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The next squeeze Volume 5 No.

33 - 2008
CEO Profile - GBP 25 - UK, ROW
Simon Hudson-Lund of IFDS
USD 45 - America
Panel - CEE custody
Analyse this -
Securities Lending Technology
Repo - Russia
In Focus - Data Services INDUSTRY MAGAZINE

Will the CDS market
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Heads up ISJ | Investor Services Journal

Back to front
Investor Services Journal September 2008 will be remembered as the month the screws fully tightened
Editor: Ben Roberts (Ben@2ipartners.com)
on financial institutions. The collapse of Bear Stearns earlier this year
Reporters: Joe Corcos (Joseph@2ipartners.com) shocked many, but the tidal wave that crashed many banks and related
Catherine Kemp (Catherine@2ipartners.com)
Contributors: Brian Bollen, Anthony Harrington
institutions upon the rocks in the last few weeks was deafening. Failed blue
chips, takeovers, capital injections, nationalisations, negotiations, stock
Group editor: Giles Turner (Giles@2ipartners.com)
market plunges and bounces, legislation rewriting – it has been exhausting
Associate publisher: Justin Lawson enough to watch from the sidelines.
Publishing manager: Monique Labuschagne
Where to start? Perhaps with Guy Monson, head of investment firm
(Monique@2ipartners.com) Sarasin & Partners, who in a webcast emphasised that this is a “uniquely
Account managers:
Craig McCartney (Craig@2ipartners.com)
financial services concentrated event” that distinguishes it from previous
Mohammed Malik (Mohammed@2ipartners.com) crises. Though financial commentators often relish elaborate comparisons,
Tarik Rekiouak (Tarik@2ipartners.com)
his analogy that the “cleaning out” of Wall Street in the form of the USD700
Operations manager: Sue Whittle billion bail out was like the flushing out of the Aegean stables is accurate.
Designer: David Copsey (david@2ipartnes.com)
Certainly the top-down rescue in the US is a Herculean task, though there
may not be an identifiable hero at the end of it all.
Commercial director: Jon Hewson (Jon@2ipartners.com)
Short selling has been temporarily banned in over ten countries,
CEO: Mark Latham (Mark@2ipartners.com) with variations of terms and duration. The credit default swap market,
Investor Intelligence partnership
however, continues unabated although many commentators declare this
16-17 Little Portland Street, asset class equally as damaging to banks’ balance sheets. The ruling has dealt
London W1W 8BP
T: +44 (0) 20 7299 7700
a severe blow to securities lending, the facilitator of shorting. Turn to page
F: +44 (0) 20 7636 6044 10 for reaction to this ruling and what it means for pension and
W: www.ISJtv.com
hedge funds.
© 2008 Investor Intelligence. Transfer agency, by contrast, is undergoing fascinating growth. In
All rights reserved.
No part of this publication may
this issue we catch up with IFDS CEO Simon Hudson-Lund (page 14), and
be reproduced, in whole or in Brian Bollen identifies the fertile market for this key investor service in Asia
part, without prior written
permission from the publishers.
(page 16).
Our fund administration coverage provides updates for other
ISSN 1744-151X.
Printed in the UK by Pensord Press.
sections of the world seeing growth and innovation in tandem: Jersey and
Guernsey and the Middle East, starting page 46. These regions are fast
becoming magnets for investment as the traditional G7 centres resolve and
stabilise their economies.
Amid such upheaval, the underlying theme for financial institutions
has been a more intense focus on the middle and back office. In this issue
Anthony Harrington explores how data has become integral as the back seat
MEMBER - periodical publishers association
driver for future strategies, from managing risk to esoteric quant analysis
(page 32). But the change in consideration is not simply a new installation
of software; it will be a change in culture within institutions that will sustain
the right overview of its entire work processes.
Due to popular demand Investor Services Journal will go monthly
Total Net Circulation 12,133 from 2009. The magazine has always strived to bring the trends in the
Analysis for the Audit Issue Vol 4, No 22 distributed June 2007.
Source: AUDIT BUREAU OF CIRCULATIONS, www.abc.org.uk middle and back office to the fore. If major institutions come to depend on
TO RENEW YOUR SUBSCRIPTION PLEASE these areas for their survival, these are exciting times.
TELEPHONE: +44 (0)20 7299 7700
OR VISIT... WWW.ISJNEWS.COM Ben Roberts, Editor Q

Contents ISJ | Investor Services Journal

Contents Full transparency in the People are starting to think about

industry is only likely to be global solutions: ‘can we have a
achieved when markets relationship with one group that will
are commoditised cover our transfer agency needs all
Mark Fieldhouse around the world?’
of RBC Dexia Page 44. Simon Hudson-Lund, Page 14.


04 / Letters to the 14 / CEO profile 32 / How to cater 46 / The well-
editor - Simon Hudson- for the data - Data connected island
Lund of IFDS The chief Services Anthony - Jersey Geoff Cook of
06 / News The last month executive talks of his rise in Harrington explores how data Jersey Finance explains the
of updates in custody, the company and the firm’s has become integral to future island’s new horizons.
clearing and settlement, global offering. growth.
securities lending, legal and 47/ Ready to go -
compliance and technology. 16 / Agents of change SECURITIES LENDING Guernsey Peter Niven of
in a transfer of 37/ Analyse This - Guernsey Finance explains
08 / News and market power - Asian the island’s response to new
Securities lending
mandates Who’s won transfer agency trends.
what this month? technology Anetics and
New adventures for transfer CheckFree explore key topics.
agents in Asia. 49 / A fund hub in
10 / News analysis - construction - Middle
CUSTODY 40 / Russian freeze
The next squeeze East Catherine Kemp
Short selling has been banned 20 / Profile - ZAO - repo and securities
explores the region’s fund
temporarily, but what of Unicredit lending A difficult year administration.
the CDS market, and its for the Russian market has
settlement? posed challenges to securities
21 - Eurofi - lending. 52 / Directory of
conference summary services
64 / Foresight – Bringing you the best of the The company listing.
Chris Smith, Euro 44 / Securities
September Nice conference.
Millennium Smith gives lending technology,
an insight into the rise and with RBC Dexia Mark
22 / From mines to Fieldhouse explores the
opportunities in dark pools.
markets - South technological revolution in
African custody A securities lending.
diversifying fund industry
is presenting new challenges 45 / 13th Annual
and opportunities for South European Beneficial
African custody providers.
Owners’ Securities
26 / ISJ Panel Debate Lending & Global
- CEE custody Four Custody Summit -
panellists examine Central conference summary
and Eastern Europe. Best of the action and debates
from Edinburgh.

... and climbing.

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Letters ISJ | Investor Services Journal

Dear ISJ,
Letters as we saw this week, this is not always WaMu was expected to become the next
achievable on the traditional exchanges. victim of the credit crisis. It took only 10
Following the London Stock Exchange’s days unfortunately to prove the forecast
trading being halted earlier in the Kind regards, correct.
month we believe the problem it and James Davies, head of Trader Systems Anyone hates to forecast unfortunate
many exchanges face is that they have Business, Trayport Ltd Q events and one hopes that the
sunk considerable development costs markets will revert back to some sort
into a proprietary system that is not of normality, but there are two new
scalable when needed. In contrast, Dear ISJ, worrying cases where our model is
those exchanges that have used flashing red for danger: GMAC and
independent software suppliers have With the demise of credit rating agencies Ambac Financial, the monoline insurer.
seen the development costs carried for assessing credit risk over the past It would probably be too late for an
by the supplier. The supplier in turn few months, it is worth considering investor to take remedial action in these
spreads the development cost across alternative methods of reading the instances. The level of deterioration on
many clients and so is able to keep the market. Thousands of market analysts credit spreads is such that the bonds
software up to date and expandable have failed to predict the unfortunate are now trading close to the expected
when needed. fate of Bear Stearns, Lehman Brothers recovery value.
Our feeling is that many of these and Washington Mutual (WaMu). Of One approach to isolating such credit
exchanges are using in-house developed course market analysts’ forecasts can situations and spot potential problems
matching engine software developed be subjective and sometimes resemble in time, is to compare the evolution of
by non-specialist contractors that can crystal ball-gazing. the StatPro VaR (or of CDS spreads) of
be prone to failures. This is because of An alternative, more objective and one issuer against its peers. Significant
the sudden increase in demand to trade mathematical method to analyse the deviations from the sector average may
different asset classes by their members, markets is to consider the credit default provide strong signals relating to the
where often the proprietary software swap (CDS) scene. The CDS market start of credit problems.
cannot easily be adapted to cope. has in fact created a new and extremely
Also, there is a vast shortage of important source for verifying the Dario Cintioli
financial software IT specialists that credit merit of the issuers, providing head of risk
mean many exchanges face difficulty a more timely and reliable measure of StatPro Q
in employing staff that can develop the credit risk. StatPro has developed such a
software when needed. Additionally, the ‘dynamic’ credit risk model integrating
independent suppliers have software Credit Risk and Market Risk.
architecture that by its nature can be The rationale for using this method is
applied to any exchange system and also simple: the current level of CDS spreads
is inherently expandable for this reason, traded in the OTC market determines
whereas software like the London Stock the amount of credit risk of each issuer/
Exchange’s is often not. issue. It is the market information that
We therefore feel that the failures drives the level of credit risk, not the
seen will unfortunately increase in rating issued by a Credit Agency.
number which is no fault of London During the current credit crisis this
Stock Exchange who are facing serious model has performed well, providing
external competition from MTF early warning signals in the three cases
markets and are under cost constraints. of Bear Stearns, Lehman Brothers
The move to electronic trading is and WaMu.
therefore directly affecting the ability In the case of WaMu the forecast
to trade and this is happening at a time ability of our model was made evident,
To express your views,
when the credit crunch means more as StatPro issued a public statement on write to ben@2ipartners.com
liquidity in the markets is essential. But, the 16th of September, declaring that or write a blog at www.ISJ.tv

SEB is the leading provider of custody and clearing services in the
Nordic/Baltic region.
Business is built on long standing partnerships with our clients.
Our commitments are efficiency, reliability and providing the highest
service quality.
For further information please contact: Global Head of Custody Services: Göran Fors,
goran.fors@seb.se. Head of Sub-Custody Client Relations: Ulf Norén, ulf.noren@seb.se.
News ISJ | Investor Services Journal

