hedge funds and processing
report, which estimates that global spending varies according to the type of becomes more important. The focus on
hedge fund IT spend could reach hedge fund that is being discussed but development in technology is moving
USD3.3 billion by 2009. UBS’s Smithers contends that overall spend has toward middle and back offices. That is a
natural process. You could have said the doesn’t believe one single outsourced The development of platforms, the
same thing about interest rate swaps platform will be able to cope with all of development of standards, is a
when that happened 20 years ago. The a hedge funds very diverse requirements: relentless, small step march towards
initial spend was on working how to “We’ve seen attempts at providing such a that,” he explains.
trade this stuff and the real money was platform, but the level of customisation SmartStream’s Miller adds: “The key
spent on building the integrated STP,” is very limited and hedge funds therefore lies in agile combination of suitably
he explains. typically have to complement these with engineered generic components.
However, given the diversity of the other systems to cope with their specific Productised solution offerings with
funds community, how can one platform requirements. But one has to think about quick time to market based on common
hope to successfully meet the needs of what activities would be better process layers, rather than engineered in
code from scratch, stand the greatest
chance of success.”
It is becoming increasingly difficult to set up a hedge One of the primary areas to tackle in
terms of both collaboration and
fund due to the barriers imposed by higher legal and standardisation, says Vandenreydt, is the
industrialisation of service level
compliance costs agreements (SLAs). This can be done
through the adoption of market
all? Anderson explains his experience of undertaken collaboratively rather than practices and a common minimum SLA.
outsourcing at BlueMountain Capital: in competition. What really creates JPMorgan’s Malde, on the other hand,
“The short answer to whether one competitive advantage?” feels that formalised SLAs are not
platform can meet all hedge fund Swift therefore asserts that front office needed in the triangular relationship
managers’ needs is no. But the first tools, including the ability to model between the hedge fund manager, the
question is then: how close can you get? complex algorithms, as well as risk prime broker and the hedge fund
And what do you focus on first? There I management systems, will remain administrator. “All three parties should
think our experience is not the norm, as specific because they do create be professional enough to work together
we are a derivatives heavy shop and we competitive advantage. On the other to achieve their objectives. An SLA is not
have focused a lot on investing in our hand, some middle and back office required if each party has clear
processing of derivatives. We have a functions could become more generic. responsibilities which are well defined
tendency to rely on more established The closer the trade gets to settlement, by the contracts that are in place with
systems for the processing of our more the more generic the platform could be, the fund: the administration agreement,
traditional securities products. In our says Desnouck. If such a generic investment management agreement and
case there is a twofold reason for this: platform were feasible, it would drive the prime broker agreement,” he says.
the real volumes lie in our derivatives down costs thanks to economies of scale Rather than the imposition of an SLA,
products but also the systems around
derivatives have never been as well
developed. The systems around equity One of the other impacts of the blurring of boundaries
and bond trading have been around for a
long time and there is therefore no between the traditional funds and hedge funds is that a
reason to reinvent the wheel.”
There is a natural tendency as hedge
number of hedge funds are now attempting to cut their
funds become bigger in size to bring financing ties with prime brokers
core competencies in-house, says
Anderson. If you are smaller you might and scope. In addition, users of such a Malde believes that communication is
rely on your prime broker or your platform would be more agile in meeting the key to strengthening the relationship
administrator to help you with new requirements. This ‘collaborative between the three parties. “A common
operational support and risk space’ is where Swift focuses its efforts. messaging format should be agreed and
management, for example. As you get to “We aim to deliver solutions that deliver standards should be put in place
a certain size, those risks become more very tangible benefit our entire regarding responsibilities and
scalable inside the business. “As we got community, without levelling the deliverables. Furthermore, technology
bigger, we brought in collateral playing field,” he adds. can ensure that the passing of data
management, confirmations, a lot of Murphy is quick to assert that this between all parties is both efficient and
trading and STP. We established direct process of collaboration and secure. The more integrated the three
links with our prime brokers too. But standardisation in the processing space parties are from a technology
that is not to say that administrators will happen over a period of years rather perspective, the more time human capital
don’t provide an attractive way to take than months. “You’ll find some can spend on value added tasks,” he
advantage of their scale for lines outside particular service niches that will have a concludes. Evidently, even in the
of your core competence,” he adds. wider potential subscription from competitive field of hedge fund
According to Vandenreydt, Swift people, but there are no magic bullets. administration, it is good to talk.■
Liquid
established itself as the regional hub.”
of it is helping the Despite these doubts about the
region’s ability to sustain numerous
markets back home? financial centres, the amount of money
Rush
flooding in as a result of high oil and gas
Andrew Warburton prices leaves one wondering: “Why on
earth not?” The evidence suggests that
investigates the separate centres could survive in the
long run by offering platforms for
complementary services.
As Nigel Sillitoe, director, Business
20 INVESTOR SERVICES JOURNAL
MIDDLE EASTERN FUNDS
Development, the Bank of New York finance and growing the financial prudent regulatory framework, the DIFC
Mellon, points out: “In time, each centre markets for Qatar itself, as opposed to a is now established as an ideal operating
will specialise in a different area. In my more international mission, which is the environment for the managed funds
opinion, the DIFC will become the main goal of the DIFC. The DIFC is not industry.”
hub, as they’ve attracted over 400 looking to be a local player in terms of One concern associated with the
hundred companies already. But it’s quite the United Arab Emirates (UAE) relatively high number of financial
possible that Qatar will specialise in economy or the Dubai economy, or even a centres in the region is that it will burden
project finance, Bahrain will specialise in regional economy. Our ambitions are investors with overly complex processes
Islamic finance, and the DIFC will cover very straightforward – to become the and regulations. Distinct legislation in
a broad field of private banking, asset international capital market for the each of the separate territories means
management and Islamic finance.” Middle East, on a par with London, New that funds cannot always be marketed in a
Dr Nasser Saidi, chief economist of York, Hong Kong and Singapore. So I lucrative, region-wide manner. “Logically,
the DIFC, is also aware of the tendency think the scope is there for the markets to there should be some sort of passport
system, as there is in the European
Union,” says Sillitoe. “This would allow
A combination of good regulatory framework, transport you to market your funds everywhere in
links and lifestyle in Dubai will make it difficult for the the GCC without having to have your
funds approved in every single territory.”
other centres to compete The Middle East currently supports
over 30 private equity firms, most of
which have pursued high profile ventures
to portray the Middle East centres as complete each other and complement in Europe and the US. Excessive liquidity
competing. But he is quick to point out their activities, rather than to compete.” in the region, combined with high
that the region needs more, rather than The DIFC has itself been a major demand for investment opportunity
fewer, financial markets, especially influence on the other financial centres in outside the Middle East, has meant that
considering the growth that has been the region, setting the benchmark for funds cannot be launched quickly enough.
witnessed in the past five years (market financial standards by introducing A number of transactions by Middle
capitalisation has increased from under detailed investment rules for collective Eastern funds have hit the headlines of
USD200 billion to no less than USD1 investment funds. The Collective late, including the much talked about
trillion today). “Average market Investment Law of 2006, sponsored by purchase of Madam Tussaud’s by Dubai
capitalisation, compared to GDP, is
running at around 70-75%. That
compares to an Organisation for
Economic Cooperation and Development
The region needs more, rather than fewer, financial
(OECD) average of around 130%. So the markets, especially considering the growth that has been
scope for the markets to grow, to attract
more companies – particularly family
witnessed in the past five years
owned companies – is great,” he explains.
Saidi also agrees with the notion that the Dubai Financial Services Authority International Capital. With the
the Gulf financial centres can (DFSA), sets out a regulatory framework rumoured future sale of Sainsbury’s
complement each other, instead of for the funds market and allows for the making ripples in the British financial
merely competing for slim external operation of various types of fund in the press, this year is set to be no different.
interest. “When people look at Bahrain, DIFC, including property funds, Islamic Some commentators have tried to point
Qatar or the DIFC,” he says, “they funds, hedge funds, fund of funds and out that funds are, in fact, beginning to
wonder whether or not they will be private equity funds. Although the other operate within the Middle East. This has
competing with each other or completing Middle East centres have begun to been encouraged partly by an overly close
each other. In each case, particularly in introduce similar legislation, Dubai’s first scrutiny of Asian money overseas and
the case of Bahrain and Qatar, they are mover status has given it a great partly by an increasing willingness on
deepening their roots in the local advantage. the part of Middle East governments to
economy. Qatar needs to grow its market, “This package of legislation,” says pour surplus money into infrastructure.
but it is likely to become an important David Knott, chief executive of the George Sauberer, regional manager for
economy. It has a very strong national DFSA, “follows extensive consultation the Middle East at SmartStream, points
resource base, but remains highly between the DFSA and the managed out: “During the last decades, the oil
specialised. They are going to look funds industry. The result is a tailor made producing countries realised the need for
towards diversifying their economy, and regime that will meet demand for a strong banking systems and they
the markets will have to be there to modern, well regulated centre for funds enhanced the infrastructure. Among
support that economic diversification.” management and administration within those countries, UAE seems to be the
He continues: “The primary focus is the Middle East. By allowing for most advanced, as they applied an e-
going to be project finance, infrastructure flexibility and innovation within a government solution that enhanced the
www.bnymellon.com
The French people have chosen advocated for some time now, has the third party securities clearing and
where hedge funds are being used as a fragmentation of the trading and has little chance of buying such an
façade for buy-out firms. The AMF clearing layers of our industry’s institution as a global French bank.
suspects that activist funds forced infrastructure through the suppression Political pressure must be one of the
various companies to be put up for sale, of the rule of concentration of liquidity reasons behind this trend, for a bank
however private equity groups may have on the ‘official’ stock exchange. Chi-x such as SocGen – a global expert in
been given the option to buy stakes in and Turquoise are examples of the international fixed income and credit
these companies. possible fragmentation of liquidity pools derivatives, but not as large as other less
Such scandal never serves the hedge that MiFID will induce.” innovative banks – should theoretically
fund or private equity industries well, It is Project Turquoise that seems to be a tasty target in this age of easy loans
especially when the press and be of particular interest for French and large scale consolidation. UniCredit,
governments across Europe have been
especially hostile. French regulators, on There is good news, however, for custodians and fund
the other hand, have made life
particularly difficult for hedge funds, managers that want a piece of the French fund
albeit through consequence rather than
direct action. Because the regulator’s
management pie
attitude towards the role of the trustee
depositary bank are stringent to say the custodians at present. According to the the Italian bank, recently eyed up an
least, it has been difficult to find a French daily La Tribune, SocGen is in offer for SocGen, only to cast its eyes on
relationship between the prime broker “very advance talks” to purchase a 3% Capitalia and the Ukrainian bank
and the depositary that suits the stake in the standalone stock trading Ukrsotsbank. Rumour has it that the
servicing of the hedge fund. A number platform. BNP Paribas has already taken French authorities or the central bank
of French asset managers have had to a 3% stake, announced by CEO Baudouin has expressed a desire for French banks
launch hedge funds abroad in the Prot at the beginning of July. to stay French. According to the
Cayman Islands and Ireland as a result. The project, implemented by seven business newspaper Les Echos, the
On the whole however, the AMF is investment banks, aims to cut market impetus is with SocGen, suggesting a
doing a good job, and as Closier states: trading costs, and has been made bid for its long term rival BNP Paribas.
“It is committed to the concept of ‘better possible as a result of the introduction of The head of Morgan Stanley in France,
regulation’. This implies that the balance MiFID. Moreover, due to the Patrick Ponsolle, has already extradited
between consumer protection and introduction of this directive, many himself from the possible furore by
flexibility for industrial innovation is banks will need to find ways of saving telling BNP Paribas’s CEO that the
moving in favour of removing a certain money, Prot has already stated that bank is not acting as an acquisition
amount of red tape that previously MiFID will cost BNP Paribas “dozens of consultant for SocGen, according to
handicapped the French players in millions of euros” to implement before weekly Magazine Challenges. This goes
comparison to certain neighbouring the start date in November. against earlier claims made by Les
markets.” Sophie Gautié, EU So while the market becomes more Echos. Throughout, SocGen has
representative, General Secretariat at liberalised and French banks continue to stoically declined to comment.
BNP Paribas Securities Services, agrees expand abroad – most recently with the Whatever happens with the latest
with the positive nature of the 50:50 joint venture between Indian French banking duel, the French
government’s new policies: “The brokerage Geojit Financial Services and custodians look set to grow. This will
objective that the government has BNP Paribas – it remains difficult to talk not only happen abroad, as the current
announced is to simplify regulation and about French custody without talking economic and political domestic climate
legislation where possible, they are about the possibility of domestic looks highly favourable for growth. The
pretty open to reviewing the current consolidation. The elephant in the room, 35 hour week has been highly damaging
legal situation and also looking at how to the possibility of the merger between for the hope of Paris being an economic
ensure companies can develop and grow SocGen and BNP Paribas, is getting as well as cultural centre. These policies
in a competitive global financial market.” bigger by the day. have led to high unemployment,
On top of this review and progression Back in 1999, Paribas, then a proudly something that Sarkozy aims to
of domestic legislation, the importance independent bank, looked like it was decrease. Yet despite of this, over the
of European legislative development is going under the hammer to SocGen. past 20 years (1986-2006), France has
of equal if not greater importance. Most BNP, big but not nearly as dynamic as achieved a higher rate of productivity
notably, this includes the development of Paribas, protested and, as an objection, growth (2.0%) than the US (1.7%). After
new stock exchanges, partly as a result of put in a bid for SocGen. SocGen some relatively poor economic
MiFID. Closier explains: “MiFID is an promptly fled from the scene and BNP management from the political sphere,
example of a key development that goes claimed Paribas as recompense. Note new guidance may allow France to be
both ways, that is to say that it favours that all the actors in this little turn of the European high flyer it has always
European harmonisation, which in turn the century drama are French. While the promised to be. The custody business
favours consolidation in terms of French may be more than happy to will no doubt be one of the main
applicable law. But is also leading to purchase assets abroad, a foreign bank beneficiaries.■
Custody-Depositary / Trustee
Fund Administration
Corporate Trust
CACEIS benefits from an S&P AA- rating
PANEL DEBATE - NORDIC CUSTODY
ISJ
Evolution
Our panel of experts
PANEL DEBATE
debate the changing
face of the Nordic
Coping with
custody market Consolidation
Bente Hoem, DnB NOR Bank
Bente Iren Hoem has been head of global relations and network at the Norwegian provider of securities
services DnB NOR since December 2003. Prior to that, she worked as a project leader in DnB within
the securities services area. She spent 15 years at Christiania Bank og Kreditkasse within the custody
business where she headed International Securities Services.