Technology financial and reference data error during this four-year was implemented successfully
management software. period by comparing the returns on time and on budget using
PARIS - GL Trade, the multi- of these international funds to SimCorp’s new BEST PRACTICE
asset and multi-market solutions Postbank will use Asset Control the returns of a pair of proxy methodology.
provider, announced that NUMIS to provide quality controlled benchmark indices, with one
Securities is now live on the pricing data to the bank’s risk using local closing prices and the MUAM is the first SimCorp
Chi-X and Turquoise markets control department and support other using evaluated prices from customer to use the new
using the GL RIMS middle and its Internal VaR (Value at Risk) Interactive Data’s Fair Value approach, which is aimed at
back office solution for all the Model for market risk. Postbank Information Service. dramatically reducing the time
post trade processing. required a solution that could and customer-side resources
be implemented to meet its Tracking error estimates the that an implementation can
NUMIS Securities, an time-to-market objectives, standard deviation of the traditionally take, yet without
independent investment banking while requiring only minimum differences between a mutual compromising delivery quality.
and broking group focused IT resources in the day-to-day fund’s returns versus those of a The initiative, covering all project
on London-quoted mid and management of the system. comparable benchmark index. It phases from analysis to live
small cap companies, has now is often used by fund managers production, has been developed
been using GL RIMS for more Dr. Guenter Fiebach, head of and investors to gauge a level of by SimCorp based upon
than two years to manage risk control at Postbank, said, risk between mutual funds with experience and documentation
their clearing and settlement “We chose Asset Control because similar investment styles, relative from over 150 SimCorp Dimension
business on CREST. Earlier this the solution’s template-driven to comparable benchmark implementation projects.
year NUMIS were looking for a infrastructure will ensure a indices. A higher tracking error
netting solution to reduce the simpler initial implementation is generally associated with a The innovative approach has
cost of processing of their LCH and allow us to meet our required perception of higher relative risk produced a very successful
cleared business in CREST*. timelines.” † in the fund. outcome for MUAM. Harry Eyre,
They also wanted access to the Company Secretary and Head of
new MTFs, Chi-X and Turquoise MASSACHUSSETTS: Research by Interactive Data’s findings Operations and Administration
in order to provide the best Interactive Data Corporation suggest that if international at MUAM, explained: “I have
possible execution service to (NYSE: IDC), the financial funds only use benchmark indices been very impressed with
their customer base. Trading on market data provider, revealed that are valued based on local SimCorp’s efforts to match our
the MTFs meant handling the that comparing the performance closing prices of international requirements to the system
new clearing services and netting of international mutual funds equity securities, an inherent and its functionality. I felt that
models of EMCF and EuroCCP. that use fair value adjustments bias toward higher tracking SimCorp was very proactive
with their proxy benchmark error will persist. This bias is during the implementation and
In GL RIMS’ netting function, indices can be misleading if the amplified on days with higher in providing documentation
NUMIS found a solution to both benchmark indices fail to employ market volatility. However, if supporting the processes behind
these challenges. Transaction fair value principles. The study fair valuation principles are it.” Q
processing costs have been found that if proxy benchmark also applied to international
reduced while the front office has indices used fair value principles, benchmark indices, the result Clearing and settlement
been able to enhance its offering tracking error (a common metric is a reduction in tracking error
to the market. in gauging fund performance) for and a more “apples-to-apples” The Clearing Corporation of
international mutual funds may comparison for measuring fund India Limited (CCIL), India’s
Simon Bailey, IT Director for be significantly reduced. performance. † leading centralised clearing
NUMIS Securities, said: “Since and settlements facility, has
choosing GL RIMs we have built a Robert Haddad, senior manager LONDON - Mitsubishi UFJ signed a mandate for US Dollar
great working relationship with of Evaluated Services, Asset Management (UK) Ltd settlements and clearing
the GL RIMS team and been able Interactive Data Pricing and (MUAM), part of Mitsubishi services with The Royal Bank
to move the platform forward Reference Data, reviewed public UFJ Financial Group, one of of Scotland Group (RBS). This
to achieve a very high level of net asset value (NAV) data from the world’s largest financial extends a previous mandate
automation and meet all the April 2004 to March 2008 for institutions, has gone live with ABN AMRO’s international
needs of a growing business.” † a sample of 166 U.S. mutual with investment management transaction banking business,
funds investing in international platform, SimCorp Dimension, now owned by RBS.
NEW YORK - Germany’s largest equities, each representing a in just six months. The SimCorp
retail bank, Postbank, has distinct fund family. Haddad Dimension system, supporting CCIL was set up by the Reserve
chosen Asset Control’s AC Plus estimated the daily tracking MUAM’s entire client operations, Bank of India to guarantee the

News and Mandates ISJ | Investor Services Journal

settlement of debt and FX Dhabi Exchange, Standard government representatives, border securities financing using
transactions by being the central Chartered now covers the entire regulators, the private sector and Asian securities as collateral,
counterparty to trades between UAE market. The ADX launch, other stakeholders to discuss the Euroclear Bank is easing
parties, but also providing together with our award winning corporate governance lessons of liquidity challenges in the global
multilateral netting services to services in the DIFX strengthens the current financial crisis. The capital markets.
its members. CCIL is the central our position as a leading provider OECD will make a statement on its
clearing agency for USD/ INR of custody services in the UAE as findings and recommendations Clients can now use Asian
interbank payments for the well as expands our sub-custody following the next meeting of ‘safe-haven’ securities, such as
Indian banking industry. Q footprint to 19 markets in Asia the OECD Steering Group on Japanese government bonds, as
and the Middle East.” Q Corporate Governance on 19th collateral to meet their overnight
Custody and 20th November. Q financing needs. Asian clients
Legal and compliance are now able to use Euroclear
LONDON - Standard Chartered Securities lending Bank’s tri-party services to close
Bank has announced that it is PARIS - Angel Gurría, OECD overnight repo transactions
expanding its custody services secretary general, has called for NEW YORK - The Securities and with European counterparties
in UAE with the recent addition a new drive to raise standards Exchange Commission (SEC) has at the end of their business
of Abu Dhabi Securities and performance in corporate extended its ban on covered day, thereby leveraging their
Exchange (ADX). The Bank now governance. short selling of more than end-of-day securities positions
provides full custody services 800 financial companies. The as collateral, and have full use
in three markets including The campaign aims to strengthen regulator announced the first of these securities the next
Dubai International Financial implementation of the OECD ban in the week ending 19th morning. European-based
Exchange (DIFX) and Dubai Principles of Corporate September in an effort to address firms, in turn, are now able to
Financial Market (DFM) in the Governance, first launched financial market concerns. finance their yen and other
Middle East. in 1999 and adopted by the The initial ban was due to expire Asian currency exposures with
Financial Stability Forum as one last night but will now last till local Asian securities and
The launch of custody services of its 12 core standards for sound the third business day after the counterparties. These clients
for clients investing in Abu Dhabi financial systems on enactment of the financial rescue use Euroclear Bank’s triparty
Financial Market demonstrates 26th March 2000. bill is made law, but in any case collateral management service
its continued focus on further no later than 17th October. to move securities and/or
developing its securities services “Rebuilding investor confidence cash automatically between
business in the Middle will be vital to helping the Euroclear Bank is bridging a the relevant accounts, and
East region. economy get back on track,” gap between European and Asian to automatically substitute
Mr. Gurría told business leaders financial entities engaging in securities that are used in
Giles Elliott, global head of in a meeting. “Strengthening overnight securities financing. financing deals when needed
product, Securities Services the rules, regulations and codes With Euroclear Bank’s recent to fulfil other transaction
at Standard Chartered Bank, of corporate governance will be move to expand its operational settlement needs. Q
said: “With the launch of central to this.” Over the coming capabilities in Hong Kong and
custody services in the Abu weeks, OECD will meet with the growing appetite for cross

Latest mandates

Month Winner Client Location Assignment Mandate size

October BNY Mellon Eureko B.V. London Custody/value added EUR38 billion
October ABN AMRO Mellon Bpf Meubel Netherlands Custody GBP 1.5 billion

September Citi Erste Group London & Vienna Brokerage/cust/clear NA

September Santander Family Investments London Management GBP 1.5 billion

September State Street Bankpension Copenhagen Management USD 200 million

September State Street Borough of Enfield Edinburgh Custody/Perf measure USD 1 billion

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News Analysis ISJ | Investor Services Journal

The next squeeze

Short selling has been banned in over ten countries, but what about a reassessment of that
other influential market, CDSs, and its settlement, asks Ben Roberts

Securities lending and hedge funds had levels soon, he said he could only hope, struggling to work out what they’re
been the winners in the credit crunch. but added: If it lasts too long it’s going to allowed to do and the number of
The lending industry, whose suppliers be problematic for everyone.” jurisdictions haven’t gone into the level
included pension funds, contributed to A member of the securities finance of detail that the States and the UK have.
keeping markets moving with temporary team at a major investment bank, who If you read them literally the seem to be
security transfers when suspicion over declined to be named, echoed this highly restrictive so there is an issue of
the contents of structured products finding. “Across Europe numerous interpretation of all of this.”
in full trading was at its height. Hedge regulators have different opinions, a lot He added that the move by the
funds in turn - dogged by suspicions of them about ‘naked’ selling [selling FSA, which banned short selling until
surrounding regulation and commodity borrowed stock without sufficient cover 19th January 2009, made sense if you
price spikes – borrowed the stocks of in the case of default] compared to regarded it as a response to systemic risk.
companies they expected to decline in covered selling, definitions thereof, what “Certainly short selling my clients would
value; selling the stock into the market a ‘market maker’ is. But there is a drastic regard as a good thing and the regulators
to buy back cheaper. effect on the lending market in general.” generally say it’s important for liquidity
But in the week that Lehman Brothers The member said removing short and adjusting prices and factoring the
began its break up, Merrill Lynch was real views into the market – but not if
sold to Bank of America and American everyone’s chasing each other down in a
insurer AIG required nationalisation, Some lenders are panic.”
regulators decided enough was enough. Can hedge funds sufficiently alter
In countries spanning three continents losing clients who their strategy to keep running as before?
short selling was placed under a That’s certainly possible, but perhaps
temporary ban, surrounding lenders and are in custody when they start again hopefully the idea
borrowers with confusion. is that everyone would have calmed
Part of this confusion stems from because they prefer down a bit. The hedge funds in the US
the uncertain wording of the legislation are crosser than those in the UK. Some
and the variations country by country. not to take any risk will be hit significantly but only in the
Further, the ban is on short selling, sense of running a more limited strategy
and not lending itself, leaves much of doing something which is a long way away from losing
to be clarified Ahmed Maudarbocus, your prime brokers, which is fatal.”
Paris head of securities lending trading wrong But while short selling is on ice, the
at BNP Paribas, says: “The rules are market for collateralised debt swaps –
not clearly written and subject to often considered as influential to the
interpretation. Many lenders fear that selling decreased the accuracy of price fate of companies – continues apace. In
they may indulge in some wrong-doing. discovery: with nothing to check the a recent webcast address, Guy Monson,
Some lenders are losing clients who are rising prices of equities it may have an head of Sarasin & Partners, twinned the
in custody because they prefer not to impact on the valuation of the pension two practices.
take any risk of doing something wrong fund that is lending them. The member He cites the “increasingly powerful
– so they don’t know what they can do added that when HBOS was bought trading community to undermine those
or not.” by Lloyds TSB, “there was a very small bank balance sheets by trading CDSs.
This doubt has stymied the lending percentage of its shares were out on “These are effectively debt insurance
market. He adds that the bank is loan”. Rather than short sellers, it was policies, which if pushed wider by
currently approaching lenders and “the long-only managers who suddenly traders, mean that future debt financing
the different legislators to have greater thought they would short stock”. becomes more expensive. In a leveraged
clarity on the matter. Asked if he expects Richard Frase, a lawyer at Dechert, bank balance sheet with minute-by-
transaction volumes to return to normal said: “Our hedge fund clients are minute calls on capital, suddenly