What have been the main drivers for growth in providers. In a win/loss relationship of region are most likely similar to the
the Nordic custody market in the last five approximately 7:1, it has helped us in challenges of custody providers all over
years and what do you see as the major building considerable market share in the world. Regulatory changes are
challenges facing Nordic custody providers in Norway, Finland and Denmark and, at keeping us busy, as is finding more
the near future? the same time, defending our very strong efficiency in our business models.
Swedish position. Standardisation and increased
Hoem: The consolidation of the trading Challenges are manifold. What will be automation for new products and services
infrastructure has had an effect on the the liquidity effects upon a successful is always on the agenda.
number of remote members and their implementation of the MTFs like
increased market share in each market. Turquoise and Chi-x? Any sub-custodian McDowall: In terms of growth drivers in
This has again, of course, had an effect working with non-scalable business the medium term for the Nordic market,
on the Nordic custody market and the models must potentially address I think a lot is hanging on OMX, Nasdaq
service it provides to the investment situations with much weaker transaction and Dubai. I think that the conclusion of
firms. The Norwegian securities market revenue levels. Any provider dependent this will be a driver. An association with
has been successful in its strategy and has on revenues from only one sub-custody Dubai would be preferable to Nasdaq
developed strengths in special sectors market will get into profitability because Dubai has greater funding and,
such as energy and shipping, which again problems, following margin pressure probably, flexibility, in the way that the
has attracted many new listings of earlier than regional providers, as a result funds could be used for development.
foreign companies at the Oslo Børs. In of economies of scale issues. To continue Dubai will certainly be looking for the
Norway, the growth in public wealth has investing and developing quality services technology efficiencies that OMX has in
increased investment both in equities and under current extreme margin pressure abundance, and it could bring the Middle
mutual funds. A well performing market is a challenge. So will addressing issues East and Scandinavian markets together
has attracted new market participants following the shift in the European very successfully. They also don’t have
and led to an increase in volumes of securities markets, where development the heavy leverage that Nasdaq does. So
investment. In addition, algorithmic during decades has been market driven it does, to a great extent, depend on the
trading has also contributed to a and now is driven by either political or outcome of the bid for OMX.
considerable increase in volumes. regulatory forces.
The main challenges for the future are How will Target2-Securities (T2S) affect the
still to adapt to new regulations such as Wennerberg: We have had strong markets, Nordic clearing and settlement region?
MiFID, Basel II, Target2-Securities, the and listed companies have shown healthy
EU Code of Conduct and local changes profits. This has attracted substantial Hoem: It is very hard at this stage to
in legislation and infrastructure. interest from investors and brokers on a predict the impact on the Nordic
Increased competition, margin pressure global basis and we see record volumes countries, as it will not have any
and overcapacity in the Nordic region are when it comes to transactions in all the immediate effect. In addition, the Nordic
also challenges. Nordic markets. Also pension funds and countries have a very different approach
fund companies are growing to the EU. While Finland has adopted the
Noren: The global investment trends and substantially and currently, we note that euro, Norway is not even a member. This
need to invest cross border have been there is a growing interest in hedge means that T2S will affect the Nordic
excellent contributors to growth. We funds. countries in different stages and in
have seen an explosive growth in the It is with regard to servicing the different ways. We believe that the Code
number of remote members in the four growing number of hedge funds that I of Conduct will prove to affect the
Nordic exchanges, following OMX’s see the greatest challenges. There is a Nordic Market more.
successful implementation. We are also growing demand on a great variety of
continuously seeing variances on how instruments and more or less exclusive Noren: It is a bit too early to say. What can
those memberships are administered, markets. be said at this stage is that T2S certainly
spurring a growth in triparty is a formidable force for consolidation in
arrangements over the past 18 months. Broström: The major drivers continue to Europe and that is certainly a feature that
The Nordic markets have also offered be stock market development, expanding SEB is welcoming. Whether or not T2S
better returns than comparable European use of derivatives products, continued is the right answer for Europe remains to
markets consistently over a period of growth in structured products, OTC be seen. At this time in the project, we
several years, further contributing to derivatives and securities lending. Hedge have a number of concerns. Multi-
growth. Both Finland and Sweden are fund activity should also be a headliner currency functionality is of utmost
heavy on cyclical shares, where on the list of drivers. These products and importance and need to be integrated in
overweighting has been evident lately, services have been growth factors for a all principles and proposals for T2S.
and the Norwegian lists’ dominance of number of years, but the interesting Support for the end investor account
energy shares has attracted a lot of angle is the innovative ways they’re being structure is of vital importance for the
additional interest. used today and the complexity of the Nordic countries. Lack of functionality
For us specifically, we have benefited a services associated with them. and support for this market model would
lot from the global trend of regionalising The challenges we face in the Nordic lead to a need to maintain duplicate
setups in the end investor markets, thus drafted and agreed by all CSDs and impossible, for NCSD to build a
increasing costs and making these participants in the T2S. consolidated platform for settlement,
markets worse off compared to markets We support direct access to T2S for the since Finland is a euro country that will
with omnibus account structures. One participants. Compulsory routing be included in T2S and Sweden is not. At
important aspect to take into account in through CSDs would lead to duplication a later time, it might be possible to settle
this context is the need for liquidity and of the process. Also, matching of non-euro currencies in T2S and then
how this liquidity is provided. The T2S instructions should take place directly in there will be possibilities for SEK and
system should not increase the need for the T2S lifecycle management and DKK.
central bank money for the settlement matching module and any additional
activity. layers or rules for matching in local CSDs Broström: It’s too early to tell what the
There has to be a level playing field for should be avoided. Direct access is effects will be and exactly how the T2S
all of the markets joining the T2S setup – important to ensure minimal delays in will be set up operationally. One big factor
a view that has been shared by ECOFIN instructing to, and receiving reporting is how many currencies will be covered; if
and accepted by ECB representatives. from, T2S. the Swedish, Danish and Norwegian
Additional costs due to a local currency or We have considerable need for further krona (SEK, DKK, NOK) are not included
a different account structure cannot be clarification of the business case as our in the project, it will have a somewhat
accepted. calculations end up at higher numbers, limited impact on the local non-euro
A high level of harmonisation is even before taking decommission costs, marketplaces in the Nordic region. We
important to achieve the financial delays and traditional cost excesses into will have to wait and see.
efficiency of T2S and it should not be account.
jeopardised by local regulatory actions. McDowall: This is very interesting. We
Harmonisation of market rules and Wennerberg: NCSD continues to build on must remember that T2S is confined to
regulations is a key factor for the success its vision of a Swedish-Finnish the euro zone, and most of the
of the T2S model. We support only one depository, and there has been some Scandinavian countries reside outside of
set of rules, processes, practices and progress. If T2S is implemented, it will the euro zone. As yet, I see no indication
deadlines that would be commonly most likely make it more difficult, if not that they will be joining it. Obviously, if
the Scandinavian securities were traded in ahead of us in this market across all areas
euros, it would give a slightly different of the securities infrastructure. Along the Wennerberg: For us this has meant an
complexion to the issue. T2S is five or six same lines, we will probably see an opportunity to develop, with Northern
years away. That is if it runs to time and increase in outsourcing deals in the Trust, a competitive range of products
gets the funding and approval that is domestic marketplaces, as well as cross and services that have so far been very
required by the relevant ECOFIN border. successful.
ministers and national central banks. It Having said that, some of the major
also needs to be successful and get the buy McDowall: If we see more banking mandates in the region prefer a local bank
in, not only from the European central consolidation, it clearly affects the custody to provide global custody, and we
bank, but the major international banks, business. If it’s between Nordic banks, it recently won a EUR10 billion mandate in
which may participate in the project in an probably strengthens the position. If a Finland.
advisory or investor role. This could Nordic bank is acquired by, let’s say a
perhaps erode or dilute some of the European or American bank, then, Broström: The global custodians’ previous
competitive elements that the Nordic candidly, the issue is whether custody is lead in technology and systems has
custody market currently has. At this one of their core services or not. decreased significantly in the last few
stage, I am slightly sceptical about T2S – years, when local providers have invested
its scope and the point at which it is going How well are Nordic custodians competing in technology and new product offerings.
to be implemented. So yes, it could be a with their global counterparts who have The local banks’ flexibility, knowledge
problem, but it is a way off – perhaps entered the local markets? and presence are arguably more
seven years. interesting for the growing number of
Hoem: As long as the market is very niche players and many times smaller
How have consolidations or alliances affected fragmented with different infrastructures start-up hedge funds and other more
your respective businesses?
Part of Nordic Custody Alliance: Swedbank, DnB NOR, OKO Bank, Amagerbanken
PANEL DEBATE - NORDIC CUSTODY
consolidation that would still have too the OMX Group to include the three
Hoem: Consolidation of the CSDs has many question marks in too many areas, Baltic CSDs in a similar deal as in
been and still remains a challenge. The not least the cost benefit side. Also, it Finland and Sweden, and thereby create a
NCSD, which was between two countries could be a consolidation with less clear signal effect where five EU countries
only, has experienced difficulties reaching borders between utility and commercial operated under one CSD umbrella.
agreements and has not made much sides of the post trade infrastructure. A
progress since merging. I believe that the standstill situation could occur where Wennerberg: Even though we would like
NCSD, the Danish and the Norwegian further consolidation is not encouraged to see further consolidation between
CSD are more likely to wait and see what and where infrastructure costs will not depositories in the region, we cannot see
will happen, in respect of T2S and other fall as quickly as the market would like anything pointing in that direction at the
European initiatives. them to. Development would be put on moment. It is a wait and see situation.
hold, as stakeholders would be reluctant
Noren: From being a very optimistic to invest in structures that might not Broström: Probably, but not in the
organisation when it comes to the exist within normal investment horizons. foreseeable future. At this point, the only
chances of Nordic consolidation on the This could have looked very different if possibility for one CSD to serve the
CSD side, we have now turned into three major factors had not weighted in. entire Nordic region is if an external
realistic negativists on this topic. It The announcement of the intention to entity moves into the region and opens
certainly would have been a necessity, create T2S arrived in July 2006 and has shop. Previous ‘internal’ attempts
and still is, as it would have provided influenced willingness to invest in certainly haven’t gotten very far.
Europe with an alternative, representing intermediate consolidated solutions
market driven and risk free consolidation. negatively. The unwillingness of McDowall: I don’t personally think
Now we stand in front of two or maybe Denmark and Norway to participate in this will happen. If Dubai and OMX
three options that from the outset look NCSD for financial, protectionist and come together, it could trigger something
less attractive. political reasons has had an impact. It like that, but that would be highly
This includes a politically driven also includes the missed opportunity of speculative. ■
Nordea Bank AB (publ)
Making it possible
ISJ23 pp39-60 Final 24/7/07 2:31 pm Page 39
EMS VS OMS
A case of pick
and mix?
ver the last 10 to 15 years, trading There is even increasing convergence and
In a world where
technology can make
O has evolved from a phone intensive
activity to an increasingly electronic,
speed-driven business. This has been driven
overlap between the two types of platforms,
with both OMS and EMS products
expanding their functionality. Some vendors
by the development of direct market access have gone down the integration road, with
all the difference, are and algorithmic trading, demanding new
capabilities and performance levels from the
efforts to build comprehensive platforms
encompassing both an OMS and an EMS,
traditional OMS technology infrastructure of buy side firms.
As a result of these trends, the industry has
while others advocate a stand alone, best of
breed approach.
systems keeping up been debating whether the buy side's
traditional order management systems
According to most experts, there has been
a fair level of confusion around the definition
(OMS) are capable of handling the speed and of both systems in recent years, especially as
with the times and high volumes of new trading behaviours the overlap between the two increases.
and, consequently, whether execution However, most industry specialists agree
how seamlessly are management systems (EMS), which were that OMS and EMS initially deal with
built for real-time trading, are going to different areas of the trading cycle. The
they combining with replace them. OMS was initially created to replace paper
However, while the development of blotters and automate workflow from the
new EMS offerings? electronic trading and the expected increase portfolio manager to the trader, acting as a
in liquidity fragmentation certainly central trading hub for many firms. It
Fabien Buliard encourages the adoption of high gradually expanded its functionality to
performance execution solutions, the need include portfolio modelling, risk
investigates for traditional OMS functionality has not management and compliance capabilities.
gone away. "Once the fund manager's portfolio and
EMS VS OMS
orders have reached the execution desk, the explains. "The only way to do that is with an integrated EMS functionality. "OMSs are
EMS kicks in," says Bertrand Rassat, EMS. So, they might forgo the OMS not made to do this," he says. "We have all
managing director at EMS vendor altogether.” heard the stories about OMSs crashing on
Flextrade. "It looks at potential market Meanwhile, the overlap between OMS and algorithmic trading because they can't
impact, liquidity and volatility risks, routes EMS platforms has been increasing in recent handle the volume of executions coming
different orders to brokers, performs post- years, with both sides trying to incorporate back. They were designed to maybe handle a
trade analysis, and generates a number of one another's functionality to meet client thousand orders a day, and now they're
benchmarks to see if best execution has been demand. "We are guided by our clients," says getting a thousand a second."
achieved." He adds that OMS and EMS are Flextrade's Rassat. "Today, we have a very Yet several initiatives are looking to offer
not opposed to each other, but successful EMS, but we realised that, in all in one platforms, often as a result of
complementary. "Most of our clients use us order to completely meet client corporate mergers. This includes the
as a layer that comes on top of their internal requirements, we also needed to develop acquisition of OMS provider Macgregor by
OMS layer," he says. some OMS functionality. We do not want to broker and investment technology provider
For Eric Goldberg, chief executive of replicate a whole OMS, because there are vendor ITG, and the creation of BNY
EMS vendor Portware, the confusion around certain aspects, like compliance, that are Convergex on a similar model by Bank of
the terminology was fuelled in part by outside our core business. But we developed New York, OMS vendor Eze Castle Software
vendors trying to protect their turf. "OMS things around the merging of orders or and private equity firm GTCR Golder
vendors have spun the functionality into allocation bulking to improve straight Rauner.
something very specific and very basic," he through processing in our platform, because "We are seeing attempts to get that all in
says. "People have a vested interest in we realised that that was how our clients one solution," Zasky says, "but even if an
confusing the client base. OMSs are trying wanted to use it." OMS provider owns an EMS provider, they
to keep their desktop presence. But who While the two types of platforms are are still two distinct applications that serve
cares about the terminology, about whether definitely converging, it remains to be seen two distinct purposes. Unless they are going
you need something called an OMS or an whether that convergence will take the form to re-architect everything from scratch, all
EMS? You have to list the functionality that of fully integrated products, or a modular they are doing is melding together two
you need and find the system or set of approach with stand alone products pieces that don't really belong together."
systems that supports this." communicating through the FIX protocol. A change in architecture is precisely what
Indeed, the need for sophisticated, real- An advocate of the modular approach, is going on at BNY Convergex, one of the
time trading functionality varies from firm EdgeTrade's Zasky contends that despite his proponents of an integrated platform, which
to firm, as do the compliance and portfolio company's EMS having some OMS sees execution management as a "natural
modelling requirements addressed by OMSs. functionality: "The reality is they serve such extension" of OMS platforms.
For the investment strategies of fund different purposes that it is unlikely that one "The original, legacy architecture OMSs
managers taking a long term approach and or the other can really serve the client as an were designed to do different functions, such
trading infrequently, an OMS is likely to be all in one solution. I think that has a lot to do as modelling and real time P&L, while an
sufficient. Firms with higher frequency and with the architecture and the intent of those EMS was designed to interact with the
more complex trading strategies, however, systems to begin with." For him, the solution market in real time" explains Jeff Shoreman,
tend to require sophisticated execution lies in communication between the two chief operating officer of Eze Castle
management functionality. systems through FIX to support each other Software. "What we did to make the
"An EMS is only pivotal for those firms in their respective roles, which are both integration happen was re-architect our
that are trading very actively," says Sang necessary to most firms. systems. It was built on our new service
Lee, managing partner at research firm Aite "In an ideal world, everyone wants oriented architecture that will optimise both
Group. "Others will rely on their traditional simplicity and everything on one screen," the OMS and EMS functionality."
OMS, which is more than sufficient." Zasky says. "However, we have noticed that The vendor started rebuilding
components of its systems one piece at a
time 18 months ago. Once the process is
complete, the whole platform will have been
Several initiatives are looking to offer all in one rewritten in C Sharp. At the end of July, the
platforms, often as a result of corporate mergers company will release the latest version of its
OMS, which includes an EMS functionality,
so far limited to global equities, with other
Conversely, not all firms have an equal the more proactive firms are all seeking best asset classes being added over time.
need for OMS functionality. For Kyle Zasky, of breed for whatever tools they are using. Meanwhile, rival ITG has been working
president of EMS vendor EdgeTrade, the None of the attempted all in one applications on the consolidation of its Triton EMS
need for an OMS or an EMS isn't necessarily come even close to that. In an environment product into the Macgregor OMS. "We have
correlated to the size of the firm, but to its where all these tools can play nicely together, a first release now in the field," says Mark
specific requirements. "If you think about a through staging and FIX, for example, you Wright, ITG's global head of products. "We
hedge fund, for example, that may not have can get best of breed with a very smooth view it as a multi-year project, because it
many compliance requirements or a large workflow and not have to sacrifice certain reflects both the integration of the two
portfolio, but is very interested in real time, functionality just because you want a single products and a big reinvestment in the core
rapid execution, and sourcing liquidity in a system." OMS technology, with a major generational
fragmented environment. Their job is to Portware's Goldberg does not believe in upgrade."
create alpha in the trading process," he the OMS vendors' ability to create real Yet, until the market decides whether it
EMS VS OMS
DERIVATIVES PROCESSING
Following its
successful
clean up of
OTC credit
derivatives
back offices,
the Fed has
now turned its
focus on the
Putting your house OTC equity
derivatives
DERIVATIVES PROCESSING
n 15 May 2007, the Federal As a result, the Fed has set further
DERIVATIVES PROCESSING
months as dealers look to meet their According to Wright, ISDA has go through, the different messages people
commitments around adoption of succeeded with Financial products would send to each other. Obviously,
automation for equity derivatives.” Markup Language (FpML) because it because this market has been a manual
Day believes that the 15 May 2007 fills a void in the industry and it’s easier paper-based market for a long time, there
letter sets out a broad range of very to make a dramatic impact where there is historically wasn’t an awful lot done in
taxing targets and that one of the main nothing to replace or enhance. He standardisation of these processes. With
contributions from ISDA is to focus on believes the future development of the growth in the market and also with
accelerating the publication of MCAs. FpML is vital, but expects progress to the new technologies that are available,
The equity market is different to the slow in the short term future, as market vanilla OTC products have, over time,
credit world in as much as there is a consolidation and take up of FpML is had to standardise.”
bigger array of product types and you given more breadth and depth. Steve Miller, senior product manager
have variations across the four main “ISDA should focus on progressing at SmartStream Technologies, believes
global regions, he says. ISDA’s principal XML-based solutions and creating a that from a technologist’s point of view,
role working with the G18 is to negotiate technical directory of products, FpML is an extremely complex use of
and publish on a prompt timescale. proprietors and agents in the market. XML, but then it has to be because the
Attached to the May 15 letter is a This directory should form the basis of domain itself is complex. It has moved
prioritised list of the next MCAs to be new OTC products in the future and be from being the de facto standard in
negotiated and finalised. “Once these are part of an industry recognised code of exchanging trade data to standardising
published and once firms sign up to them, practice approved by regulators. The the business processes in which these
they can be loaded onto the automated technical directory should fall short of messages are used. “I have no doubts
platforms and then you’re in a position trying to create a standard OTC as this whatsoever that it will prove technically
where you can conduct the confirmation would take forever and probably not flexible enough to keep pace with the
activity in an automated fashion. It was succeed as the industry continues to level of innovation, but all concerned
always going to be a bigger challenge in innovate and create new products,” must guard against making the process of
the equity world because it is client- Wright explains. adoption too onerous and the cost of
based, versus credit where it is SwapsWire’s Hunter believes that the adoption too high,” he warns.
predominantly interbank, so you have a main strengths of FpML are the Engelen reckons that the market
bigger population of participants and product definitions, namely the ability to reaction to FpML has been positive: “If
actors in the market to penetrate in terms represent rates, credit and equity you look in the confirmations spaces at
of automation. It’s a more complicated derivative trade structures in electronic the different providers that you have, like
picture and it builds to quite a complex form. Over the seven years that FpML SwapsWire, DTCC Deriv/SERV and T-
matrix of variables that you’re trying to has been around, it has proven that it Zero, they all use FpML as the
take account of. It will necessarily can evolve to keep pace with the underlying standard to communicate
therefore be slower but the firms are as innovations in the financial products trade information. So from that point of
committed to this as they were to credit,” being traded and in the changing legal view it has been very successful. We also
Day adds. documentation mechanisms being have a project ongoing to transport
Gary Wright, CEO of analyst firm developed by ISDA in conjunction with FpML over SwiftNet and there has been
Benchmarking International Systems & market participants, he says. a lot of interest from the investment
management community and custodians
because they have only recently begun to
look at automation of their derivatives
Over the seven years that FpML has been around, it has trades and processes.”
Miller believes that the DTCC has
proven that it can evolve to keep pace with the played a significant part in reducing
innovations in the financial products being traded outstandings by providing a centralised
confirmation matching function, in the
form of Deriv/SERV. However, he feels
Services (BISS) Research, believes that Karel Engelen, head of FpML at that its major value going forward is
ISDA has played a key role in working ISDA, explains how the association is likely to be the Trade Information
with regulators to find solutions and working for the good of the industry: Warehouse, a database containing a
increase knowledge of derivatives “One of the things that we do is to take golden copy record of each credit
products in the market. “An XML-based different products for different derivative derivatives contract that is accessible to
derivative solution is clearly the asset classes and translate all the all participants, as confirmation utilities
electronic language for a solution most products into XML. You take an interest become more commoditised. SwapsWire
likely to succeed long term. There needs rate swap and you translate that into an and Swift are already encroaching on this
to be a faster track to implementing these XML format. Additionally, we look at space, he says.
solutions that the regulators could assist different business processes that people BISS Research’s Wright agrees that
in, if they understood technology more,” apply, for example, trade confirmation. the DTCC is one of the driving forces
he explains. We look at the different steps you would behind the industry’s success so far in
DERIVATIVES PROCESSING
this area. “They have had good success in foreseeable future it is realistic to Wright feels that it would be great if
the markets they serve, but this is still a envisage a single infrastructure for consolidation could happen, but believes
small part of the industry global derivatives across all asset classes. Not that, realistically, it will not. “There is
problem. They could be more open to only are there too many moving parts, too much competition in this market for
working cooperatively internationally but it’s not clear that the marketplace any single institution to provide a
rather than instilling their own solutions would like to put all its eggs in one central processing capability. You might
and standards,” he contends. basket.” find the DTCC has a pivotal position in
But it is not just Deriv/SERV that has Jerome Thouvenot, back office the US, but they will struggle
had an impact on the area. SwapsWire manager at Sophis, adds: “The market internationally. Such an industry
solution likely needs to be a cooperative
not for profit business and this does not
look like any present entity. More likely
Equity derivatives processing is split between SwapsWire there will be a continuance of
and the DTCC, both of which require a dedicated internal developing agreed international
standards and a wider take up of
line and system existing technology at the buy and sell
side firms, with closer cooperation
between international clearing houses
launched its OTC equity options has seen the emergence of several and other infrastructure providers,” he
capability in 2005 and its confirmation specialist platforms, such as Omgeo, T- says.
service captures deals and allows them to Zero and DTCC, but it is not likely that Regardless of whether there is a
be verified and confirmed electronically. they will all consolidate into one single, single processor or a number of them in
The first product supported on global platform. In the current market it the long term, what is clear is that the
SwapsWire was interest rate swaps is impossible for there to be one unique regulators are taking the issue of
(IRS). Over the last five years, market
volume in IRS has grown massively. The
combination of this market growth and
widespread adoption of SwapsWire by
dealers, inter-dealer brokers, and the buy
side has meant that volumes on network
have been close to doubling each year.
According to SwapsWire’s Hunter, the
volume of trades booked on the network
on one day last week was the same as the
entire volume booked in the first five
months of operation. There are many
who believe that the IRS market would
not have been able to sustain this pace of
growth without SwapsWire, which is
now a core component of the swap
market infrastructure, he adds.
Equity derivatives processing is
therefore split between SwapsWire and
the DTCC, both of which require a
dedicated internal line and system. Given
that the maintenance of these may be
costly in the long term, will the industry
Sweeping reforms?
remain satisfied with supporting two
processors in the long term? platform as there is no unique desk. outstanding derivatives confirmations
Hunter believes that this is not a Presently, desks are specialised and very seriously. This is good news in the
possibility in the near future: “There is no therefore require specific tools for short term for processors and the
single processing infrastructure for the processing.” numerous niche vendors that have
combined underlying markets which ISDA’s Engelen agrees that there is sprung up in the area. As Engelen notes:
derivatives are based on. One might room for several players in the “Increased regulatory scrutiny has
argue that the delivery characteristics confirmation area, the settlement area meant that the pace of investment in
and regulation of securities instruments and the pre-trade area. “However, it is technology has accelerated. Financial
preclude that possibility, and the same difficult to say how many there will be institutions are now assigning more of
doesn’t apply to derivatives instruments. and who exactly will be there in five their budgets to derivatives processing
But I think it is not likely that in the years’ time,” he continues. technology than ever before.”■
OFFSHORE OUTSOURCING
OFFSHORE OUTSOURCING
typically save 32% per process. The most objective when deciding to outsource, India can expect to reap cost savings of
efficient offshorers take just 15 months while 25% claimed that increased up to 49%. The fact that the region is
to migrate each process, compared to flexibility was an equal priority. still used so frequently is testament, not
around 25 months for poorer Guillermo Kopp, executive director of only to the reliability of its resources,
performers.” analyst firm TowerGroup, stresses the but to the low cost of its workers, whose
Until recently, the uptake of importance of these ulterior motives for average wage of USD685 per annum
offshoring was mainly driven by the outsourcing: “It used to be labour compares particularly favourably with
desire to cut expenditure through taking arbitrage. Now it’s business process the USD1000 average of Indonesia and
advantage of labour arbitrage. Whether optimisation that makes for a winning the USD2,700 average of Thailand.
this remains the main source of savings strategy. It’s all about operational Mike Mathias, director, Banking and
for financial services institutions – or efficiency. Through best practices, an Financial Services Consulting, Tata
whether splitting business processes has offshore provider can fulfil a function Consultancy Services, comments: “The
This is not to say that labour arbitrage is the only driver of offshore outsourcing. A
number of reasons to outsource one’s business exist side by side with the initial driver
eclipsed it – is still being hotly debated. more efficiently, and with better quality, ‘toe in the water’ phase has since evolved.