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News Analysis ISJ | Investor Services Journal

raising the cost of that capital can have

catastrophic consequences.”
The best of example of this, to which
Monson refers, is HBOS in the UK. The
Hedge funds
inability to secure capital left it needing
a buyer, and Lloyds TSB stepped in to
takeover the owner of Halifax – a deal
secured by the British government. The
terms of the deal, as Monson suggested,
boost back end
“were inconceivable to a bank analyst”
just a few weeks before. According to A recent survey by KPMG found that more expensive.”
Data Explorers, a mere 3% of HBOS’s hedge fund managers spend on average As the bigger hedge fund administrators
shares were on loan at the time of the 45% of their management fees on have been bought up, PCE and Phoenix,
bank’s collapse. This puts the focus middle and back office operations. two boutique administrators focused
firmly on the CDS market and the The survey also found that eight out on the growing number of small and
aforementioned pressures on HBOS. of ten managers polled think investors midsized hedge funds, have emerged.
The CDS market boomed in 2002 on are placing more emphasis on back “It’s a market that we recognise is
the back of the collapses of Enron and and middle office processes, and where naturally attractive to us,” says Gray.
WorldCom, and the outstanding deals over 70% of managers’ clients are These services are timely, as more
topped USD62 trillion at the last count. institutional the proportion spent on institutional investors are entering into
CDS’s are deals made between two corporate control increases significantly. these small to mid hedge funds. This
participants that make a deal about the It also found that one in ten is driving a greater focus on risk and
solvency of third party. One side – that managers are not covering their costs infrastructure management.
may have lent money to the third party - with management fees. “Clients now turn up with ten page
pays the other and receives a promise of Across the market, investors are due diligence questionnaires. Within
a pay-off if the third-party defaults. The driving the need for hedge funds to those questionnaires there will be the
danger lies in the situation wherein if the implement increased risk controls, question how is your middle office
insurer (second party) defaults the first as well as efficient operational and infrastructure built, is it robust, and
party who took out the insurance will compliance systems. The associated what’s your disaster recovery plan.
not be assured of getting its money back costs of these controls are becoming Is it tried and tested. Those kinds of
– particularly if the second party had increasingly problematic for small to questions get harder to answer if it is,
sold on its side of the deal to a fourth midsized firms. like the stereotype, three people sitting
(and then perhaps fifth) party. However, Gavin Gray, managing around desks with Blackberries.”
In the last few years the US Federal director of Phoenix Fund Services’ But, while the cost of running the
Reserves has taken steps to establish a offshore operations, believes the funds is increasing as a result of the
central counterparty – called CCorp – problem lies more in the knowledge changing face of the client base, small to
for the CDS market, and the regulator base of the manager than in over-priced mid sized hedge funds had been looking
met with investor and exchange administrators. to capture institutional money for the
representatives on 7th October to discuss “Running the mid and back office last couple of years. And there has to
matters. The plan, still in an early stage is certainly becoming quite expensive. be an expectation that institutional
and recently put back to 2009, aims to A lot of start-up hedge funds are being investors will demand a deeper level of
gather all the swaps from a bank and run by fund managers who have come infrastructure.
process them to the clearing house as a out of bigger houses, where there has Gray adds that the prime broker
single, defined exposure. But questions been an infrastructure around them market will also change. “With credit
must be answered as to how any that they may not have been fully aware drying up they have really started to
settlement system for the CDS market of - particularly around trade settlement focus themselves on their top tier clients
can cope with such high volumes of processing, settlement breaks, and trade and there has been less appetite for the
participants looking to wind up deals in cycle. And so they run into difficulty start up client with the prime brokers.
a more risk averse climate. Q trying to set up their own systems. The potential depletion in lenders of
“The business model of a small to securities presents more of a barrier to a
medium sized hedge funds becomes start-up client than the cost of running
unviable when a manager is determined the mid and back office.” Q
– in a start up situation - to maintain
his own infrastructure. This can make it

CEO Profile ISJ | Investor Services Journal

Simon Hudson-Lund of IFDS

Simon Hudson-Lund talks to Ben Roberts about his swift rise and the
globalisation of a transfer agency offering

Simon Hudson-Lund is into his sixth

month as CEO of IFDS, a leading
transfer agent that embodies a truly
global operation. It is also his fifth year
at the firm, having joined in 2003 as
managing director of client services
running the back office and client
relationships from Legal & General,
before becoming chief operating officer
in 2005 and then stepping up to his
current position in April. He says the
IFDS founder, Charlie Effinger – who
left to become head of Cofunds to
leave vacant the COO position – was
instrumental in his move from
the insurer.
“Charlie had come knocking on
my door trying to sell me his system
solution for a number of years,” he
explains. “The joke at IFDS was that
he gave me a job to get me out the way
because I would never buy anything!
I thought when I came to IFDS that
probably sack me after a week, but things
have gone from strength to strength.”

After 13 years of growth, the main complexity and compliance headaches,

We’re offering a business area of servicing traditional they appoint us to do that on their
fund managers has altered due to what behalf and we have the arrangements
packaged service to he describes as a migration of accounts and agreements with fund accountants,
to platforms. IFDS began servicing transfer agents, and third party
those distributors pensions two years ago with Virgin fund managers.”
Money and earlier this year it launched This means that the service that
who don’t want the a fund hosting service, which Hudson- can be provided is scaleable. With
Lund says almost became a rival to Schroders, for example, IFDS provides
burden of being existing clients. “Traditionally we’ve transfer agency, with the fund manager
offered the transfer agency services dealing with all other issues. With
fund managers to fund managers who are their own Chartwell, however, IFDS uses the ACD
authorised corporate director, if you like. hosting service for the entire back office
themselves Now we’re offering a packaged service organisation, with Chartwell focusing
to those distributors who don’t want solely on the distribution side for
the burden of being fund managers promoting the fund. In this instance,
themselves. So rather than having all the IFDS will choose the fund manager,

ISJ | Investor Services Journal

the future, and low cost processing. If this activity may be run out of India.
we’ve got 32 clients who all want to do This means that IFDS’s offering to
something different that’s not going to global clients is made up of number of
work too well. So for basic processing systems in different countries that can
we try and keep all our clients in the be joined together, rather than a single
same box.” The service becomes more system. “You can centralise processing
bespoke, he continues, when it comes to a certain extent, but a lot of these
to the distribution side – “what terms big domains you must have feet on the
[the clients] want with individual agents, ground. So an organisation like ours
what service they want”. where we have significant operations in
The firm uses its Fast system to keep all those locations can actually start to
record on a fund’s underlying investors. bring them together so the end client
People are starting Hudson-Lund says he has seen a growth will see just one relationship. Some
in the amount of firms looking to people think you can come up with
to think about outsource their back office operations. one all-encompassing system. We’ve
“I think this is a combination of things: looked at product engines that can be
global solutions: if you do it yourself you have an element joined together, front end and back end,
of fixed cost you can’t get rid of. If to meet the requirement of whatever
‘can we have a someone outsources to us it goes on locations clients want to operate in
a variable cost tariff: as their business whatever products.”
relationship with changes, as their customers deal through Is there no risk that separate
platforms rather than direct they move systems may suffer a communication
one group that will onto a variable cost model which allows breakdown? “The trick,” he explains,
them to keep a better control of “is to pull out of the core system those
cover our their cost.” bits that need to talk. A good example
Cost pressure has become a critical is payment of commission, or ‘rebating’
transfer agency factor in fund management. IFDS makes - paying money back to distributors.
the significant investment in technology If you have a distributor dealing with
needs all around the needed to provide the best service and you across different locations, what you
keep step with regulation. “Some of the don’t want is lots of systems talking to
world?’ smaller fund managers come to rely on each other trying to work out what that
the expertise we can support them with is, and perhaps sending seven cheques
to keep them abreast,” he says. from seven countries. The core system
The demand for a global solution should be processing the business;
is also a key consideration for clients. the information is then extracted to a
Since 1995 IFDS grew up with a service separate system that will deal with that
that spanned the UK. Now, he explains, commission itself. We built one called
an international solution is more the AMC rebate engine, which will
custodian, auditor and accountant along frequently required: sometimes for pull information from the underlying
with all the due diligence this entails. firms that operate in the UK, Ireland systems and make one payment to the
He explains that IFDS will often select and Luxembourg, sometimes Ireland, end distributor.”
State Street – a part owner of IFDS – as Luxembourg and the US, or any other Having occupied a few positions
the custodian, except when the client combination. “People are starting to at the firms, he says CEO particularly
will have an existing relationship with think about global solutions: ‘can we appealed to him as it allowed him
a different custody provider, or would have a relationship with one group that to focus on business strategy and
specifically want independence from will cover our transfer agency needs all development. The client contact is the
IFDS’s shareholder. Impartiality is always around the world?’” IFDS now have a same, he says, but the role is less “hands
the case with the auditors appointed, sister companies in Boston and Canada, on”. “When you’ve spent a few years
he says. with a “raft of other operations” in other involved in nuts and bolts you can stand
But scalability is not always the most countries through State Street. back and be a bit less detached.
effective attribute, he says, particularly Local presence is a vital ingredient “The operational team have had
when it comes to record keeping, the to winning and keeping clients. Fund room to grow; it’s been great for me
firm’s core offering. “The benefit of managers often want to put trades getting involved in more business
going to a large transfer agency like IFDS through a local trading desk, and are development while staying close to
is certainty of delivery, investment in less concerned that the back office for the clients.” Q

Transfer Agency ISJ | Investor Services Journal

Agents of change in a transfer of power

The infrastructural boom in Asia has demanded the major transfer
agents to keep in step, writes Brian Bollen

Predicting the future is by definition an

uncertain affair, particularly given the
chaos of recent events in the western
financial markets. But Scott McLaren,
managing director, RBC Dexia Investor
Services, Hong Kong, is in the vanguard
of optimists when it comes to the future
for Asia.
“Asia currently represents one of
the most exciting opportunities for the
global funds industry, with the vast
untapped potential of China just one
future prospect,” he says. “Recent high
growth in more established markets
across the region – such as Singapore
and Hong Kong – is also driving new
demand for management, distribution
and support solutions.”
But much work needs to be done
to automate the investment processing
environment to prepare for increased
trading volumes, he argues. “With
offshore funds flooding into Asian Offshore investing Through IT investment, local presence
markets – Taiwan has recently recorded and integrated operations facilities,
150% year-on-year growth in this sector is proving hugely transfer agents can assist automation
- this is a challenging but not insoluble drives - boosting efficiency, limiting
problem and the introduction of popular the scope for error and bringing real
facilities such as Swiftnet funds servicing benefits to reduce the end to
is helping.” technologies that help more widespread end cycle time of a transaction.”
McLaren identifies the growth in the efforts to automate the industry.” Marcel Weicker, head of location
distribution of UCITS funds throughout Against this backdrop, transfer agents in BNP Paribas Securities Services’s
the region is a major developing trend have a clear role in the region. Pascal recently opened Singapore office, says:
and says offshore investing is proving Bérichel, Luxembourg-based head of “There is still a good deal of physical
hugely popular. SGSS Fund Distribution Services, says: activity, with subscriptions and
“From an asset servicing perspective, “Beyond traditional record keeping and redemptions generally coming in by fax;
Asia remains a highly fragmented region administrative support, transfer agents Swift is trying to make inroads into that
– with different rules, regulations and can support distribution channels by with Swiftnet. As more foreign funds
infrastructures for each local market,” he following clients into new distribution gain approval for public distribution
says. “As service providers we must work centres to set up local offices in Asia. in Asia, we will inevitably see more
to support and understand both the day- Investors working across regional Asian products being distributed, and fund
-to-day requirements of clients and their markets face a number of complexities managers generally are looking for one
broader strategic vision. The manual – not least time zone and language centralised source of service to act as
nature of much of the fund processing challenges when dealing with European their Asian registrar, operating in the
work in Asian markets remains a based administrators for UCITS and same time zone and the same languages
major issue, but RBC Dexia Investor coping with multiple interfaces between as the end investors.”
Services is among companies employing the different platforms and systems. Against the accepted Western