Jeremy Smith, director of Z/Yen, than an ongoing operation in the UK. There is enough factual evidence to
believes that labour arbitrage is the most That way, not only do you have attractive suppose the idea that outsourcing to
crucial advantage to be gained. “I’ve differentials, you have the benefit of India is here to stay. In fact, it is even
worked in this business for many, many higher quality. It enables the adoption of snowballing, as market leaders start
years,” he says, “and I’ve seen different best practices and, if you wish, the gaining competitive advantage through
business models – the vertical versus the highest possible productivity.” ‘right sourcing’. This is putting pressure
horizontal. You don’t get huge savings Whatever the main driver of offshore on competitors to follow suit and
by doing that. You might make 10% one outsourcing is, these factors have, survive.”
way, 10% another way, but in my view, of together, resulted in an overall increase As for the types of business processes
the savings you get from moving to of 1,800% in the number of people that are being outsourced, the Deloitte
India, 90% is cost of staff.” employed overseas in the last four years. survey shows that offshoring has marked
This is not to say that labour arbitrage Peer Mohamed, chief operating officer of many functions within the financial
is the only driver of offshore the software development company services industry. Uptake has been
outsourcing. A number of reasons to Financial Objects, points out that particularly concentrated on back office
outsource one’s business exist side by productivity has increased processes, however – such as transaction
side with the initial driver. One is the comparatively. “What we have now is processing and payments – but its
availability of staff: it is a fact that a much greater productivity. We can afford influence has also been felt in
large number of graduates are available to employ so many more people on the administrative functions. The splitting of
in both India and China. Second, if a coding [of products] and, more business processes has mainly occurred
business process is based around the end importantly, the testing, that we can be between customer facing processes and
of the European or US business day, more sure that products produced are non-customer facing processes, with
advantages can be gained from situating right first time, so that we don’t have to those processes that involve limited
a process within a certain time zone. The spend money sorting out bugs after customer interaction being outsourced.
final advantage is that institutions can release. We have 30 to 35 people just Mark Seaman, principal consultant of
provide additional services that may not doing testing: we simply couldn’t afford Etheios Consulting, explains: “A fund
be possible from a base in the UK or the to do this in the UK,” he says. company might scan in customer
US, whether due to lack of funds or staff For all these reasons, India remains correspondence in the UK, and send the
availability. Basing a function overseas the outsourcing capital of the world. images offshore for processing, with the
can, in this way, mean added value. With its highly skilled, English speaking resultant customer confirmations
The London Business School and workforce, its strong education system printed and despatched from the UK.”
Capco Institute survey supports the and low cost natural resources, it rose to The increased industry focus on
notion that labour arbitrage is being dominance towards the end of the 1990s compliance and reputational risk has, of
surpassed by other quality led concerns. and remains there to this day. Although course, had an impact on some
“Other factors,” it states, “are emerging globalisation has been advancing for outsourcing agreements, as well as the
as important drivers.” Furthermore, it some time, wages in India are still, on influence of regional politics. But it seems
shows that over 40% of respondents average, five times lower than in the UK. that, for the moment at least, offshore
mentioned quality improvement as a key An American firm that outsources to outsourcing remains alive and well. ■
an objective assessment is made of and settlement industry what MiFID will concentration rules, need to be prepared
whether a legislative or non-legislative do for investment firms and stock for either fragmentation of liquidity or for
approach is the best way of delivering the exchanges. It will open up competition sustained downward pressure on pricing.
required change. The commission seems between clearing and settlement providers Or probably both.
to be doing just this; no new regulation and drive down prices of cross border, But how does this affect settlement
has been proposed for hedge funds or for post-trade systems? Exchanges are very important
credit rating agencies and the proposed services. The provisions on access and sources of transaction flows, and hence
company law framework reforms have interoperability in the code will (once revenue, for all settlement systems. As the
been simplified. Furthermore, implemented) deliver the framework that trading markets become more competitive
commissioner McCreevy recently said will support those articles in MiFID (34, and, as liquidity potentially fragments, it is
that he would not seek to require 35 and 46) that allow investment firms, only those CSDs that can invest to handle
reporting of bond trades, as no market MTFs and stock exchanges to choose the volume increases and adapt their
failure has been identified. their clearing and settlement location. The services to serve both the consolidation
Most noteworthy for the European two are complementary initiatives, and are trends (for example, NYSE Euronext) and
securities industry as a whole is the vital to the delivery of an integrated the fragmentation trends (for example,
market led code of conduct for clearing European capital market. Project Turquoise) that will be successful.
and settlement, which is currently being Settlement systems must be able to serve
implemented. If successful, it will lead to Drivers of post-trade multiple trading venues so that the
benefits and cost reductions across the reform exchanges and the MTFs can provide
industry far quicker than any directive Driven by a combination of pension their own customers with the choice of
could ever have achieved. under-funding and the rise in algorithmic clearing and settlement location in line,
Recognising the challenge, and the trading, exchanges are compelled to invest not just with MiFID, but also with
opportunity, that the code presents to our in technology to deliver greater speed and customer demand.
industry, we must be pragmatic and trading capacity. In turn, this has a knock Will combinations like NYSE Euronext
focused. Meeting the aggressive deadlines on effect on the post-trade industry that lead to post-trade transatlantic
and the need for all stock exchanges, CCPs also needs to be able to manage growing consolidation? This is probably unlikely in
and CSDs to agree on, and implement, the volumes. As transaction volumes increase, the near term. The NYSE Euronext
code’s provisions consistently will be a traders are becoming increasingly keen to merger is a specific case, with distinct
formidable and complex task, but it is see this growth drive their profit margins, listing venues, trading platforms and
achievable. which in turn helps to explain the regulatory environments, all very
It is encouraging that the industry is considerable pressure that broker-dealers different from previous consolidation
rising to this challenge, not least because are putting on stock exchange fees. We trends, which aimed to deliver a single
we realise that if we do not, the threat of recognise this pressure at the post-trading trading platform and a single rule book,
a detailed intrusive directive hangs over level as well; for example, in 2005 and such as the Euronext markets.
us. 2006, the Euroclear group responded by Furthermore, exchange consolidation was
The first part of the code (requiring delivering more than EUR90 m in rebates a significant factor in the mergers of the
price transparency) has already been and EUR68 m tariff cuts to its clients. Belgian, Dutch and French settlement
largely implemented. Euroclear, as part of Today, the market finds itself in the systems within Euroclear, and the delivery
the settlement market infrastructure, is midst of fundamental reorganisation. of a single settlement solution for these
working to deliver greater comparability Trading activity is being redefined as three Euronext securities markets is
of pricing to enable users to understand exchanges face not only increasing scheduled for mid-2008. The implications
and compare exactly what they are paying competition from rival international at post-trading level may not necessarily
to different providers across Europe. exchanges for their blue chip stocks, but be ‘consolidation’ but rather increased
Furthermore, action is advancing on also domestic competition for domestic ‘cooperation’ between DTCC and the
delivering a meaningful protocol to deliver business through MiFID in Europe and Euroclear group to support NYSE
access and interoperability between the Reg NMS in the US. Euronext, particularly in settling dual
three layers of the value chain (stock There is no crystal ball as to how listed securities.
exchanges, CCPs and securities settlement Europe’s markets will react to MiFID. In To a great extent, consolidation and/or
systems) by the end of June 2007. So far, fact, it raises more questions than it fragmentation of the trading landscape
the most progress has been achieved at provides answers. Should investment does not matter much from a post-trading
settlement level. And lastly, the industry is firms compete directly with exchanges perspective. What matters is that post-
starting to consider how best to deliver and look to internalise more trading trading providers can handle whatever the
unbundled services and accounting activity? Should firms create their own front office serves up. Choice and open
segregation, as laid down by the code, by MTFs like Project Turquoise? Or should access is vital, allowing natural
the end of this year. they become users of a new breed of competition to deliver what we all want:
What the code demonstrates is that commercial MTFs like Equiduct or Chi-x? service providers that offer the best value
‘better regulation’ does not have to mean One fact is undisputed: MiFID gives at the best price. Unless we have both, the
new laws. It can mean flexibility, users a range of strategic options and cost of cross border trading, clearing and
proportionality and self regulation. opens up competition at trading level. settlement will never fall to the levels that
In a sense, the code does for the clearing Stock exchanges, particularly those with we can, and should, expect. ■
SIBOS 2007
Sibos @ F
rom its humble beginnings in 1630 the Boston Massacre, the Boston Tea
– when Puritan colonists from Party and the Battles of Lexington,
England founded the city on the Concord and Bunker Hill.
Shawnut Peninsula – Boston has risen to It may also be worthwhile noting that
giddy heights. However, its zenith may be in 1838 the Boston and West Worcester
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US PAYMENTS
he domestic payments market in the US has been potential to create queues and a certain amount of customer
US PAYMENTS
hit 60% of total non-cash payments. The European ISO 20022 standards. Any requirements of end customers. “If US
adoption that has occurred over the past development with the STP 820 will be banks fail to do it, it is highly probable
15 years has primarily been driven by done in a way that is compatible with that newcomers will fill the gap,” warns
financial institutions promoting card ISO 20022 standards.” Deschrevel.
payments and direct debit/deposit ACH. DeCicco believes that an upgrade to “We see that a number of banks are
Given the US e-payment adoption the US dollar wire transfer systems that going one step further in the relationship
trajectory, e-payments should gain three creates uniform standards with other with their corporate clients. They do not
to five percentage points annually. The market infrastructures has long term limit themselves to servicing their
last 20 percentage points will be the benefits for the industry and is a worthy clients anymore. They are helping them
toughest to realise and will require objective. But he does not feel that the to better manage their relationship with
weaning small businesses off the cheque process should be rushed: “I think that their own customers and suppliers. This
and on to ACH.” the US market will get there in a can take several forms and requires a
However, it is not just Nacha that is timeframe that works best for the wire stronger business relationship and
working to modernise the US domestic transfer system operators and their trust,” he continues.
payments market. In 2006, the Federal participating banks.” Bellacosa is wary that this may still
Reserve Banks and the Clearing House Regardless of which format is chosen not be enough to retain customers in the
Payments Company conducted research in the end, this upgrade is part of the future: “Scale, price advantage and
that concluded that the two US dollar driver within the payments system to tailoring are important to retaining
wire transfer systems were in need of an more effectively serve corporate corporate customer loyalty. However,
upgrade. Fedwire and CHIPS needed to customers and tackle commoditisation in even having superior products may not
be enhanced in order to be viable options the market. “Commoditisation means be sufficient, when other factors such as
for the migration of some business to that we need to deliver products that extension of credit may influence
business cheques to wire transfer provide greater value to our clients. It customer retention.”
payments. makes client service and product quality Despite globalisation, DeCicco does
The main problem highlighted by the the key points of differentiation for not believe that significant competition
research is the format of the current banks. Institutions that successfully will come from outside of the US
limited and unstructured remittance
information fields, which mean that it
would effectively be impossible to
automate the receipt of a wire transfer.
The process has been somewhat delayed by the fact that
Deschrevel explains: “Large US no technical format has been chosen, as ISO 20022 and
corporates want additional reference
information to be included along with STP 820 are still being evaluated
the large value payment instructions to
facilitate invoice reconciliation.
Corporates are also asking for uniform differentiate their capabilities will view domestic market. It is not easy for non-
payment initiation standards. Existing any potential commoditisation more as domestic players to establish the scale
Fedwire and CHIPS payment formats an opportunity than a threat,” says necessary to be a major competitor in the
have limited fields for reference DeCicco. US market, he explains. Deschrevel
information.” Bellacosa adds: “The US market has seconds this notion in the short term:
The process has been somewhat seen substantial price compression for “The US payments market is still
delayed by the fact that no technical pure payment processing. Third party dominated by the indigenous banks. In
format has been chosen, as ISO 20022 service providers have driven down the short term we see no major threat to
and STP 820 are still being evaluated. pricing, and scale processing like cheque that business model. But there is a
ISO 20022 is becoming the global conversion to ARC have also forced number of large non-US financial
standard in technical formatting, but pricing down as banks have needed to institutions that have demonstrated their
STP 820 has been proposed as a US build volume to offset investment in ability to innovate and that would be
standard. An ongoing evaluation is these new processes.” interested by opportunities in the US
therefore weighing the benefits and While it is clear that it is becoming market.”
drawbacks of each option. Both more difficult for banks to differentiate In short, it seems that the US domestic
organisations are also in the process of their services, the large providers are is making significant progress towards
upgrading their existing proprietary adding more value added services to ridding the paper from the processing of
networks from older technology to IP- attract and keep corporate customers. payments and better meeting corporates’
based technology. These services are springing up around needs. However, in a commoditised
JPMorgan’s DeCicco adds: “If STP the area of data mining or through market, how long can paper continue to
820 becomes the preferred choice, it will packing disparate information into be processed if volumes of cheques
be because it can be implemented more actionable data. Differentiation is a decline sharply? Moreover, how long can
quickly and adopted more broadly in the question of how to leverage new banks fend off the advances of the new
US. And yes, the US will align with technology to meet the business entrants to the payments market? ■
Natural remedy?
flexible. As people become more familiar
with securities lending, it should develop
into a more relaxed system. In Manila,
the combination of short selling with the
provisions, announced in February, will
bring a new vitality and depth to the
securities borrowing and lending
market. The market is opening up more,
The securities lending market in Asia is on offering structures that will attract
liquidity, and that is a major positive
the mend, explains Brian Bollen move for overseas investors.”