Transfer Agency ISJ | Investor Services Journal

consensus, it seems that at least some so that we start getting more adoption term potential has also been identified in
clients in Asia are actively rejecting across the market. “The risk we have as Vietnam, Malaysia and Indonesia with
straight-through processing. “They an industry is that in the current manual fund managers launching or forming
prefer to use fax messages, and that climate there are bottlenecks which may local alliances.”
can be more difficult to handle,” says cause major impediments to capture David White, executive director,
Bérichel. “Increased automation is the asset gathering in times of high growth.” Mutual Fund Technologies, a transfer
way to reduce cost and risk, but some While much investment interest agent supporting some of the world’s
customers are reluctant.As service continues to focus on mainland China, largest fund managers, says at a
providers, it is crucial to stay ahead of any changes in legislation within the strategic level the transfer agency
the game in terms of adapting to market are likely to take some time, he market can be split into two broad
market change.” adds. The current preferred business models. There are the global transfer
A number of steps need to be taken to entry route to the Chinese market is agents who administer cross-border
move the market forward, Scott McLaren though joint ventures and that is likely foreign funds distributed into Asia, who
believes. “Moves to improve market to remain the case for a good while yet. are traditionally supported by local
infrastructures via the development of A number of regional markets can be service centre offices. Then there are
cross-border trading and settlement described as key in terms of business local transfer agents who administer
platforms would be a huge step forward, growth? Regional growth centres in the domestic products in their country of
as would more widespread adoption current market include Hong Kong, residence. These can be both in-house
of protocols such as SWIFT. The good Singapore, South Korea and Taiwan and/or outsourced operations. “I can
news is that the Association of Southeast but China and India also hold huge see this trend continuing although I do
Nations (ASEAN) is engaging in serious long-term potential just through sheer see more global asset managers setting
debate on the emergence of cross border population and increasing wealth, says up local operations in order for them to
infrastructure platforms, but their Scott McLaren. “Taiwan has registered distribute domestic products,” he says.
creation will inevitably take time.” high growth in offshore fund sales but Compared with a year ago, White
McLaren acknowledges that the we are also seeing renewed growth and says transfer agency has become
market is still tied to the fax machine. interest in the local sites as well with more complex with the popularity of
He says leading transfger agents can help some foreign players entering the market alternative and non-standard mutual
move them to paperless automation but recently through acquisition. South funds. He adds that Asia will follow
also need the distribution channels to Korea is also looking like an increasingly a similar trend to other international
understand the benefits of automation strong play for asset managers. Longer financial centres with a period of
Transfer Agency ISJ | Investor Services Journal

continued volatility and limited overall Reflecting the changes taking place funds, he adds; they represent some 70%
growth. “However, I do envisage in Asia, Société Générale Securities of foreign funds bought in the special
more global asset managers setting Services announced from Paris on administration region. Second is the
up local operations and distributing September 1 that it had opened a new proximity to China which looks set to
domestic products, so there should office in Hong Kong to offer transfer become the vast consumer market that
be a growth in the number of local and registrar agent services. SGSS Hong western manufacturers and financiers
transfer agents. I also believe that the Kong Trust Company Limited’s declared have been dreaming about for decades.
range of more complex and alternative primary focus is to support SGSS asset “China could be a huge new market for
products will continue to grow in management clients, offering state- funds, with around 2,000 billion cash
popularity. As markets pick up I see of-the-art services and local expertise sitting in banks,” he says. “Tomorrow,
the trend of significant money flows to simplify their relationships with perhaps, depositors will begin placing
into the established European fund investors and distributors in the region. that cash in funds.”
ranges continuing. Not surprisingly, “China will need to set up pension
most major global asset managers plans in the coming years, partly because
have a strong focus on Asia and the Investors working the one child per family policy means
opportunities it offers, and this in turn the population will grow old very
will impact transfer agents and the across regional quickly,” observes Pascal Bérichel. “This
services they offer.” presents a good opportunity for funds to
“One of the key issues remains Asian markets meet a current immediate need and to
trade and settlement automation. prepare to address future needs.”
Asian markets continue to be behind face a number of Changes in the existing European
their US and European colleagues and, landscape will inevitably impact upon
although have now embraced STP complexities - not investment and investment servicing
processing methods, they are still some practices in Asia. What started as a very
way behind in their overall use of STP. least time zones and retail-oriented service two decades or
There is significant effort being made so ago, when transfer agencies started
by global fund managers and service language distributing funds to retail customers,
providers to encourage more deal and is not yet a mature business, suggests
settlement automation throughout Pascal Bérichel, but the market leaders
Asia. More automation and take up of The range of services, which includes are working more and more with very
STP processing is needed. In addition, dedicated account management for large global fund managers. “Therefore,
as alternative products become more investor clients, transaction processing they need to build a global transfer
mainstream, there will be a need to and the calculation and management agency platform with open architecture,”
bring traditional and alternative record- of trailer fees, is tailored to each client’s he says. “With open architecture you
keeping together for consistent audit and specific requirements and needs, it says. can sell different kinds of funds, not just
controls, as well as reporting.” The new office in Hong Kong your own but those from other fund
From a transfer agent perspective, will also serve as a base to expand its managers, giving the customer more
the market is still very fragmented and extensive range of services into Asia. flexibility and more choice.
there are no real dominant players. Bérichel identifies two reasons for the “[Asian] investors there can be very
With regards to manufacturers and opening of the Hong Kong office. First, demanding; they do like more service,
distributors in Asia, according to Lipper it forms part of the overarching project and you need to be very close to the
FERI and Cerulli Associates, retail banks to migrate to SGSS assets belonging to customer. If you don’t provide good
dominate with over 60% of distribution, Pioneer from the previous incumbent. service, they will go elsewhere.” This
followed by 20% direct and over 10% Pioneer wanted a Hong Kong office exacerbates the widespread pressure
through private banks/brokerages. to service investors, to help with from clients to provide better service,
Pressure for the markets to open up will distribution in Hong Kong, to delete new solutions, greater proximity and
continue to be placed on those which are time lag from the customer service lower prices, he feels. “You need to be
currently closed to foreign funds. equation and to be physically closer to more innovative in the way you do
I also see that the global transfer agent investors, he explains. business; the situation today is more
operating a 24 hour service will become Hong Kong in particular is very difficult than it was a year ago, but this is
the standard.” interested in Luxembourg-domiciled true everywhere, not only in Asia.” Q

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Custody ISJ | Investor Services Journal

ZAO Unicredit
providing custody services in 1996 to both market is based on the excellent SWIFT
foreign and domestic clients and for less IT facilities enabling maximum STP rate
than 10 years of perfect practice managed to possible in the market together with various
take leading positions in the Russian market. value added services, such as Market
At the moment IMB is one of the most Intelligence and News Distribution, Tax
dynamically growing custodians in Russia Advisory and Consultancy, MIS, STP and
with respect to volumes and service quality. Depot Market Evaluation Reporting etc.
Having a diversified client base, which ZAO UniCredit Bank Custody aims to
includes Global Custodians, international be pioneer in new services provided in the
and local brokers/dealers, custodian banks, market and technologies development, that
asset managers, commercial banks and benefits to our clients.
corporate clients, ZAO UniCredit Bank in We have developed a unique system for
its activity tends to provide the widest range Corporate Actions area, which is one of
of services combined with tailor-made the most important for clients investing in
solutions and personal approach. Emerging Market, enabling to minimize all
The competitive advantages are based on possible risks.
a combination of a strong local experience Actively communicating with
and UniCredit Group Custody wide presence Infrastructure Institutions, ZAO UniCredit
in a majority of CEE Countries, which Bank Custody is working on creation of new
enables our clients to cover the whole region products and services available in the market
with a single provider with unified high level for the clients.
services standards. ZAO UniCredit Bank Custody provides
ZAO UniCredit Bank Custody provides various services for corporate clients
services with respect to Russian local market in M&A and Financing area acting as a
and international markets. Direct access to custodian, settlement and pledge agent. We
Kazakhstan, Ukraine and Czech Republic participated in a number of large market-
markets is provided for our clients currently significant M&A deals. Total amount of
with more markets to be opened in the settled M&A deals in 2007-2008 exceeds
nearest future. USD 3,5 bn.
Apart from that ZAO UniCredit Bank ZAO UniCredit Bank Custody employs
Custody provides its customers access to all highly professional and experienced English
Major Markets and international securities. speaking staff with perfect communication
ZAO UniCredit Bank is a member of Taking strong positions in the market skills, market knowledge, proactive approach
UniCredit Group with 100% of the share with wide experience, reputation and and client focus. The clients are able to
capital owned by Bank Austria. recognition in the Russian market, ZAO receive full information in a timely manner
ZAO UniCredit Bank Custody is an UniCredit Bank actively participates in the and a personal client relationship manager
integral part of the UniCredit Group market development. ZAO UniCredit Bank to take best care of the client.
Custody business line acting under employees take key positions in all major The combination of all factors mentioned
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ZAO UniCredit Bank (formerly market changes, practices and expectations. positions in Russia with highest level and
International Moscow Bank) started Provision of services at the Russian local widest range of services provided. †

Conference ISJ | Investor Services Journal

Eurofi conference: Nice

Joe Corcos heads to the sunny south of France for a
similarly heated debate on market transparency and regulation
said: “The financial system relied too
heavily on ratings agencies before the
subprime crisis unfolded. I mean by
that, that I am not convinced that those
banks who originated the subprime
mortgages and packaged them into
securitised products had done their
own due diligence on some of these
subprime assets.
“Regulators had not sufficiently
concentrated on the new financial
model that had been developing. The
role of the credit rating agencies was
created because of the little attention
paid to the transformation of the
The conference enabled the Eurofi business model of the financial
think tank to present its proposals services industry.”
to Ecofin, the EU’s Economic and Here the veteran banker rather neatly
Financial Affairs Council. summed up one of the main themes at
Despite the inauspicious start in Eurofi - that the system had changed Eurofi proposals
which all attendees were made to re- and none of the regulators noticedm,
register for the event at the outset, the including the dangerous leverage of ÝÛ A specific role for the supervisor
well-chosen line-up of speakers was a securitised products. from the home European country.
who’s who of European regulators and “The was a reverse pyramid where
members of the financial services sector, regulators were not involved in the ÝÛ The mission entrusted to the
including the co-president of Eurofi, profound change, and then everybody European supervisor committees
Jacques de Larosiere, and the governor took advantage of the dispersion of (CEBS and CEIOPS), to resolve
of the European Central Bank, Jean risk,” de Larosiere added. possible differences between
Claude Trichet. De Larosiere did not spare the supervisors and check that the
Brits were surprisingly thin on institutional investor side either, conditions for fair competition.
the ground, though the event was pointing out that this sector did not
well-attended by throngs of elegant carry out due diligence. Among the ÝÛ The creation of a new tool for the
Frenchmen and resolute Germans. The proposals discussed were those that global steering of the ‘Initiative
fact that Eurofi, with its theme of EU suggested regulators keep tabs for the development of microcredit
regulation, occurred as the financial on agencies. in Europe in support of growth and
system’s most fundamental flaws were S&P’s David Bell said: “Regulations employment’.
being exposed by the financial crisis, which allow regulators to directly
made it all the more relevant. Few interact with specific ratings is bad. If ÝÛ Support for the European
concrete conclusions were drawn, but a regulators get called up about rating Investment Bank’s decision to set
clearing of the air between the industry agencies and get asked to interfere in the up a facility with EUR20 million
and regulators was nevertheless useful. process of application of criteria which for the European Investment Fund
On one panel - ‘Restoring investors’ will make the ratings less independent. to support half of operations
confidence’ - chaired by de Larosiere, It could lead to regulators abusing to finance the creation of a
the discussion centred on improving power.” Q microfinance institution.
market transparency, the fallacy ÝÛ Encourage banks’ involvement in
of relying on rating agencies and this process for cooperation with
improving originators behaviour. microfinance institutions.
When asked for his input, de Larosiere

Custody ISJ | Investor Services Journal

Mines to markets
South African custody is a fascinating representation of the country’s
wider economic opportunism, writes Ben Roberts

South Africa’s economic position

is akin to the wide-ranging view of
the continent obtained at the top of
Kilimanjaro. A burgeoning internal
market is married with investment
opportunism into its neighbouring
states similarly rich in commodities.
Asset managers controlling pension
funds are diversifying the new 20%
foreign allocation of its assets and the
custody market has had to keep step.
But the changes that have allowed this
growing fluidity from South Africa
over its borders are underpinned by a
vital constant. “A key is relationships
and local knowledge,” says Mark Kerns,
managing director at Standard Bank.
“Standard Bank has many offices across
the continent, and investors outside
Africa will come to us for services if
they want to invest. There will be more
consolidation but in the mid term there
will be space for those with particular
The country is gradually adding
more exotic instruments into its
financial rostrum, such as ETFs,
represented on the Johannesburg Stock
Exchange. For decades the country
has provided much of the world’s
platinum and a steady supply of gold,
copper and zinc, which has seen a boom
period for much of the last 18 months
as Western and Far East institutions
look to move into alternative asset
classes. But the commodity slump this
summer emphasised the importance
of a non-correlated portfolio. The
extension by the treasury and the
Financial Services Board to increase the
foreign allocation of a pension fund
to 20% is further impetus to widen its
palate. High commodity prices will lift