Why is this happening? The general
consensus is that a growing awareness of
the benefits that securities borrowing be emulated in Asia. “It is all part of the Asian securities lending market looks
and lending can bring is a ‘category one’ same wave, creating new opportunities lucrative because of high fees and
driver of change. “At the time of the for banks with ambition to expand their unexplored arbitrage opportunities that
Asian financial crisis, the markets simply operations further,” he says. In the have become increasingly difficult to find
weren’t deeply enough developed to cope meantime, one should probably add, in mature markets, lenders should
with the degrees of volatility they securities lending in Asia is dominated beware of a number of risks. This
faced,” adds Komo. “Exchanges have by hedge funds looking to implement includes political, economic, financial,
continued to broaden and deepen their new trading strategies, and by the major fiscal, legal, regulatory, rules driven and
markets in terms of the number of international prime brokers, who service procedural risk, and, especially,
infrastructural risk. And while some
markets in Asia still do not allow
securities lending at all, fund managers
The increasing size of the Chinese – and to a lesser can overcome these restrictions by using
degree, the Indian – market, as well as the emergence of swaps on their long positions, and prime
brokers can then sell the long positions
the Japanese market from economic doldrums, lays an on behalf of the hedge fund to generate
the short position.
excellent platform for continued securities lending Having said that, the increasing size of
growth in Asia the Chinese – and to a lesser degree, the
Indian – market, as well as the
emergence of the Japanese market from
players and the activities they undertake, their requirements. Goldman Sachs, economic doldrums, lays an excellent
and securities borrowing and lending Morgan Stanley, Merrill Lynch, platform for continued securities lending
falls into that category. Now the Lehmans, Deutsche Bank and UBS growth in Asia. “It is clear that various
authorities want to strengthen their feature regularly as houses that are Asian markets for securities lending are
local capital markets and take advantage active on the prime brokerage front. at different stages of their development,”
of increased global liquidity. Securities Asia is booming, states Trevor Amoils, Amoils continues. “The Australia, Japan,
borrowing and lending is a means to an head of Securities Lending and FX, Asia and Hong Kong markets are more
end to encourage the introduction of Pacific, RBC Dexia Investor Services. advanced. They have become more
more sophisticated instruments such as “Annual rates of growth in the major familiar with securities lending and also
derivatives and futures. Once you accept east, south and southeast Asian allow short selling. Korea and Taiwan
that derivatives stabilise a market, you economies last year ranged from 10.9% are following suit, having updated their
need short selling and securities in China to 4.2% in Thailand. No wonder legal framework to facilitate securities
borrowing and lending to enable you to fund managers based in Europe and lending. The markets in India and the
hedge those instruments and attract North America are looking not only to Philippines are moving toward greater
foreign capital.” invest in the region, but also to distribute openness for foreign transactions more
He warns readers, however, not to funds within it. The bull run in cautiously and in small steps. It is not
overplay the impact. “The reality is that commodities and resources and the clear though whether China will proceed
in the early stages, transaction volumes massive private equity appetite for assets in the same direction.”
are relatively small. This is not has also resulted in increased M&A Northern Trust’s Sunil Daswani,
unexpected given the lack of depth of activity. All this activity creates an director for Securities Lending, Asia, and
experience of local players, and their excellent environment for traditional the current chairman of the Pan-Asian
lack of familiarity with the product. We securities lending and equity finance.” Securities Lending Association, has
don’t expect people to jump in with both He continues: “A considerable amount remained consistently optimistic about
feet overnight, as this is an evolutionary of work has been done with regulators the prospects for securities lending in the
process. But the longer you wait, the and exchanges to introduce a securities region. He points to the increase in the
longer it will take. You need to start lending model that recognises the number of corporate actions and other
somewhere.” requirements of both international events in local markets, coupled with
Is the future bright, even rosy? He lenders and borrowers. To date, the new index and statistical arbitrage
believes that it is, that economic growth major focus when opening new emerging opportunities for securities lending that
and vibrancy will continue to be the market lending capabilities has been the continues to create greater demand.
norm across the region, with even the protection of the local market. The “Asia’s markets are still in a boom cycle,
likes of Vietnam doing well in the demand for short exposure and the which is helping to continue to create
shadows cast by India and China. relative lack of acceptable securities great opportunities,” he says. Moreover,
Technology will, of course, play a key lending infrastructure in some of the people are lending who didn’t lend
role, and developments that have already emerging markets has resulted in a move before, and people who actively want to
been seen in the US, UK and continental away from traditional lending and a rise lend are questioning why they can’t lend
Europe, in terms of liquidity, IT and the in popularity of synthetic products.” in certain markets.
outsourcing of non-core functions, will He warns, though, that while the Markets such as Taiwan, Korea and
Best in
maximise returns on their short term cash
pool. In order to be allowed to use the
amortised cost method of securities
valuation, which assists in the maintenance of
show?
Are enhanced cash
a stable NAV (an essential feature of money
market funds), these funds must meet the
credit, maturity and diversification
requirements of rule 2a-7.
‘yield plus’ funds the These include, generally, a prohibition on
acquiring any instrument having a remaining
securities lender’s new maturity of more than 397 calendar days, not
cash management maintaining a dollar weighted average
portfolio maturity of more than 90 days, and
complement to money investing in only ‘eligible securities’. These
market funds? are defined, generally, as a security that has
received a rating in one of the two highest
Frank Bonanno reports short term ratings categories by nationally
recognised statistical ratings organisation, or
is of comparable quality as determined by the
board of the fund or its delegate.
The amortised cost method allows
securities to be valued by reference to their
acquisition cost, with adjustment for and price; certificates of deposit, which are funds in the enhanced cash segment, as
amortisation of premium or accretion of short term, actively traded instruments they seek to be a potentially higher
discount, rather than their value based on issued by banks or thrifts; and lastly, yielding investment than money market
current market factors. The use of a stable commercial paper, a form of unsecured, funds while offering what they hope is
NAV assists cash managers in simplifying short term corporate debt. acceptable incremental increased risk.
the evaluation and management of The overall enhanced cash market, While certain enhanced cash investment
potential overnight returns on their although it may invest in similar securities, pools allow for single instrument
investment allocations. It allows them to differentiates itself from money market maturities of up to seven years, a yield plus
focus on the current stated yield or return funds by focusing on relative value among fund such as the reserve yield plus fund
Only time will tell if yield plus funds become a true complement to, or perhaps even a
replacement for, money market funds for securities lenders’ and institutional investors’
short term cash management
of a fund, and not be as concerned with a the various alternative asset classes, using (the first registered yield plus fund offered
change in the principal amount of their some or all of the following investment to institutional and retail investors that
investment. strategies: more active trading, extending also seeks a stable USD1.00 NAV)
Since 1971, only one fund has broken single issue and weighted average currently has a limit of 24 months. This is
that stable USD1.00 NAV and been forced maturities, allowing for greater price much closer to the 13 month limit on most
to liquidate, although a number have volatility, and holding more illiquid securities prescribed by the money market
avoided ‘breaking the dollar’ only by an securities, with a very few using leverage fund rule. The overall enhanced cash
infusion of capital from their fund as well. Certain enhanced cash funds, but market issue maturity limit appears to be
managers. In 1994, Community Bankers not yield plus funds, also have increased approximately 38 months, based on the
US Government money market fund, a credit exposure. Active trading may mean data available. In addition, many enhanced
small fund which invested in risky more frequent selling than money market cash funds do not offer daily liquidity at all.
derivatives on behalf of the parties that funds, which very often buy and hold to Lastly, a yield plus fund would seek to limit
managed it, liquidated when its NAV fell to maturity. Certain instruments that may WAM to as close to 90 days or less as
94 cents. The difference to investors was have greater price volatility may also have possible (the 2a-7 limit) in order to assist
made up so no one lost principal. There are a premium attached because of that the fund in maintaining a stable USD1.00
also several examples where sponsoring increased volatility. Those types of NAV. This is unlike other cash plus pools
companies have sustained faltering investments can include mortgage-backed that have WAM limits of up to 180 days.
MMMFs, primarily by buying or or asset-backed securities. Maintaining a low WAM can help to
otherwise supporting troubled fund assets. Enhanced cash funds are primarily manage interest rate risk, NAV stability
Because these occurrences have been so composed of private entities structured in and the competitive posture of the fund,
few and far between, cash managers have the form of separate accounts, limited because instruments with longer
been able to become comfortable that partnerships, and limited liability maturities may not readjust their
stability of principal is a fundamental, companies, and, on rare occasions, may also associated interest rate as quickly as the
though not guaranteed, part of their cash be formed as a business trust that is a market does.
strategy of overnight investment in publicly registered investment company. Some yield plus funds also seek top tier
money market funds. These types of entities may be formed in credit ratings from respected ratings
Money market and enhanced cash funds the US under the laws of states such as agencies in order to further assure
generally invest in the following securities: Delaware and New York, or offshore in investors. In order to obtain such a rating,
US Treasury securities and direct jurisdictions as diverse as Ireland and the a fund must meet certain requirements,
obligations, backed by the full faith and British Virgin Islands. such as only investing in securities that
credit of the US Treasury, including short While yield plus funds do not adhere to receive a certain level of ratings from
term (three and six month) Treasury bills rule 2a-7 and therefore must be careful not credit ratings agencies.
(T bills) and repurchase agreements to characterise themselves as ‘money Only time will tell if yield plus funds
collateralised by T bills; US government market’ funds, they do seek to demonstrate become a true complement to, or perhaps
agency securities, backed by the moral that they offer investment strategies that even a replacement for, money market
obligation of the US government and are much closer to rule 2a-7 than many funds for securities lenders’ and
including the obligation of agencies such other enhanced cash funds. For instance, in institutional investors’ short term cash
as the Federal National Mortgage a manner similar to money market funds, management. In only a few short years, the
Association and the Small Business yield plus funds should also seek a stable success of these funds has proven that at
Administration; short term repurchase NAV and offer daily liquidity, and therefore least some market participants perceive the
agreements, in which an investor agrees to must structure their portfolio investment possible added risk is worth the potentially
purchase securities from the borrower strategies appropriately in order to achieve better return.
today and the borrower promises to such goals. This may eventually Frank Bonanno is vice president of
repurchase the securities at a specified date differentiate yield plus funds from other marketing al t The Reserve
MIFID
Mutual Mis-understanding?
Does the industry really understand
the true implications of MiFID?
Paul Kennedy investigates
iFID - everyone has heard of it surrounded the amount of tick data that for counterparties, instruments and
Dominating Data
JOHN RANDLES. CEO, POLARLAKE NIKOLAY EGOROV, DIRECTOR, THE RUSSIAN NATIONAL DEPOSITORY
CENTRE
As data volumes have increased, so has the burden on the It’s obvious that all participants must have validated,
financial markets industry to get the right data to the right accurate data, consistent throughout the whole
systems at the right time. This has remained a constant, if infrastructure, as information disparity may cause
increasingly tricky, challenge. transaction breaks. Since Russia has been integrated in the
The emergence of enterprise data management (EDM) in world market infrastructure, the improvements – followed
the last few years has led to great strides being made in the by a rise in the quality of the reference data used by financial
move towards taming the torrent of reference data currently institutions (their front, middle and back offices) – are
flooding the industry. The key effort surrounding this has closely connected with the capital market efficiency, as well
been on centralisation, in an attempt to capture and as operational risk and expenditure reduction.
cleanse data before making it available to fund managers. The National Depository Centre (NDC), the biggest Russian
Typical data management projects spend 44% of their time settlement depository, is actively involved in developing
on the data acquisition process, 20% on scrubbing and common reference data standards. Thus, in keeping with
36% on reference data distribution, according to research the resolution of the ANNA Board of Directors, in 2006,
by analyst firm TowerGroup. NDC started to perform the complete range of functions of
The average number of systems within financial markets the National Numbering Agency for Russia. Nowadays,
firms containing client and counterparty reference data is NDC allocates ISIN (ISO 6166) codes to Russian securities
44. The average number of systems containing instrument and other financial instruments. Instrument identification is
reference data is 37. So when you achieve a ‘golden copy’ fundamental, but not, in itself, sufficient, as it is unique at an
the job is still not done. Getting the reference data to the issue level, but not at an instrument level. NDC also
fund manager can still be a momentous task. allocates CFI Codes to securities in accordance with the
The scale and number of the systems involved means to ISO10962 standard, supports data description methodology
modify each system in order to access reference data is too for Russian securities and provides ISIN and CFI daily data
big and onerous a task for anyone to take on. The update to the ANNA database.
combination of home group, commercial, unsupported Today, Russian issuers should disclose corporate
commercial and obscure systems, means organisations are announcements via information providers such as news
often afraid to interfere with them because they work (even agencies, as well as posting them on their company’s
though not to maximum efficiency) and are mission critical. website. There is no primary information provider in Russia
So, regardless of the investment made in the and corporate information is pretty much decentralised.
centralisation of reference data, the ROI promises of EDM Therefore, the third barrier identified in the Giovannini
can only be delivered when the centralised is decentralised Report – inefficiencies in corporate action processing – is a
and the myriad of downstream systems benefit from the very actual one for the Russian infrastructure. But corporate
golden copy. actions remain, not only Russia’s, but one of the world’s
most complex, risky and inefficient processes.