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As the leading regional custody provider in SubSaharan Africa, we
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Custody ISJ | Investor Services Journal

a stock exchange significantly overall, spend at shops.”

but this can swing both ways. Charles There has also been increased
Cohen, vice president, client executive investment in an initiative called Broad
UKMEA at State Street. “Diversification Based Black Economic Empowerment,
into assets such as venture capital and a government scheme that attempts to
hedge funds has been encouraged distribute wealth more equally to black
from the Financial Services Board.” people in which firms are measured for
State Street provides global custody, their contribution using seven ‘pillars’.
investment accounting, performance “The limit to the amount of foreign
measurement, securities lending and asset allocation is a historical fact of
transition management services for how thing work,” says Charles Cohen,
the international assets of a range of and adds that pension funds usually
institutional investors in the region. The take advantage of its foreign allocation.
majority of this business stems from the “Having talked to a lot of our clients
10 year-old Nedbank Alliance, although there seems to be a lack of transparency
it also works with a number of domestic over execution costs, which raises
custodians. questions over scheme governance,” he
Custody service is Richard Middleton StanLib manages says. “We are working on transaction
a South African growth fund, and cost analysis and discussing this with
the building block his investments give some indication clients – there is a lot of interest in
of any sophisticated of the new asset areas emerging in this service. We are in the process of
the market away from mainstream demonstrating that these services work
product that you commodities that will impact on fund equally well for local assets, as well as
custody. Infrastructure is booming, he international – this greatly increases
want to put on top says, principally in preparation for the State Street’s opportunities in the
of that, whether it’s football World Cup in 2010. The hedge region, which are currently limited by
fund industry is still small, according the 20% foreign investment limit. We
OTC derivatives or to Bennie Van Der Westhuizen at hope that these services will also raise
ABSA Capital, although the FSB is awareness of governance issues and
anything else encouraging pension funds to invest stimulate local competition,” he says.
in it. Middleton’s growth fund invests State Street works with clients as
in South African companies that have a retrospective to see to what extent
Bennie Van Der a higher-than-sector-average growth their managers are trading outside
forecast over two years and uses the daily trading ranges. The most
Westhuizen, State Street indirectly for settlement. important thing, Cohen says, is to help
ABSA Capital “We’ve got secondary listings in Anglo schemes improve their governance for
American, Richmont, that we invest in both international and domestically
as well but through the Johannesburg invested assets. If a portfolio has 100%
Stock Exchange,” he explains. “They’re turnover – which is not uncommon –
all domiciled [in South Africa] and a then trustees and investment committee
lot of them are expanding into other members need to be aware of these
economies.” He gives the example of significant implicit costs, monitor them
Murray and Roberts, a construction and manage them.
company that now has interest in With 80% asset allocation domestic,
Canada, Australia, and the Middle East. the pool of international custodians in
“On the back of the commodities South Africa is small. Amid heavy recent
boom is you have a mine and bank consolidation globally, the country
infrastructure around it, this builds up leaves room for the niche provider, says
a community, so post-infrastructure Standard Bank’s Kerns. “It’s horses for
because the guys in the local community courses in a sense,” he says. “Custody
would be building the infrastructure, must be scaleable. “Investors outside
they would be paid and disposable Africa will come to us for services if they
income would go up, with money to want to invest in the continent. There

Custody ISJ | Investor Services Journal

will be more consolidation but in the new demands, according to Van Der The custodial view is
mid term there will be space for those Westhuizen. He says that have used
with particular knowledge.” electronic platforms of communication that there is interest
Success in establishing clients in for the last 15 years, even when most of
the country can lead to unlocking the market operated using paper and in lending, but no
business in the rest of the continent, phone lines. This allowed ABSA to be
and custodians and fund managers alike first to market with changes attracting set system
echo Kerns’s emphasis on relationships. a lot of domestic clients in the process.
For example, Investec, a client of “The reporting was a big part of it. In
State Street, offers pan-African and south Africa market in terms of asset
MENA funds. This presents numerous managers and not necessarily SWIFT in early development of a sovereign
challenges however – Cohen gives the clients, so we built a capability to wealth fund, partly due to its enormous
example of settling in highly specialised report in any form they require – either commodities revenue – and Namibia
markets that can also be highly straight into the back office system for will result. Despite the greater global
inefficient, such as Nigeria or Ivory them to do the varied conciliations.” connections through global custodians
Coast. Until recently the firm used Securities and the increased foreign investment
Whether foreign allocation or and Trading Technology or STT for this, that might make South Africa seem
domestic, Van Der Westhuizen says but changing markets have caused it to to be ‘Westernised’, the investment
a sea-change is also occurring with look for a new vendor. “We looked at industry is certain it remains a product
the decision making of a portfolio various options in terms of technology of its continent. “We are still an African
of a pension fund. In the past, he [given our] international focus, with country although it is both a third world
explains, a fund would be handed over the influence of our affiliate company and first world economy,” says StanLib’s
to the manager, and they would have – Barclay’s Capital - and our focus on Middleton. “I think a lot of African
complete control. However, after a looking at what hedge funds and prime countries still look to us as an African
number of incidences in the last few brokers and these more sophisticated country and so, I would guess give
years in which trustees lost money investors look at.” ABSA has recently South African companies the benefit of
from their pension contribution, the shook hands with technology platform the doubt in terms of coming into their
trustees are increasing their education to Megara, from Vermeg. “It’s cutting market.” Q
in the investment business and taking edge technology, open architecture
a more active role. He says this has led and it provides us with even more
to increased consolidation to obtain flexibility,” says Van Der Westhuizen.
all services – and all relevant updates – “On the trustee side we’ve made a
from one custodian. “With the trustees similar decision and we’re about 80%
we’ve seen consolidation of the vanilla complete implementation of Invest One
custody product to one custodian. the Sungard product. That will give us
Any information the trustees would further abilities to diversify to other
require in terms of performance of products.” What are the differences
asset manager, growth per manager, is for the custodian in corresponding
obtainable from one source.” He adds, with pension fund trustees compared
however, that this is not always the case with asset managers? “We deal with
– the trustees might still want securities the pension fund directly more on a
lending operated from a different place. monthly or quarterly basis so they can
On the subject of lending, the look at the funds. The relationship with
custodial view is that there is interest the asset manager will be daily.”
in lending, but no set system. Lending Van Der Westhuizen adds that the
is mainly still completed over the custodial services “is the building
phone, which has led to problems of block of any sophisticated product
delivered stock and borroer exposure. that you want to put on top of that;
Collateral requirements are often higher, whether it’s OTC derives or anything
occasionally as high as 110% collateral else”. As South Africa explores new
rather than 102%. assets and trading strategies, some
ABSA Capital is undergoing a believe it is inevitable greater business
change of technology to move with with Botswana - currently the former

Panel: CEE Custody ISJ | Investor Services Journal

Panel: CEE custody

Ms. Renata Mudrova is a PhD Lilla Juranyi has been global head Nikolay Egorov is a graduate Ulf Noren is is head of Sub-Custody
graduate from the University of of custody at ING Wholesale Banking of the Moscow Engineering and Client Relations at SEB, Custody
Economics in Prague in the field Securities Services for two years. She Physical Institute. Since 1992 he Services
of international trade. She spent is also a member of the Settlement has held various roles at MICEX. He
several years in the United States Committee of the Budapest Stock was appointed NDC director on 14
and China working and studying. Exchange and a member of the December, 2004. On October 14,
Since 2006 she has been working SMPG in Ukraine from her regional 2005 became senior vice-president
at CSOB in Prague as a relationship position. and is a member of the executive
manager in the custody department. board at MICEX.

1. Will there still be room for a niche custody provider in the Europe consolidation of custody business mainly happens when
region that can withstand competition of bigger rivals? two financial institutions merge and instead of two agents the new
giant wants to use only one. In such cases we can see assets moving
Mudrova: Even if the initial enormous enthusiasm has partially eased, from one provider to the other. Real consolidation of the business
the Central and Eastern European securities market has been still when one bank steps away from the custody arena in CEE is rare.
attracting great interest from the side of Western investors over the Competition is increasing more and more, and surprisingly there are
few last years. The background for this development can be seen in still newcomers. The market is ´over-banked´ as well in the securities
the mixed effect of EU enlargement, intensive privatisation process business where there are too many newcomers. In a few countries,
and economic liberalisation in CEE that have attracted the interest including some matured markets in Central Europe, some banks still
of international investors, and of course, where investors go, so will decided to launch custody as their new service.
global custody providers follow. For large international banks, a Egorov: The securities accounting system in the Russian
presence in Central and Eastern Europe became a ‘must’. Suddenly, Federation includes considerable enough number of participants.
the original local custody providers in CEE had to face international Among the largest custodial structures are not only the Russian
competition. Currently there are four big players on the Czech market leading banks, for example, Sberbank (Savings Bank of the Russian
– CSOB, Citibank, Unicredit and ING Bank. In my opinion, there is Federation) and Gazprombank, but also subsidiary companies of
hardly any large niche for another global custody tiger in the Czech global custodians – ING, Unicredit and others.
Republic, unless some global custody provider, who is currently a Russia is a rather volumetric market in terms of internal liquidity;
client of one of the big four players, became independent. therefore there is the ground to believe that local custodians,
Juranyi: I absolutely believe that there is room for niche players. traditionally possessing the branched out regional network and the
Of course it can also be a matter of interpretation who is identified big client base, will keep their positions in the market.
as niche custody provider. Niche players always provide some kind of Among five depositories, which have the FFMS license of the
service differently than the others, they are specialised in one segment settlement depository, only two depositories provide settlement
of the services and add very specific value added services to its clients. services to the Russian stock exchanges and serve as securities
Generally customers get a more individual client focused approach settlement centers. NDC have been initially established as a legal
from such a niche player, and they appreciate central depositary to service the market of the government securities
these services. traded on the MICEX - largest exchange in Russia, the CIS and the
Consolidation is an interesting point. It is true that the financial Eastern and Central Europe.
market goes into the direction of consolidation but different business Presently NDC operates 99 percent of transactions effected on
lines might follow merger of the banks with different speed or do corporate debt and munies market as well as more than 90% of on-
not follow at all. Of course the fight to take or keep the business exchange trades in corporate stocks. Thus, The National Depository
is fierce, and the clients will obviously benefit from it, through Center can be considered as the CSD de- facto.
better pricing and improved service levels. In Central & Eastern Thus, we believe that NDC can take the niche of custody provider in
the region as well.