An effective framework for straight through processing data trader may only need a few fields, he or she may need more
on corporate actions will appear when the Corporate depth – the kind of data that drills down, not only to the
Information Centre is established on the basis of the CSD. issuer, and the issue, but to the exchange level too. The
Nevertheless, NDC has already worked on the barrier settlement department may need more breadth, but may
removal by implementing announcement standards. All the not have the database structure to be able to determine
reference data from the issuer and registrar are immediately whether a trade occurred on the LSE or the NYSE, creating
verified and reformatted to an electronic form, before being an interesting settlement challenge if the ex-dividend dates
disclosed in both Russian and English on the NDC’s are different.
website. As for NDC’s clients, certain corporate So, how can we move closer to ‘nirvana’? Often, a trader
announcements are mailed to them directly. will hear of a correction first, and make a change to allow
As a conclusion, I should underline that reference data them to execute with time sensitivity. How that change
unification remains a key driver in the global integration finds its way back into corresponding datasets in other
processes for the whole international financial community. applications, and back to the master databases, while
preserving data integrity, is critical. Recognising the fact
that a piece of data that comes into the organisation needs
to be treated as an asset and tracked (where it goes, how
it is stored, and who can change it), is a vital component
to achieving automation.
Is reference data
automation a case of
Why is reference data
‘nevermind’ or nirvana?
such a hot issue? Because
it’s never been the hot
MICHELE KELSEY, SENIOR VICE PRESIDENT, PRODUCT BUSINESS topic
OWNER, REUTERS DATASCOPE PRICING AND REFERENCE DATA
requirements. Nearly all of these hot topics have at their eye of the beholder, so is the beauty of a total data
core the intent of risk reduction and mitigation. However, solution. Some find it a beautiful idea, but when faced
the basics are no longer so basic, and include the need to with waking up in the morning to a data management
capture and maintain pricing and other market data and system that does not fill a particular department’s
contract data, as well as all of the above. It is imperative to business need, why should that business head continue
maintain accurate client data, securities attributes, market to flirt with a beautiful idea when what is really needed is
data, corporate actions information and contract specifics, a plain old workhorse of an idea – a beast. Other
as industry players can no longer simply resubmit a trade companies might find that the beautiful idea works
for processing when it fails due to the lack of a contract perfectly for them.
being set up in the system in a timely manner. This can What am I waffling on about? Looking from the outside,
take hours or even minutes, these days. The liability and the need for an EDM solution is obvious. In any
reputational risk are too great. organisation, outsiders can see many departments
Much industry discussion currently centres around collecting, cleansing and storing the same information
distributed versus centralised versus outsourced reference each day as each other. Why not do this only once, but
data management, primarily looking at the monetary costs give access to everyone? It’s a great idea.
of each. From a risk management perspective, the answer From a vendor’s viewpoint, data is now provided on a
will be different for every organisation and should be licensed basis, so there is no benefit in providing multiple
determined through deliberate thought and analysis, feeds when one can be provided. But what happens when
rather than cutting corners on cost or attempting to fit an you have an EDM project managed from the US that
existing, older solution developed for equities onto an ever includes French, German and UK business units and is
changing derivatives initiative. Perhaps reference data’s implemented in India? Unless it is very well managed, a
day in the sun has arrived. lengthy and often messy project ensues.
European business units are unlikely to be able to get any
new business requirements implemented quickly while
what is normally a multi-year project is underway. What
happens is that each business unit will again go away and
begin to source additional data feeds to be implemented
alongside the EDM solution. As most resource is taken up
in the main project however, the data implementation is
sometimes piecemeal.
Is reference data a beauty Naturally, when asked, a data vendor or solution provider
is happy to help any client who needs any additional
or a beast? solution, as well as working on an EDM project. What this
means is that we do indeed have solutions that are too
RICHARD NEWBURY, HEAD OF PRODUCT SERVICES, TELEKURS complex for the smaller project and, at the same time,
FINANCIAL others that are too simple for an EDM project. However,
this range of solutions is one of the strengths that data
vendors and solutions providers play to.
Data vendors and solutions providers are often pilloried Innovations such as ISO15022, risk solutions, new
either for not providing innovative solutions, or for counterparty data, implementing MiFID solutions and
proposing solutions that are too complex. But which view responding to other regulations take resources to bring to
is right? life in data solutions. Making sure that solutions are
The answer is the key to understanding why there are available for any type of project that clients are running is
fewer enterprise data management (EDM) projects and the bread and butter of any successful solutions provider.
even fewer successful EDM projects than might otherwise We are proud to be able to offer solutions that, depending
be the case. So what is the answer? on your viewpoint, are both innovative and complex, while
The answer is that both views are right. As beauty is in the also mundane and simple.
ISJ23 pp62-68 Final 24/7/07 3:17 pm Page 66
MANDATES
Northern Trust has been selected to provide custody and fund administration services to the USD91 million Gottex Market
Neutral Trust, a fund of hedge funds. Gottex, a Guernsey registered, closed ended investment company, trades on the
London Stock Exchange. It has a global focus and seeks to achieve its investment objective through investing in
underlying, independently marketed neutral hedge funds. Sue Baines, sales manager, Global Fund Services, Northern
Trust, says: "We're delighted to be working with Gottex Fund Management as we continue to grow our alternative fund
administration business. This is the first listed fund to be established under the recently introduced Guernsey registered
closed ended investment fund regime, which enables regulatory consent to be granted within 72 hours of the application
being submitted."
State Street Corporation has announced that it has been appointed to provide custody, fund accounting and fund
administration services for approximately USD18 billion in assets for the Baron Funds' US mutual funds.
JPMorgan Worldwide Securities Services has announced that it has been awarded mandates for custody and related services by
five UK mid-size pension funds. The pension fund sponsors include ArvinMeritor, House of Fraser, Kingston
Communications, Lend Lease and Pilot's National Pension Fund. Pilot has consolidated its assets under custody with
JPMorgan.
AXA Investment Managers has funded a GBP550 million mandate by the HSBC Bank Pension Trust. The mandate, managed by
AXA IM's sterling fixed income team based in London, will look to outperform a non-gilt benchmark. The consultant
advising HSBC Bank Pension Trust was Watson Wyatt.
Société Générale Securities Services (SGSS) has announced that its Madrid office has been appointed as agent bank by KBC
Group for all its Spanish assets: equities, public and private fixed income products. Previously served by Exel Bank, the
mandate given to SGSS Madrid covers the assets of KBC Bank and KBC Securities, which amount to more than EUR2
billion. This new success reinforces SGSS’s position as an agent bank on the Spanish market, where SGSS offers a wide
range of products: sub-custody, global custody, trustee and fund administration services to resident fund managers and to
international banks, brokers/dealers and financial institutions.
Citi has announced that it has been appointed by Nexum to service its Luxembourg domiciled hedge fund. Citi will act as
fund administrator, transfer agent, and custodian and provide prime brokerage services and compliance monitoring. The
solution is live and all assets have been successfully migrated onto Citi's common funds administration and custody
platform in Luxembourg.
STATISTICS
Asset Servicing
GOAL is the widely-acknowledged industry leader in providing creative products,
T: +44 (0) 844 499 6388 services and solutions to automate and optimise the global reclamation of withhold-
C: David Monks, Saghar Bigwood ing tax and class action compensation. Our research has shown that in excess of
or Stephen Everard US$6 billion of withholding tax remains unclaimed each year by the rightful owners
A: 10, Earl Street and beneficiaries and the amounts for class actions is even larger.
London, EC2A 2AL. To establish your potential ability to reclaim over-withheld taxes and/or class action
E: dmonks@goalgroup.com or compensation GOAL provides a free proof of concept analysis. We simply require details
sbigwood@goalgroup.com or sev- of the income entitlement(s) and/or trade details together with the type and domicile of
erard@goalgroup.com or the underlying beneficiaries. We do not need the name(s) of the beneficiaries.
info@goalgroup.com Our Products include GTRS, Class Actions, GQI, e-Reclaim, GOAL TaxBack, DMS
and Bespoke Software Development.
Consultants
C: Professor Michael Mainelli, Z/Yen helps organisations make better choices. Our name combines Zen and Yen -
Executive Chairman “a philosophical desire to succeed” - in a ratio, recognising that all decisions are
E: michael_mainelli@zyen.com trade-offs. Z/Yen’s mission is to be the foremost risk/reward management firm.
C: (Disaster Recovery and Project In the financial markets Z/Yen conducts numerous research projects on a variety of
Management): Keith Ford, wholesale and retail issues, as well as providing technical strategy, support and
Senior Consultant prediction systems. Z/Yen’s renowned annual studies include:
E: keith_ford@zyen.com i. Global cost per trade benchmarks on equities, money markets and foreign
T: +44 207-562-9562 exchange;
F: +44 207-628-6786 ii. Operational performance of broker ratings;
W: www.zyen.com iii. Operational performance of client (buy-side) ratings.
International: Olivier Storme CACEIS is an Investor Services company with six offices across Europe. Owned in
equal parts by Crédit Agricole and Natixis, CACEIS provides Custody, Fund
T: +352 4767 2847 Administration and Corporate Trust services to demanding Corporate and
E: olivier.storme@caceis.com Institutional clients. We have considerable expertise in Cross-Border Fund
Distribution Support as well as Alternative Investment and Private Equity servic-
ing.
France: Patrick Lemuet Our staff have the language skills and industry knowledge to develop business
T: +33 (0)1 57 78 03 34 relationships into strong partnerships and our powerful IT systems are constantly
E: patrick.lemuet@caceis.com updated to ensure high levels of process automation.
CACEIS is responsible for over EUR1.75 trillion held under custody, and over
W: www.caceis.com EUR850 billion under administration.
www.dbs.com DBS offers a full range of custodial services including securities safekeeping, settlement
+65 6878-1830 of trades, corporate actions and market information updates. These services are
+65 6878-4766 available in Singapore, Hong Kong, Indonesia, India, China (A-shares) and other select-
Ms Low Swee Fun ed markets. DBS also offers short-term, highly liquid overnight facilities for its clients'
investorsvs@dbs.com accounts to earn daily interest on any excess funds.
DBS Bank Ltd,
With over 20 years of experience in the custody business, DBS' strengths lie in its ability
Global Transaction Services, to provide quality services, in depth knowledge and expertise of the Asian markets, as
Securities Services, well as customized business solutions to support clients’ businesses. Its clientele
6 Shenton Way, #36-02, comprises the global custodians, international central securities depositories, broker-
DBS Building Tower 1 dealers, financial institutions, insurance companies, investment managers, private banks
068809 Singapore and corporate.
DnB NOR is the largest and leading provider of Custody, Clearing and
T: +47 22 94 92 95
Remote Member Service in Norway In addition, DnB NOR provides a wide
F: +47 22 48 28 46
range of value added services to both Foreign and Domestic clients.
Contact: Bente I. Hoem
Through an Alliance solution with banks in Sweden, Finland and Denmark,
E: bente.hoem@dnbnor.no
DnB NOR can offer seamless regional products, which can be customized to
our client's needs.
W: www.dnbnor.com
Handelsbanken was the first Nordic bank to provide complete custody services in the T: +46 8 701 2988
entire Nordic region. We conduct in-house processing in each Nordic country, with F: +46 8 701 2990
well-experienced staff with in-depth market knowledge and access to market Contact: Johan Wennerberg
information. Each client is allocated an account manager fully responsible for the E: custodyservices@handels-
day-to-day activities, as well as a regional relationship manager. Handelsbanken banken.se
provides specialised and tailor-made custody services including complete corporate Address: Blasieholmstorg 12,
action services, securities borrowing and lending for all Nordic countries, as well as SE-106 70 Stockholm, Sweden
settlement and clearing services to clients that are remote members of the Nordic www.handelsbanken.com/nordic_
stock exchanges. _custody_services
Nordea is the leading financial services group in the Nordic and Baltic Sea region
and operates through three business areas: Retail Banking, Corporate and
Institutional Banking and Asset Management & Life.
- The leading financial services group T: +47 2248 6238
- A world-leading Internet banking and e-commerce operation Contact: Anne-Lise Kristiansen
- The largest customer base of any financial services group in the region Head of Sub-custody and
- A leading asset manager in the Nordic financial market Clearing
- The most comprehensive distribution network in the region E: anne-lise.kristiansen@nordea.com
Nordea is the leading custody services provider in the region. Nordea provides high
quality, tailor-made custody services for local and foreign investors dealing with
Nordic, Baltic or global securities.
Santander is Spain’s leading financial institution and the largest bank in the euro zone
by market capitalization. Our commitment and contribution to the securities industry is
well established after more than a century of providing services in this field. T: Europe: (34) 91 2893932 / 28
T: USA: (1212) 350 39 02
W: santanderglobal.com
Santander’s cutting edge technology enables it to offer a comprehensive array of inno-
E: globalsecurities@
vative services in a broad range of markets. Santander currently has full local capabili- gruposantander.com
ties in Iberian and Latin American markets along with a franchised presence in many
others. Santander`s experience and product range ensures that every aspect of the
securities business is fully contemplated.