Don’t hope. Know

Seize your opportunity

Clients need a knowledgeable partner to help Our clients will benefit from the increased focus of Wholesale Banking
simplify a complex environment. ING Wholesale Securities Services on Central and Eastern Europe and a wider product offering.
Banking Securities Services understands that. We This will further help expand our leading position in the region as recently
listen to our clients’ needs and act as their eyes shown by several prestigious Global Custodian Awards for Excellence.
and ears in nine local markets across Central and ING is your partner for Local Custody in Bulgaria, Czech Republic, Hungary,
Eastern Europe and Belgium. Creating success Poland, Romania, Russia, Slovak Republic, Ukraine and Belgium.
through partnership, ING has built a reputation
as a pre-eminent provider of securities services For further information please contact our Global Head of Custody Services,
across Central and Eastern Europe since 1994. Lilla Juranyi at +31 20 797 9435 or by e-mail: Lilla.Juranyi@mail.ing.nl

ING Wholesale Banking is a marketing name of ING Bank N.V. ING Bank N.V. is registered with the Netherlands Authority for the Financial Markets and the Dutch Central Bank. Copyright ING Wholesale Banking (2008).
Panel: CEE Custody ISJ | Investor Services Journal

Noren: We will continue to build a presence in the Baltic markets of those ones accepted internationally. Recently NDC and Swift have
based on our strong presence there and in the closely-tied Nordic announced the joint initiative for the unification of the connectivity
markets. We are growing well in Ukraine and have just started up in options or access to the market infrastructure.
Russia. The trend is to appoint regional providers but it remains an Noren: There is a wider technology offering in the CEE. As our
unchallenged fact that not everyone is consistently good in each of CEE world spans ‘only’ five markets our opinion is based on that. If
the CEE markets. As we carefully build our Custody offering in the we start looking at the trading environment, I would say that there
CEE according to a model that is consistent with the offering in the are only small differences in how technology is used here compared
Nordics, we will be perceived favourably also in the CEE markets. We to in Western European markets. Our five markets are in different
envisage that single market providers or smaller regional providers evolutional stages and where we see a more or less fully assimilated
will continue to lose ground. stage in the Baltics, Russia is developing very quickly and Ukraine
suffers from the fact the market is so fragmented, complicated and
2. How does the technology used in the local banks compare nationally protected that it is reflecting also in the technology field.
with companies from Western Europe and the US? Will we see However, the relative size of the markets limits the extension to
similar offerings in the next few years? which technology investments can be made and to us it makes sense
to leverage a lot in this field with the development we conduct in
Medrova: To be successful means keeping up with the state-of-the- our larger home markets. Custody is a technology driven business in
art technology. We have to keep in mind, that many CEE countries general and requires a comparably large portion of IT-spending.
made a great technology leap during the transition period, buying
new technologies and investing heavily into IT. There have been 3. How closely is the growth of securities lending market in
large amounts of funds invested into innovations to get even closer these countries tied to the growth of the custody market – for
to anything you would find in Western Europe or the US. Generally example, if custodians offer lending services?
said, the technologies in CEE countries are currently at the level
comparable with Western Europe or the US. Medrova: Borrowing and lending shares on the capital market has
Juranyi: I think that there is no general rule or standard reply. become a ‘hot’ issue in the Czech Republic. We have noticed the
Probably the difference is that the banks with foreign ownership increased interest in this service from foreign investors. One of the
have their own custody system that is run in other countries, so it is reasons might be the growing interest rates and as a consequence the
an easier roll-out when you have to update it according to the local increase in profitability of such transactions. The settlement house
requirements. However, in Central & Eastern Europe we talk about UNIVYC is the main organiser of the share lending and borrowing
a region, but the countries have fragmented markets with different system in the Czech Republic, arranging not only the loaning of
legal backgrounds, different market infrastructure and sometimes shares but managing and operating the whole settlement system.
restrictions. Implementing the same system in several countries in the However the sticking point is the reluctance of lenders to lend
region is a challenge when the specifications, reporting requirements securities. Investors should always have in mind that the lending/
should be adjusted to the local requirements. borrowing of shares legally means a change in ownership in the
For local banks, especially if they offer custody services in one Czech Republic; that is why the collateral to the value of 110% of the
country, they generally buy a software package from a local provider. borrowed shares is required in the Czech market.
It might have an advantage that the local vendor knows the market Juranyi: Securities lending is an evergreen topic, but there is room
very well, follows all the regulatory changes easily and sometimes they to develop. It is a service that everybody is looking for and everybody
can be more flexible with the change requirements. wants to borrow, but the lending side is quite poor. In some countries
If a custodian wants to follow the rapidly changing market and want it is even not possible at all, but it will come. The problem is in
to be innovative to offer very competitive and high level service to its most cases the liquidity of the stocks and quite often the not very
clients, then they have to make heavy investments and be prepared supportive regulatory background. The transfer of ownership is in
to continue into the future. You can breathe a bit after a successful most cases clear, but it is quite difficult to build a successful lending
system development and look what the next developments are. A market if the ownership of the lent securities is also transferred but
state-of-the-art system is evitable a must otherwise your operations the lender would like to participate in a corporate action but it is not
will suffer with daily problems and that can be a big risk to the possible because of the lending. What can be done in such situations?
custodian bank and to its clients as well. Stocks should be turned back and replaced. But monitoring of
Pure local banks very rarely offer custody services to foreign global corporate actions when the stocks are not in your portfolio and to act
clients, so the client base and the type or complexity of the services is in your own client’s interest can be risky. In some countries securities
different. lending is restricted for some type of investors, eg, pension funds.
Egorov: Taking the technologies and risk management into Participating in securities lending also requires continuous system
account, I think that the Russian financial market can be considered update and it can be expensive. Also the daily operation, monitoring
as one of the most developed in the world. Talking about ourselves your collateral requires special attention and very flexible system.
we are very proud that in July 2008 Thomas Murray has upgraded the Egorov: The development of security lending services in Russia
NDC rating at AA-, which means very low risk and corresponds to the has been to some extent limited by the legislative framework. Though
level of, say, leading European and American CSDs. Also Accenture the repo deals have been broadly used until September 2008 and
has assessed the NDC technological platform a couple of years ago namely repo become the segment of the Russian financial market
and concluded the NDC service model matched the requirements that first experienced the consequences of the global liquidity crisis.
for the CSDs dominating in the global context. To reduce fees, NDC Therefore nowadays we should re-think the risk management for
does its best to implement domestic market standards on the basis either lending or repos, at least toughen connections with the market

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Panel: CEE custody ISJ | Investor Services Journal

participants to understand their critical points. The bi-lateral system compliance control, execution variety demands and reporting needs
of control over risks is not enough to guarantee the country’s market are on the rise. We envisage that we will see a steeper demand curve
safety; the organized market has to suggest extra opportunities. going forward as investor quickly adopt to the more established peers
Noren: In none of the market securities lending is practised at all. in the ‘old’ markets.
It is allowed in the Baltic markets but there is simply no need for it in
order to grease the machinery in terms of facilitating settlement and 5. Which of the CEE countries has developed to become the most
the opportunity lending part will possible get some momentum at the similar to Western European countries?
time when volumes become better,
Mudrova: Many CEE countries – Czech Republic, Slovak Republic,
4. How has the demand from clients in the CEE countries for Poland and Hungary – have been already approaching the economic
custodial services changed in the last few years? level of Western Europe, including the living standard, GDP growth
etc. From an investor’s point of view, there are CEE countries that
Mudrova: There are two points of view to look at this question – tends to be very lucrative – like the Czech Republic – thanks to their
foreign and domestic clients. Originally the foreign clients demanded currency appreciation, securities prices etc. The market infrastructure
perfect and smooth settlement and corporate actions at first stage. largely varies across the CEE countries. The clear goal is to harmonise
Currently these services are considered as standard and obvious and the local rules and market practises with prevailing standards in
foreign clients are more demanding the above-standard services with Western Europe. The lack of nominee concepts, omnibus accounts
added value. If you are not able to keep up with them, you are out and never-ending waiting for CSD are the real Achilles’ heel of
of play. many of them. Progress has been made, but very slowly. CSD has
Talking about the domestic clients, a strong shift from traditional been created for example in Hungary, Poland, Serbia or Slovak
ways of keeping assets (eg, current accounts or terms accounts) Republic, but the decision regarding its establishment is still pending
towards other possibilities of preserving free financial resources has for instance in the Czech Republic. From this perspective, Poland
been apparent in the Czech Republic for the last few years. Various and Hungary are leading the way – both have established efficient
products of financial markets – stocks, obligations, certificates, CSDs (Keler in Hungary, KDPW in Poland) and meet many of the
standard derivatives, various forms of collective investments – started developed market standards. On the other hand, while Hungary has
playing more and more important role, and as a consequence the already established omnibus account, Slovakia has already approved
demand for custody services has significantly increased. the necessary legislation, you don’t find omnibus account structure in
Juranyi: Clients’ demands are higher and higher for the custody Poland, and the Czech Republic is still waiting for the decision of the
services. It is true for the service elements, absolutely true for the regulator
service level, for the speed of settlement, shortened cut-off times Juranyi: The Czech Republic, Hungary, Poland, Slovak Republic
and more professional and sophisticated reporting. Clients are joined the EU from the Eastern block first. They had a relatively well-
demanding an ever increasing STP rate of the custodian. It is not just developed market in the 1980s, early 1990s. The background is that
because of the possible lower fees, but also because of minimising the these countries had to launch or reopen the stock exchanges from the
operational risk of manual processing and the speed of processing scratch, and they could make good analysis of the Western European
especially when significant increase of the transaction volume is markets. That is also one of the reasons why in these countries the
expected. On the other hand the higher expectations are rarely market was dematerialised immediately or after a short period of
rewarded by higher fees. Quite often additional services are required physical market, the stocks were dematerialised. These countries
for the same price, but the request for regular fee revision is not a are in the special situation that they are considered occasionally as
surprise at all. mature markets and sometimes as emerging markets.
Egorov: The demand for custodial services can be described Egorov: The Russian NDC corresponds to the largest CSDs
qualitatively and quantitatively. The value of securities held in NDC in Europe and America on a level of risks. It is the independent
accounts for the period of Aug. 2004 to Aug. 2008 rose up to 285% assessment. The Russian economy is strong enough to see out the
and reached RUR4.3 trillion. current global financial crisis. In view of the federal gold and currency
We have developed many new services, for example, speedy settlement reserves Russia belongs to a few top world economies. In this context,
schemes between NDC settlement depository and the largest it can be compared with the European Union as well.
custodians, that allow to accelerate considerably settlements on blue- Noren: In our opinion, and based on the markets where we have
chips stocks, including settlements between the Russian and foreign a presence, there are three markets that in all aspects but market
investors. cap and trading volumes are at the same, or better, level as Western
Gross settlement, intended for getting instant liquidity, has been European countries. If ranking them internally I would say Estonia
implemented by MICEX Group in March 2008, beforehand, not (in terms of adopting modern market assimilation), Lithuania (in
waiting global crisis. In present conditions, you see, rather actual terms of the blend of quality issuers) followed by Latvia which is very
service? We follow the market environment, wishes of participants, low volume on cash equities and a stubborn unwillingness from the
world tendencies. CSD to realise that basis point fees must come down big way in order
Noren: Not that much in style, actually. The approach is to not act as a negative factor preventing growth.
getting more global and more sophisticated but for the bulk of the
investments, style is still conservative. Even if allowed, we do not see 6. There is no CSD in many of the countries. How significant will
a lot investments allocated to foreign exchange alternatives, private this be for their development within custody services?
equity, hedge funds etc. When investments are outside the traditional
investment horizon, they virtually go into funds. However, Mudrova: Critical, as creating CSDs is the major step towards

Panel: CEE custody ISJ | Investor Services Journal

attracting liquidity, and therefore addressing this issue must be a the equities, the other the other types of securities. The most important
priority for all of the CEE countries that have not been done that yet. prerequisite would be to have standardised, transparent settlement
Another question is what to buy. In this respect it is important to systems, easy communication with their members, clear status of the
mention the trend of consolidation of stock exchanges. ownership transfer, efficient transparent registration.
As mentioned before, Hungary, Poland, Slovak Republic or Serbia Egorov: The existence of CSD is one of the key elements
have already established their own CSDs. The Czech Republic, on determining the limit policy for international investment institutions
the other hand, is still in the process of ‘getting there’, even if the cause it significantly increases the transparency of market
establishment of CSD in the Czech Republic has been pending for a infrastructure in general. This guarantees the protection of ownership
long time, and is required not only by foreign investors. Despite the rights, decreases the risks of breach of investors’ rights in the course
fact that the Central Securities Register (SCP), UNIVYC – the clearing of corporate conflicts, solves the problem of “double registry”
and settlement house - and SDK actually perform the function of and provides for the formation of a unified source of corporate
standard CSD, creation of one single Central Securities Depository information. The existence of a unified central depository will help
would definitely make the Czech market more attractive. increase and improve settlements on transactions with securities. The
Juranyi: This is really a problem for the CEE markets. A lack of lack of the central depository and clearing is a factor decelerating the
general standardisation, efficient settlement and guarantees are issues development of securities market.
that need to be resolved in these markets. In Russia typically the two Noren: It will be an absolute necessity in order to keep with the
clearing houses compete with each other for some years now and the pace of growth. In three of our CEE markets there are CSDs that
establishment of a central clearing house does not seem realistic in stabilise the post trade environment and contributes to a great deal
the coming years. In my view there could also be a compromise if two of predictability and efficiency. The other two have ground to cover
clearing houses operate in a market if there were a clear spit of their and it is a must to come to terms with the uncertainties even if both
functionalities: one could do the clearing for one type of securities eg, markets in fact have de facto CSDs. Q

Technology ISJ | Investor Services Journal

How to cater for the data

Technology vendors urging the necessity of good data in
precarious times have been vindicated, writes Anthony Harrington.

With markets in such a turbulent state,

holistic risk management has become
priority. Every organisation, buy or
sell side, is now desperate to get a fully
integrated view of its exposure in every
possible direction to every counterparty,
geography and market sector.
It has meant that data services has
ceased to be consigned to obscure
specialists the front office will hardly
ever see. The fear of vulnerable
businesses, combined with the
positive pressures of brokers and other
organisations look to develop new
trading strategies based on a deeper
understanding of data its services, are
thrusting the subject to the fore.
Stuart Plane, co-founder and director
of the enterprise data management
systems provider, Cadis Software, says
in today’s climate there is a growing
realisation that the issues involved could
be crippling to the business.
“What we have seen over the years
is that a lot of data validation, and
the nuances within the data, are being
controlled by the IT folks, who do not
have a deep understanding of either
the data or the way it is being used by
the front office,” he says. The solution
is to enable the people who actually
use the data to get closer to the data
management function in all its guises.
This, he says, is where Cadis Software
comes in. “The delivery and software
driven manipulation of the data is very
much an IT function but with our help
the users can really get involved,” he says.
In this way, a fund manager looking
at some securities data can see at a
glance that something is wrong with that
data – if something failed overnight, or
if there is an invalid rule hierarchy. An
example of the latter could be where the
rule should be to take the price from
XYZ source before ABC source, but the

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Technology ISJ | Investor Services Journal

system is doing the reverse. “That kind that the entire organisation can run of understanding of the data attributes of
of logic will be embedded in code. We “one version of the truth”. derivatives, and this is build into the data
will help them to analyse the problem “There are hundreds of attributes model.”
and to make sure that it doesn’t happen that data can have, all of which can be Edelstein foresees a steep increase in
again,” says Plane. vital,” he says. “If you set up the data regulatory activity and in the regulatory
On this level, it is all about correctly, then you can pull out all kinds framework, and that organisations will
troubleshooting. More fundamentally, of views of that data, so you can see look for a deep understanding of their
it is about establishing the right what your counterparty risk is. You can securities. The emphasis will be on
foundation data to feed the front office analyse the collateral you are holding on transparency and visibility. “In the past,
systems. thousands of transactions. Moreover, all not being able to see into the securitised
According to Plane, the biggest of this can feed into downstream risk package, for example, has been of
source of demand for Cadis right now applications and accounting systems to advantage to many. But it was always
is organisations attempting to break increase the transparency of information all going to collapse at some point, and
out of the data silos they have created this point has now been reached,” he
for their portfolio accounting systems, comments.
and their trading and risk management “You can’t John Coulter, a director at the data
infrastructures. “The whole focus now analysis systems house Vhayu, believes
is on holistic risk management and understand the risk every institution will need to re-examine
that is why they are investing in this its data now in the light of what will
space. At the same time, the whole data behind a derivatives undoubtedly be a new and tougher
integration space is fraught with risk regulatory climate. “The SEC is certain
from an execution perspective. We are transaction if you to be given a lot more power. Hedge
talking about very high data volumes funds will be undergoing a complete
and projects in this area have a poor cannot identify all overhaul and we are going to see a lot
record, with projects taking years to more regulation at the Federal level,”
implement and having a very high the counterparties he says.
failure rate,” he says. Vhayu’s main product is Velocity,
Data services and data transparency involved.” the data analysis software that takes in
are bedrock components of the Markets real-time market feeds and trades and
in Financial Instruments Directive Neil Edelstein, looks for underlying patterns. It can take
(MiFID). The aim of opening up in feeds either directly from markets or
European borders and create a truly GoldenSource via aggregators such as Reuters, and it
pan-European financial services sector does real time analysis on the data. “We
creates issues around the way data throughout the organisation.” deploy proprietary algorithms within
is gathered, maintained, and shared. GoldenSource targets both the buy- our search engines to scan the markets
These issues have ultimately to do with side and sell-side, because institutions for patterns. These patterns can be
data transparency and accountability. are looking for a twofold benefit. On the matched against tick by tick data going
However, with major banks failing to the one hand, they want to be able to match back years, which gives a good level of
left and to the right, MiFID has rather and compare feeds from various sources predictive confidence once a pattern is
dropped off the agenda. The issue of to validate data. On the other hand, they identified,” Coulter says.
risk visibility and risk management is far want to be able to assign a whole raft Velocity is primarily used by tier
more urgent. of attributes to data to cope with the one sell-side broking houses. “They
Neil Edelstein, vice president, product vast increase in transaction complexity. will create algorithms for executions
solutions at GoldenSource, says his As Edelstein observes, you can’t using their own secret formulae and will
company has been advising clients for understand the risk behind a derivatives package the system with their pre-trade
years, long before the current “toxic transaction, for example, if you cannot analytics for their buy-side customers,”
debt” problem, that not understanding identify all the counterparties involved. he says. The dealers can then do the
their core data was at the root of many “What is very important in derivatives analysis before they commit to the trade,
of their difficulties. GoldenSource is the linkage between the derivative and can use post trade analytics to see
provides a data warehouse which creates and the underlying instruments that how the reality has matched with the
both a data repository and a mechanism determine it. To cope with this we have predicted outcomes.
for scrubbing and validating the data, so developed a solution that offers a deep “We have a number of large

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Technology ISJ | Investor Services Journal

hedge funds using our systems for However, given the constant increases in
“quant” analysis,” he says. Quant the volume of data and the huge storage
analysis, or quantitative analysis, uses demands, it must ultimately make sense
mathematicians and skilled statisticians to spread the cost across a large client
to analyse trends and patterns in gigantic base instead of having each organisation
data sets. The mathematicians involved bear the full cost of its own storage and
in this analysis are known in the trade processing requirements, he suggests.
as “quants” and their activity is called Kevin Covington, head of strategy
quant research. and propositions at BT Global Financial
Quant research looks for alpha Services, says one features of BT’s data
generation by mining vast amounts services is that it records everything,
of historical information to find so that where necessary people can
something that is going to give the reconstruct all the components of any
dealer an advantage in the market for transaction event. “The whole dialogue
a small period of time. However, to be is stored in an encrypted form. So that
successful, quant research needs massive if there is a later dispute, or someone
amounts of data. That poses particular repudiates an event, you can retrieve and
“Complete challenges both in terms of storage and recall the messages exchanged to effect
data handling at the hardware level. that transaction”, he comments.
traceability is not However, Coulter points out that Covington points out that with
the daily data set for global equities data transaction volumes having gone
just a nice thing to is itself equal to around a terabyte of through the roof, and with trades now
data. “It is very difficult to take in, store being “fragmented” across multiple
have, it is essential, and work with data sets of that scale. sources in complex instruments, it
Moreover, the dealing floor in many is getting increasingly difficult to
and regulation now organisations is charged internally for reconstruct the complexity of what
data, with an annual fee perhaps totally has gone on. This difficulty, he says,
demands it around USD20,000 per terabyte. If you is being compounded by the fact that
add on bonds, indices and derivatives dealing desks want more and more
Kevin Covington, BT and multiply them by the number of data sources and their urgency to
trading days in a year there are millions get visibility on markets and market
of dollars in storage costs alone.” conditions makes them tolerate less
Organisations want applications than optimal installations and less than
providers to compress the data in real 100% reliability. “If the front desk wants
time. Velocity, he says, can compress the a new feed in they want it in instantly
data by a factor of four that provides and the pressure is on the systems people
very significant cost savings. Vhayu’s to deliver that as fast as possible, and
application for Quant research runson the trade off can be in robustness. Our
an eight core Intel processor with 64Gb argument is that complete traceability
of RAM and Coulter is looking forward is not just a nice to have, it is essential
to the 16 core processors Intel expects and regulation now demands it,” he says.
to launch in 2009. The future for this “You cannot and should not give up
kind of analysis, he feels, has to lie resilience to secure faster trading access,”
with hosted systems, where a specialist he concludes.
provider offers institutions a massive BT operates a shared infrastructure
storage network populated with, say, model with a very high degree of
global equities and bonds data, and robustness and non repudiation.
with powerful tools for analysing the “Organisations such as ours have a vital
data. The barrier to entry to this kind role to play in the participation and
of service will be formidable though, he generation of data traffic,” he says. As the
says. Firms regard their analysis as their industry deals with greater and greater
capital and what they are doing with degrees of complexity, it needs to retain
data could be a billion dollar proposition its focus on the ability to reconstruct
for them. trades and events if it is asked of them. Q

Analyse This ISJ | Investor Services Journal

Analyse This:
Securities Lending Technology
Has securities lending truly broken out of the back office?
By Rob Sammons, lead developer, analyst, Anetics

that there will ever be one hub with

access to every opportunity. Instead, the
securities lending desk must aggregate
and leverage the various hub oppor-
tunities with its own bilateral relation-
ships. This is where telephone, e-mail,
Bloomberg messages, chat, and spread-
sheet attachments aim to fill the gap.
You will have a utility that you and
your team use to engage in serial, bilat-
eral communication with your hierarchy
of trading partners, as you seek to do
deals. Let’s assume the favoured commu-
nication medium is e-mail. Your e-mails
will be generated at your direction by
this desk utility, maintaining a database
of what you distribute and to whom.
Your counterpart will most likely
have a similar desk utility. Upon receipt
of your inquiry, it will compile your
transmittal into its database and alert
your trading partner. He or she can then
review the request and respond in min-
utes, if not seconds, directly into your
desk utility. Any deals you agree to do
are accepted and forwarded directly to
your trading system with no further key
entry. A confirming e-mail is automati-
Global securities lending will continue or more, trading partners. Information cally generated.
to grow because it is no longer a practice is the key requisite to these relationships. This is bilateral dealing is as it has
limited to the facilitation of short-selling Although there are trading hubs that been since the dawn of commerce: offer,
and/or dividend arbitrage. It touches aggregate some information - the major counteroffer, acceptance, execution. It is
on almost every aspect of a firm's asset agent lenders publish daily, if not real- just what's happening across securities
management. To be successful there are time, lists of aggregate holdings available lending desks today but with frequent
two key requirements - one internal, the for loan - this is only part of the picture. document copying and pasting, double
other external. The securities lending The industry may have graduated from or triple key-entry of data, and a team
desk sits in the middle. the use of fax as a means to distribute that must remember the state of play on
The internal requirement is easy. You lists, but it remains mired in a patchwork each negotiation. In the future, comput-
must know your position. The external of electronic messages and phone calls. er programs can do that for you, keeping
requirement is a bit more difficult, deal- The order routing and straight- track of all your offers and needs. You
ing agreements with the marketplace. through settlement of trading hubs are just click to propose or accept.
Most firms have dozens, if not a hundred useful. But it is unreasonable to believe On to the future! Q

Analyse This ISJ | Investor Services Journal

Why would you look at risk management in securities lending as an

entirely separate issue? By Tom McEvilly, UK sales director, CheckFree
ORM, now part of Fiserv