SEB is the leading provider of securities services in the Nordic and Baltic area. We
are committed to custody and clearing processes for the wholesale market. We hold
securities worth over EUR 460 bn and provide services in more that 70 markets, 9
of them under the SEB name (Sweden, Norway, Finland, Denmark, Luxembourg, T: +46 8 763 5770
Germany, Estonia, Latvia and Lithuania). F: +46 8 763 6930
We offer a full range of securities services including corporate action and
Contact: Goran Fors
information services, securities lending and services to remote members of the
Nordic and Baltic stock exchanges. We continuously develop new products in E: goran.fors@seb.se
connection with clients and partners to ensure we deliver the high-quality W: www.seb.se
products our clients demand. We always strive to make the processes more
efficient. With a history of 150 years in the securities industry; we know the market
and our clients well.
Sébastien Danloy
Global Head of Sales,
Société Générale Securities Services offers institutional investors, asset managers
Investor Services
and financial intermediaries a comprehensive range of financial securities services:
Société Générale Securities
custody, clearing & trustee services, fund administration, asset servicing and transfer
Services
agency. SGSS currently ranks 3rd European custodian and 9th worldwide custodian
T : 33 (0)1 41 42 98 65
(Source: Globalcustody.net) with EUR 2,448* billion in assets held and valuates
E : sebastien.danloy@socgen.com
4,140* funds representing assets of EUR 365* billion. (as of March 2007
W : www.sg-securities-
services.com
Standard Chartered leading the way in Asia, Africa and the Middle East.
Standard Chartered has a history of over 150 years in banking and is in many of the
world's fastest-growing markets with an extensive global network of over 1,200
C: Neil Daswani, branches (including subsidiaries, associates and joint ventures) in over 50 countries
Global Head, Securities Services in the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom
T: +65 6517 0022 and the Americas.
E: Neil.Daswani@sg.standard-
chartered.com As one of Asia's leading custodians, Standard Chartered has an impressive track
record across the 16 Asian markets in which it provides securities services. It serves
W: www.standardchartered.com
global, regional and local custodians and broker-dealers, as well as local and regional
fund managers. The Bank plays a key role in promoting the development of these
markets and keeping the international investor community informed of industry
developments across the region.
Unicredit Markets & Investment Banking (MIB) serves as UniCredit Group's global
product and competence center for global financial markets and investment banking
services, including Custody throughout Central and Eastern Europe, including Austria.
T: +43 50505-58510
Brand diversitiy under which the group operates (Bank Austria Creditanstalt, HVB,
F: +43 50505-58579 Bank BPH, Bank Pekao, Zagrebacka Banka and International Moscow Bank), has its
C: Andreas Petzl , Head of Sales roots in local market presence and knowledge, contributing into a single unified
and Relationship Management product across the region. In 2006 the group was recognised by no less than 3
E: Andreas.petzl@ba-ca.com independent surveys as being the best region custodian
W: www.hvb-custody.com/ The group's ability to deliver service excellence across 13 markets is the cornerstone
of our success. From participation in local market associations to our inter group
training sessions, to a client consultative approach, the group continues to work
towards making a single impression - excellence.
Data Services .
Interactive Data (Europe) Ltd Interactive Data Corporation (NYSE: IDC) is a leading global provider of
A: European Headquarters financial market data, analytics and related services to financial institutions, active
traders and individual investors. The company’s businesses comprise: FT Interactive
Fitzroy House, 13-17 Epworth
Data, ComStock, CMS BondEdge and eSignal.
Street, London EC2A 4DL
T: +44 (0)20 7825 7800 FT Interactive Data provides global securities pricing, evaluations, dividend, corporate
F: +44 (0)20 7608 3514 action and reference data designed to support financial institutions’ and investment
funds' pricing activities, securities operations, research and portfolio management. FT
E: eu-info@interactivedata.com
Interactive Data collects, edits, maintains and delivers data on more than 3.5 million
W: www.interactivedata.com
securities, including daily evaluations for approximately 2.5 million fixed income and
C: Brendan Beith – European international equity issues. FT Interactive Data specialises in ‘hard-to-value’ instru-
Sales Director ments and ‘hard-to-get’ information from emerging markets.
Fund Administration
Butterfield Fund Services (BFS) provides valuation, accounting, corporate secretarial, Andrew Collins Managing Director
compliance, directorial and shareholder services to hedge funds, fund-of-funds, and T: 441-299-3954
mutual funds. BFS also services international pension & insurance trusts. Clients E: andrewcollins@bntb.bm
such as financial institutions, insurance companies, and institutional investors use Tania Kowalski Marketing
Butterfield Fund Services to set up and launch investment funds. BFS operates in Manager T: 441-278-6300
Bermuda, Bahamas, the Cayman Islands and Guernsey. E: taniakowalski@bntb.bm
Whether a fund is just starting out or is well established, Butterfield Fund Services A: Rosebank Centre 11
can provide complete solutions to help clients better service their investors. With Bermudiana Road, Pembroke,
over $50 billion in assets under administration, many alternative funds have turned Bermuda HM 08 / P.O. Box HM
to Butterfield Fund Services for timely and accurate administration services. 195 Hamilton, Bermuda HM AX
CACEIS is an Investor Services company with six offices across Europe. Owned in International: Olivier Storme
equal parts by Crédit Agricole and Natixis, CACEIS provides Custody, Fund T: +352 4767 2847
Administration and Corporate Trust services to demanding Corporate and E: olivier.storme@caceis.com
Institutional clients. We have considerable expertise in Cross-Border Fund
Distribution Support as well as Alternative Investment and Private Equity servic-
ing. France: Patrick Lemuet
Our staff have the language skills and industry knowledge to develop business T: +33 (0)1 57 78 03 34
relationships into strong partnerships and our powerful IT systems are constantly
updated to ensure high levels of process automation. E: patrick.lemuet@caceis.com
CACEIS is responsible for over EUR1.75 trillion held under custody, and over W: www.caceis.com
EUR850 billion under administration.
www.imfcfundservices.com
Established in 2002, IMFC Fund Services B.V. is a boutique hedge fund
administrator and a trustee with its offices in Amsterdam and Sydney. IMFC t +31.20.644.4558
offers third parties administration and related services to all type of onshore and f +31.20.644.2735
offshore funds combining high quality, independency, technology, timely calcula- Mrs. Consuelo Nardon
tion with flexibility, experience, custom-made solutions and competitive rates. c.nardon@imfc.nl
Rivierstaete Building,
Our services include: fund set-up and corporate services, NAV calculation Amsteldijk 166, 1079 LH
and other accounting services, R&T agent and other investors and compliance Amsterdam, Netherlands
services. For more information visit our website.
PFPC is a premier provider of processing, technology and business solutions to the C: Fred W. Jacobs, III
global investment industry. Our core offering includes accounting, administration, A: PFPC, 301 Bellevue Pkwy
investor services, middle-office services and regulatory administration services. Whether Wilmington, DE 19809 USA
your products are U.S. or non-U.S. domiciled funds, trust vehicles, limited partnerships T: 302-791-2000
or commingled investment products, PFPC’s multi-jurisdictional, multi-fund capability F: 302-791-1570
allows us to process your complex fund structures - from hedge funds, fund of funds E: Information@pfpc.com
and private equity funds to master/feeder and multi-managed funds. C: Fergus McKeon
A: PFPC Riverside Two
PFPC offers personalized alternative investment solutions tailored to your unique Sir John Rogerson’s Quay
needs. With more than 30 years in the fund servicing industry, our seasoned and Dublin 2, Ireland
responsive professionals bring you the know-how, focus and dedication to deliver the T: +353-1-790-3500
services you need, when and where you need them, any way you want them. E: Information@pfpc.com
C: Stuart Mauger
Our clients have access to a broad range of value added services and tailored solu- T: +44 (0) 1481 744479
tions including global custody and fund administration services for funds domiciled F: +44 (0) 1481 744529
in the Caribbean and Channel Islands. E: stuart.mauger@rbc.com
A: PO Box 48 Canada Court
Our services include Trustee, banking and credit facilities, treasury and foreign St Peter Port Guernsey GY1 3BQ
exchange, trade execution, financial accounting, corporate services, derivative sup- C: Deanna Bidwell (Cayman)
port services and online access, leveraging a custody network that covers 80 plus T: +1 345 949 9107
markets worldwide. Our service combines leading edge technology with professional F: +1 345 946 1288
expertise and a truly integrated service delivering creative, customised solutions. E: deanna.bidwell@rbc.com
W: www.rbcprivatebanking.com
Sébastien Danloy
Global Head of Sales,
Société Générale Securities Services offers institutional investors, asset managers
Investor Services
and financial intermediaries a comprehensive range of financial securities services:
Société Générale Securities
custody, clearing & trustee services, fund administration, asset servicing and transfer
Services
agency. SGSS currently ranks 3rd European custodian and 9th worldwide custodian
T : 33 (0)1 41 42 98 65
(Source: Globalcustody.net) with EUR 2,448* billion in assets held and valuates
E : sebastien.danloy@socgen.com
4,140* funds representing assets of EUR 365* billion. (as of March 2007
W : www.sg-securities-
services.com
Adrian Maher
E: amaher@swiss-financial.ie Drawing upon an extensive track record of proficiency, dependability and
T: +353 51 351180 responsiveness, Swiss Financial Services acts as administrator as well as registrar
F: +353 51 871595 and transfer agent of funds investing in a broad range of financial instruments.
Swiss Financial Services (Ireland) These include futures, foreign exchange, equities, options, bonds and other funds.
Ltd.
Units 5/6 Tramore Road Business We perform accounting and administration services for diverse fund types domiciled
Park in, but not limited to, the United States, Bahamas, Cayman Islands, B.V.Iand
Waterford Ireland.
Ireland
DPM Mellon provides onshore and offshore alternative asset fund administration,
back and middle office outsourcing, portfolio valuation, daily NAVs, risk
W: www.dpmmellon.com administration and portfolio transparency solutions for fund managers, asset
T: +1 732 667 1155 allocators, institutional investors and proprietary traders.
F: +1 732 662 2650 DPM Mellon’s services are designed to solve complex administrative needs and
C: Skander Aissa improve operational efficiency. From the most basic reports to complex portfolio
E: Aissa.s@dpmmellon.com valuations, risk analysis and daily transparency, DPM has the systems, infrastructure
A: 400 Atrium Drive Somerset and experience to handle your toughest administrative challenges.
New Jersey NJ 08873 USA DPM Mellon has a world-wide staff of approximately 200 employees. DPM Mellon
is headquartered in Somerset, New Jersey with offices in London, the Bahamas, and
the Cayman Islands.
Hedge Fund Services, based in the Cayman Islands, Ireland and Canada holds a
leading position in the area of hedge fund administration, offering a complete range
of services including accounting, NAV computation, share holder services, banking W: www.ubs.com/fundservices
and credit facilities. With the dedication and experience of a professional team of C: Mr Gerhard Fusenig
200 and our state-of-the-art web reporting, accounting and shareholder systems, we T: +41 44 235 4992
are well positioned to provide clients with a first class service. E: gerhard.fusenig@ubs.com
With specialist expertise in both single manager and fund of hedge fund adminis-
tration, we provide facilities for both onshore and offshore funds. A: UBS Global Asset
Capabilities also extend to services for investment funds through our teams in Management, Fund Services,
Luxembourg, Switzerland and the UK. Stauffacherstrasse 41, PO Box,
Cayman Islands: Darren Stainrod, tel. +1-345-914 1076 CH-8098, Zurich, Switzerland
Ireland: Don McClean, tel. +353-1-436 3636
Canada: Pearse Griffith, tel. +1-416-971 4702
DIFC
The DIFC is the world's newest international financial centre. It aims to develop the Dubai International
same stature as New York, London and Hong Kong. It primarily serves the vast Financial Centre
region between Western Europe and East Asia. Level 14, The Gate
P.O. Box 74777, Dubai, UAE
Since it opened in September 2004, the DIFC has attracted high calibre firms from
E: info@difc.ae
around the globe as well as its region. Firms operating in the DIFC are eligible for
benefits such as a zero tax rate on profits, 100 per cent foreign ownership, no T: +971 4 362 2450
restrictions on foreign exchange or repatriation of capital, operational support and M: +971 50 4958902
business continuity facilities. F: +971 4 362 2333
W: www.difc.ae
Prime Brokerage
Europe (London):
Fimat Alternative Investment Solutions group is a global, multi-disciplinary, solution Philippe Teilhard (44) 207 676
providing organisation dedicated to delivering innovative & superior prime brokerage 85 36 - Duncan Crawford (44)
services to the alternative investment industry such as investors and fund managers. 207 676 85 04
Fimat AIS offers these services on all major asset classes and their related listed &
Americas (New York):
OTC derivative products, as well as providing dedicated account management, cross-
Steve Solomon and Marc Cohen
margining tools, hedge fund start-up services, quantitative information for investors
and Capital Introductions. (1) 646 557 9002
Fimat AIS is part of Fimat, which employs over 2,000 people in 29 market places, Asia (Hong Kong):
and is a member of 48 derivatives exchanges, and 20 stock exchanges worldwide. Kirby Daley (852) 2848 3368 -
www.fimat.com Gregoire Dechy (852) 2848
3369
A: Europe/Asia/Africa
42 New Broad Street Fundtech's payments solutions automate all aspects of the funds transfer and cus-
London EC2M 1SB tomer notification process, enabling straight-through-processing (STP) of payments.
United Kingdom Fundtech also offers payments solutions for continuous linked settlement (CLS), nos-
tro account management and enterprise-wide payments management.
T: +44-207-588-1100
Global PAYplus - The enterprise-wide payments management solution for global
F: +44-207-588-1155
financial institutions.
A: Americas PAYplus RTGS - A fully integrated, multi-currency payment system for banks resid-
30 Montgomery Street Suite 501 ing in countries outside the U.S. that have established Real Time Gross Settlement
Jersey City, NJ 07302 (RTGS) standards.
T: +1-201-946-1100 PAYplus USA - The leading payments solution for financial institutions in the US.
F: +1-201-946-1313
T: +44(0)870 1650019 Voca is your payment partner. Our unmatched experience means we can
F: info@vocalink.com offer you a range of low risk, value-added services that leverage our
W: www.vocalink.com know-how and technical capabilities.
Securities Lending .
Data Explorers Limited, a specialist and independent company, offers impartial
W: www.dataexplorers.com
T: +44 (20) 7392 4000 quantitative measurement of securities lending performance services to the global
F: +44 (20) 7392 4004 securities financing industry. We help our clients monitor and understand the
A: 155 Commercial Street, relative performance of their lending activity and risk, and turn raw lending, borrow-
London E1 6BJ United Kingdom ing and collateral data into useful, actionable information. We also provide proxies
London: Julian Pittam for short selling information.
T: +44 (20) 7392 5018 Working with the industry we ensure information flows are appropriate and peer
E: jp@dataexplorers.com groups relevant. We are not involved in transactions.
Boston: Tim Smith All of our services: Performance Explorer, Transaction Explorer, Risk Explorer,
T: + 1 (617) 973 5099 Index Explorer and Report Explorer are web based and available to clients
E: tim.smith@dataexplorers.com
over the internet.
T: +1 212 901 2224 EquiLend Holdings LLC was formed by a group of leading financial institutions to
C: Michelle Lindenberger develop a global platform for the automation of securities finance transactions.
E: Michelle.lindenberger@equi- The EquiLend platform is designed to increase efficiency by standardizing, cen-
lend.com/info@equilend.com tralizing and automating front and back office processes, while delivering global
access to liquidity, reduced risk and scalability. The EquiLend platform is
A: 17 State Street, 9th Floor
designed to process equity and fixed income securities finance transactions on a
New York NY 10004
global basis.
T: +44 20 7743 9510 Investors include: Barclays Global Investors; Bear, Stearns & Co. Inc.; Credit
A: 54 Lombard Street Suisse; The Goldman Sachs Group, Inc.; J.P. Morgan Chase & Co.; Lehman
London EC3V 9EX Brothers; Merrill Lynch; Morgan Stanley; Northern Trust Corporation; State Street
W: www.equilend.com Corporation; and UBS.
Securities Lending .
JPMorgan's Securities Lending program is unparalleled due in no small part to the New York: William Smith
Firm's breadth of capability, financial strength, professional expertise and seamless T: 212-623-5664
operations. E: william.z.smith@jpmorgan.com
Our program enables investors to access a broad spectrum of lending markets, with a London: David Mitchell
diverse borrower base, offering a broad indemnification against borrower default, T: 44 207 7420055
while achieving very competitive bids for their securities - all of this in an environ- E: david.mitchell@jpmorgan.com
ment designed not to compromise the activities of their fund managers. .As one of
the founding members of EquiLend, a global automated platform for borrowers and Sydney: David Brown
lenders, JPMorgan is at the forefront of technology and is ideally placed given its T: (61-2)92504606
integrated lending, custody and accounting platforms. E: david.ldn.brown@jpmorgan.com
W: www.jpmorgan.com/wss
Pirum provides a full suite of automated reconciliation and straight through process-
ing (STP) services supporting Operations within the global securities finance T: +44 20 7220 0961
industry. The company's on-line SBLREX service encompasses daily contract F: +44 20 7220 0977
compare, monthly billing comparison, mark-to-market & exposure processing, C: Rupert Perry
pending trade comparison, income claims processing and custody reconciliation.
E: rupert.perry@pirum.com
Subscribers to Pirum’s services significantly increase their operational efficiency
A: Pirum Systems Limited
and reduce their risk by using Pirum’s solutions, as staff are able to focus on fixing
the exceptions instead of using their time to check and process routine business. 37-39 Lime Street
These automated processes are more scalable and risk controlled too, allowing London, EC3M 7AY
significantly higher volumes to be managed without corresponding increases in W: www.pirum.com
operations headcount.
Santander is the only Spanish financial institution with a team exclusively dedicated
to securities finance & with the purchase of Abbey in 2004 has expanded its
capacity on a Global basis with trading teams in London (UK) & Connecticut (USA). W: www.gruposantander.com
T: (3491) 289 39 42/54
Santander's leading local capabilities in Spain, Portugal, UK, USA & Latin America,
E: securitieslending@
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 & gruposantander.com
financing, including availability across all assets classes, as well as access to
uncommon emerging markets.
Technology .
Advent Software EMEA, established in 1998, provides trusted solutions for the front
through to back office operations, based on a true real-time fund/portfolio
accounting platform, to the investment management community throughout Europe, T: +44 (0)20 7631 9240
Middle East and Africa. Advent has an established network of offices across the F: +44 (0)20 7631 9256
region serving a growing client base of asset managers, hedge fund managers, prime
E: emea@advent.com
brokers, fund administrators, wealth managers, private banks and family offices who
continue to improve their businesses using Advent’s suite of integrated investment
A: One Bedford Avenue,
management solutions. Advent Software EMEA is part of Advent Software Inc. London WC1B 3AU, UK
(Nasdaq: ADVS), a global organisation that has been providing solutions to the W: www.advent.com
world's leading financial professionals since 1983. Firms in more than 50 countries
using Advent technology manage investments totaling more than US $8 trillion.
Aquin Components ranks among the leading IT solution providers to the international
asset management and fund industry. Its core competency comprises investment Annette Lindinger
compliance and risk monitoring; trade and order management; data management; press@aquin.com
customized reporting; custodian reconciliation and management of software T: +49 69 21 93 66 600
integration projects. F: +49 69 21 93 66 650
Mainzer Landstr.
Aquin’s clients include the best-known asset management companies and custodians 199 60326
in Europe and the USA. They benefit from substantial cost savings derived from Frankfurt am Main
automation of investment management processes supported by the choice of Germany
stand-alone products or integrated solutions. The company has its headquarters in W: www.aquin.com
Frankfurt am Main and subsidiaries in Zurich, Paris, Luxembourg, London, Dublin
and New York.
Broadridge Financial Solutions, formerly ADP Brokerage Services Group, with nearly
$2.0 billion in revenues and more than 40 years of experience, is a leading global
provider of technology-based outsourcing solutions to the financial services industry. Our
Broadridge Financial Solutions integrated systems and services include international securities processing, investor
The ISIS Building communication and outsourcing solutions. We offer advanced, integrated systems and
193 Marsh Wall services that are dependable, scalable and cost-efficient. Our systems help reduce the
London E14 9SG UK need for clients to make significant capital investments in operations infrastructure,
T: +44 (0) 20 7551 3000 thereby allowing them to increase their focus on core business activities.
E: info@broadridge.com Proxy Edge – comprehensive solution for institutional global proxy voting management.
W: www.broadridge.com Gloss – leading international STP system which automates the trade processing lifecycle from
trade capture through confirmation, clearing agency reporting and settlement.
Tarot - a UK retail and private client stockbroking, custody and fund management solution.
Securities Data Management – outsourced data services for securities operations.
Burns Statistics provides software and consulting services. We are focusing on ran-
W: www.burns-stat.com
T: +44 (0)20 8525 0696 dom portfolios, a technique that provides significantly improved performance meas-
C: Patrick Burns urement. A particularly powerful feature is that the initial holdings of the portfolio
E: patrick@burns-stat.com can be used in the performance analysis in order to gain even more precision.
4-b Jodrell Road Performance measurement is after the fact, but random portfolios also allow fund
London managers to test trading strategies before implementing them. There are many addi-
E3 2LA UK
tional uses of random portfolios as well, one is to objectively evaluate the effect of
constraints on a portfolio.
DST International is the world’s premier vendor of technology solutions to the global
T: UK +44 (0)20 8390 5000
investment management community with over 700 clients in 55 countries, and
Boston +1 617 482 8800
1500 employees in 19 of the world’s leading financial centres. Our wide range of
Hong Kong +85 225 812 880
asset management solutions meet the needs of fund managers, dealers, settlement
F: +44 (0)20 8390 7000
staff, custodians and record keepers operating as international asset managers; from
E: info@dstintl.com
front office simulation, opinion management and modelling functions, through data
A: DST House, St Mark’s Hill,
management, dealing and settlement to custody and corporate actions. The suite of
Surbiton, Surrey, KT6 4QD
products can be used either as stand-alone applications or brought together in flexi-
W: www.dstinternational.com
ble combinations according to specific needs.
Elemes NM is your partner in global agent bank custodian network management pro-
viding a global view of your relationship network in a powerful and easy to use pack-
Fingertip Developments Ltd
age. It includes diary, invoice verification, document management, multi-entity Curtain Court
views, reporting, account information incorporating fee and rate structures, contacts, 7 Curtain Road
notes and supports eFee – electronic fee invoicing technology. London EC2A 3LT
UK
Unrivalled extensibility allows you to develop your own functionality with your in-
house development team. T: +44 (0)20 7100 9280
enquiries@fingertip-
Flexibility does not stop with the software, our commercial terms offer adaptable
developments.com
pricing to suit present and future requirements for all sizes of organisation.
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 F: 001-201-291-7808
streamline business processes, Koger offers Fully Integrated Fund C: Mr Ras Sipko
Administrator, a vertically integrated suite serving the back-office E: ras@kogerusa.com
software needs of the 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
~ GRID, Global Reach Interface Daemon New Jersey, NJ 07652, USA
Other programs, such as PTAS, KIT, and KORS available separately, complement W: www.kogerusa.com
the core competency of Fully Integrated Fund Administrator.
Building on over twenty years of experience in capital markets and cross-asset soft-
ware 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 the most complex derivative products.
C: Hélène Desbiez
Coupled with a high degree of flexibility and customization, Mx Asset Manager fea-
Business Development Manager
tures a multifaceted design catering to the needs of both service providers (prime
T: +33 1 44 05 32 00
brokers, administrators, asset servicing providers) and direct clients (portfolio man-
E: helene.desbiez@murex.com
agers for mutual, pension or hedge funds, insurance companies).
W: www.murex.com
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-dimen-
sional risk management in a thriving market.
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 replacing costly and restricting legacy platforms. peterevans works in a col- peterevans
laborative manner and sees clients as partners to help meet all the demands in today’s New Broad Street House
marketplace. The xanite product suite offers a highly configurable, flexible and fully 35 New Broad Street
integrated, browser based, comprehensive front to back solution that complies with mes- London EC2M 1NH
sage standardization and settlement harmonization. Deployed as a single application or T: +44 (0) 29 20 402200
integrated as components into your existing platform. Each of the xanite modules can de E: info@peterevans.com
delivered via an ASP or self-hosted. Covering: wealth management, custody corporate W: www.peterevans.com
actions clearing and settlement private client and on-line stock broking Clients contin-
ue to retain all control with their portfolio, fund and relationship managers, brokers,
middle and back office operation – on line anywhere in the world.
Pirum provides a full suite of automated reconciliation and straight through process-
T: +44 20 7220 0961 ing (STP) services supporting Operations within the global securities finance
F: +44 20 7220 0977 industry. The company's on-line SBLREX service encompasses daily contract
C: Rupert Perry compare, monthly billing comparison, mark-to-market & exposure processing,
pending trade comparison, income claims processing and custody reconciliation.
E: rupert.perry@pirum.com
Subscribers to Pirum’s services significantly increase their operational efficiency
A: Pirum Systems Limited
and reduce their risk by using Pirum’s solutions, as staff are able to focus on fixing
37-39 Lime Street the exceptions instead of using their time to check and process routine business.
London, EC3M 7AY These automated processes are more scalable and risk controlled too, allowing
W: www.pirum.com significantly higher volumes to be managed without corresponding increases in
operations headcount.
Over 100 Capital Markets firms worldwide rely on Singularity to achieve step-change
improvements in efficiency and cost-effectiveness. Across front, middle and back office
T: +44 (0)20 7826 4470 operations, Singularity's clients are improving performance by automating process and
F: +44 (0)20 7826 4480 leveraging their human capital most effectively. Our process automation solutions com-
C: Nick Stevens bine deep knowledge and long-standing capital markets experience with award-winning
E: sales@singularity.co.uk technology. Clients include JPMorgan, Bank of Tokyo Mitsubishi UFJ, Raymond James,
A: Cable House, 4th Floor Prudential, Invesco, BNPParibas, Morgan Stanley, American Express and M&G.
54-62 New Broad Street -By cutting latency in securities processing, our clients are recognising new efficien-
London EC2M 1ST UK cies, reducing costs and increasing throughput
Further Contacts: - By streamlining their customer on-boarding processes, our clients are gaining faster
US T: +1 212 946 2685 access to fees, increasing customer satisfaction & gaining greater cross-sell opportunities.
Singapore T: +65 9616 7732 - By automating their KYC & other compliance processes, our clients & reducing risk.
- By improving collaboration in their client reporting cycle, our clients are providing
more timely and insightful investment performance information.
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