When it comes to managing the A penchant for

complexities of risk in the securities
lending market, it is fair to say that there technology also
are some pain points that are unique to
the sector. There are also themes that are demonstrates a
common to other parts of the financial
services industry, such as mergers and drive towards much-
aquisitions, creating a larger, more fluid,
and liberalised market. needed transparency
So it would be fair to say that it is
in everyone’s interest to look at risk
management practices holistically, you agree with this view or not remains
particularly within diversified financial open to debate, but what is apparent
services institutions. This enables one is that the regulators are not opposed
area to learn from another and hopefully to letting the ‘invisible hand’ of the
avoid the pitfalls and unnecessary risks market be more heavy and conspicuous.
encountered by others. Again, here one can learn from other
Operationally invasive, relationship sectors. Rather than consider these
intensive, increasing trading volumes, attempts by the regulators to manage
affinity for telephones and faxes and risk prescriptively as a cost burden,
reluctance for greater automation are all smart players are considering it, handled
issues that plague the securities lending correctly, as a source of competitive
space. They are also hurdles that other advantage.
sectors have faced and successfully dealt Look to where technology can help
with. The need to increase operational with requirements that are common to
efficiency, mitigate risk and improve more than one regulation and continue
internal controls is present in securities to automate where at all possible so
lending operations as they are in front- that an audit trail is demonstrable.
Watch an interview to-back operations in other areas of A penchant for technology also
financial services. demonstrates a drive towards much
with Geoff Harries, If firms take the time to step back and needed transparency.
consider what can easily be automated Increasingly over time the industry
vice president, rather than focusing on what cannot, will come to embrace solutions
opportunities emerge to adapt best which deliver on three operational
products strategy at practices and make incremental dimensions simultaneously: (1)
improvement. By automating and improved efficiency via automation, (2)
CheckFree, at www. standardising processes it gives precious integrated risk management capability,
staff resources the time to look at the and (3) embedded controls which
isj.tv bigger picture and focus on analysing satisfy and array of regulatory and
where the greater concentration of risks compliance mandates. It will simply be
potentially lie. unsatisfactory for any of these three to
The sector is also facing further be neglected or deemphasised. Rather,
regulation as it is sanctioned for being they must be approached collectively to
a key player in short selling. Whether gain maximum benefit. Q

Securities Lending ISJ | Investor Services Journal

Short straw for lenders?

Securities lending in many countries was affected by recent regulation
changes. Here is a summary of the alterations.

Country What is banned? Duration Covered securities Covered persons Disclosure requirements

Australia ‘Naked short selling banned; As yet unlimited All listed stock All market participants, None
covered shorting except in a excepts some market makers
few market making circumstances and warrant market makers

Belgium ‘Naked’ short selling of securities Three months up All voting securities issued Not applicable to market makers, Net short positions at 0.25%
with voting rights attached to 22nd December by financial institutions and liquidity providers or counterparties of one of the covered issuers
issued by financial institutions traded on Euronext Brussels on block trade. Institutions can
only lend to cover pre-existing positions

Canada Short selling of certain financial Until 3rd October 13 TSX-listed companies All market participants None
sector services unless extended that have links to the US

France ‘Naked’ short selling, but financial Until 22nd December Listed equity instruments Market makers, liquidity providers Short positions of 0.25%
institutions may lend to cover unless extended in banks and insurers or counterparties for or more of capital of
existing positions or transactions block trades are exempt. listed issuer
not related to shorting

Germany ‘Naked’ short selling on 11 1st January, though 11 banks, insurers and Lead brokers, market makers, None
financial services firms subject to ongoing other providers designated sponsors exempted

Ireland Short selling of certain Unlimited Governor and company of Market makers exempted Position 0.25% or more of
Irish publicly Bank of Ireland, listed firm must
quoted banks Allied Irish Banks, disclose by 3:30pm
Irish Life and Permanent,
Anglo Irish Bank

Luxembourg ‘Naked’ short selling of shares of Unlimited Shares of credit All participants; intermediaries None
institutions and insurers must verify client sales

Netherlands Naked shorting of stocks and 21st December 2008 Aegon, Binck Bank, Fortis, Market makers in cash and derivatives; Short positions of 0.25%
depository receipts of financial ING, Kas Bank, SNS Reaal, or more of capital of listed issuer
companies Ven Der Moolen,
Van Lanschot

Taiwan Covered short sales for all listed 1st Oct – 14th 150 stocks) will be banned All participants None
stocks; the combined amount of Oct 2008 from short-selling when
short sales and those on margin they trade below the
will be capped at 10% of a listed previous session’s close.
company’s outstanding stock;
borrowed securities must not
exceed 1% of a listed company’s
outstanding stock.

UK Creating or extending 19th January 2009 32 listed banks Non applicable to market makers Daily disclosure (on a T+1 basis)
short positions of all net short positions in such
companies in excess of 0.25%

US Naked short selling Until 17th October – Total number is of Not applicable to registered market Institutional money
could be extended companies protected makers or block positioners. managers report new
now over 900 Institutional money managers short sales to the SEC
report new short sales to the SEC

Securities Lending ISJ | Investor Services Journal

Russian freeze
With struggling markets and increasingly strained relations with the
West, Joe Corcos explores its repo market and assesses the challenges
to developing securities lending

Autumn winds aren’t the only thing “In these times [lack of central
chilling Russia at the moment; its counterparty] is a problem, because
relations with Western Europe and the banks want to get netting and get rid
US remain frosty in the wake of recent of counterparty risk.”
political tensions. Yet there is one area Godfried De Vidts
where Russia does aspire to emulate
the West, in the sophistication of its
free markets and the infrastructure and
protections in place that keep them
functioning. It is the goal of the Russian
financial community, including the Bank
of Russia, to transform Russia into a
financial giant. To this end, the country
is aiming to create an onshore securities
lending industry.
If Moscow is to ever take its place

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Securities Lending ISJ | Investor Services Journal

alongside the financial meccas of New an outright collapse of the market,

York and London – a long way off, some “I think probably combined with mistrust about the
say - then developing a securities lending intentions of the government have
industry is crucial in providing liquidity. we’ve taken quite a resulted in a massive cooling of interest
But solid structures must be put in place from Europeans and Americans who
to support such strategies and put at few steps backwards only months ago were regarding Russia
ease those wishing to make use of them. with interest. This is something that
The biggest obstacle to Russian from the possibility could prove costly in the future should
securities lending is the lack of a Russia ever decide that it wants to
central counterparty making it almost of having an active become a financial hub of any kind.
impossible to ensure the delivery of a On 17th September, trading was
securities loan in time to cover a sale. securities lending suspended on the RTS and Micex indices
This is because in Russia every stock has after dramatic falls in share price. The
a private register with a registrar bank, market in Russia.” Micex lost 25% in just over two days,
and updating the stock register can leaving it more than 55% down on the
become a lengthy process. Measures are David Rule peak it reached three months before.
in place to speed this up, but these things On the Friday of that week, the markets
take time. had to close again twice, this time due to
The lack of a central counterparty in share price rising too rapidly.
turn means that counterparty risk is a Oskenoyt says: “To my mind there
factor. Godfried De Vidts, the chairman were quite a lot reasons to [close the
of the European Repo Council, says: to point to the fact that a sec lending exchanges]. It was a good decision. It
“In these times [lack of a central market is only a few steps away. As De gave time for the monetary authorities
counterparty] is a problem, because Vidts says of the Russian system: “If and the investment society to make up
banks want to get netting and get rid of it works for repo there’s no reason it their minds on certain problems with
counterparty risk.” shouldn’t work for securities lending.” liquidity and clear them up.”
How close-out netting would But the goodwill of the Russian And he goes on to admit that had
be enforced, and by whom, is one authorities towards short selling and the government not poured billions of
of the many issues that the Russian securities lending has become severely Roubles into the markets to stimulate
authorities would have to resolve before anaemic in light of current market liquidity, the situation could have grown
implementing a securities conditions. And ultimately, in Russia, if even worse.
lending scheme. the political will is not present, then any “Of course had the government not
By comparison Russia has a well- progress towards creating new financial injected the funds it would have been
developed repo market. This was strategies will lie dead in the water. a problem. But to my mind the main
implemented in 1996 with federal bonds David Rule, chief executive of problem is how to make these markets
from the Bank of Russia. The repo the International Securities Lending work in the long term. Our monetary
market subsequently thrived for two Association, says: “I think probably authorities have to decide how to replace
years until the Russian financial default we’ve taken quite a few steps backwards a short-term liquidity with a long-term
of 1998, after which an entirely new repo from the possibility of having an active liquidity supply. Then the problem will
mechanism was installed, this one in line securities lending market in Russia.” be solved. And to my mind they will find
with modern practices. Since then the Reputation is another important factor. a way to do this. In any case it’s quite a
Russian repo market has continued After being carefully and painstakingly common problem for all countries.”
to thrive. built up again since 1998, Russia’s Currently Russia’s political
George Oskenoyt, an adviser at the reputation among foreign investors has belligerence, the chaos of its financial
Micex stock exchange, explains: “Repo again plummeted in recent months. markets and its lack of infrastructure
is used in Russia in short periods, from Some of the largest traders in Russian preclude any likelihood of an onshore
overnight to two weeks. It is either a stocks pulled out in swathes in the wake securities lending market materialising
one-day, seven-day or 14-day period. of the country’s conflict with Georgia. anytime soon. But the will is there from
Repo is used in Russia for all the same The recent plunge in the price of oil, the Russia’s financial community. Oskenoyt
purposes it is used for in the West, cornerstone of Russia’s whole economy says: “The central bank and Russian
including the funding of short positions along with gas, has only custodians and clearing houses are
and so forth”. exacerbated matters. interested in building these markets,
The fact that there is a thriving repo The closure of the country’s once legislation has taken place. It is not
market in the country would seem stock exchanges in order to prevent easy to forecast how long this will take.”Q

Securities Lending ISJ | Investor Services Journal

Technology in focus
Mark Fieldhouse of RBC Dexia explains the development of
technology in securities lending and its impact on the marketplace
In recent years technology has intelligence and negotiation.
revolutionised the securities In this environment, service
lending marketplace - driving providers are challenged to
greater trade volumes and deliver an integrated service
boosting market efficiency. offering, which not only
In the past, technology was maximises revenues but manages
focused on trade capture and risk and maintains operational
internal post-trade processes. transparency. This is why beneficial
But it now supports pre-trade owners will need to ensure they
processes such as auctions, are in a strategic partnership with
electronic trading and price a strong, committed provider
benchmarking which have pushed for product development, all
overall transaction volumes ever structured within a robust
higher. risk management framework.
Automation is the key to the The ability to work within this
future in terms of driving down partnership framework will be an
cost, improving the timing of on-going collaborative process and
communications in the settlement key to success.
process and further eliminating Looking ahead we expect to
both errors and redundant manual see continued commoditisation of

Full transparency in the industry is only likely to be achieved

when markets are commoditised
players will need to manage the business
processes. Because of the large volume more effectively as margins decline, the industry in certain markets that will
of transactions and the larger number which is why automation is gaining drive demand for increased efficiencies
of outstanding positions between in importance. with an even greater emphasis placed on
counterparties, operational risks are Looking ahead, the development straight through processing (STP).
a significant part of the securities of electronic trading is likely to have a Full transparency in the industry
finance business. The use of technology major impact on the market. is only likely to be achieved when
solutions that are centralised, global and Growing acceptability of electronic markets are commoditised. This will
standardised mitigates those risks. trading will significantly impact the way not necessarily happen in the short
At an industrywide level, operational securities lending transactions are made, term but there are signs the market
efficiency, Straight Through Processing in term of price transparency and gains is moving forward. As the process for
(STP), continual transaction cost in productivity. ongoing commoditisation continues,
reduction, and new regulatory Currently, electronic trading systems custodians will need to manage and
requirements remain critical drivers are mainly focusing on GC flow business implement solutions through process
in the push for securities lending and auctions. As it becomes easier to enhancement and cost efficiencies. This
improvements. post and access inventory, traders will will fuel growing demand for innovation
Considerable investment in scaleable be able to shift their focus from high- and commitment to future product
and flexible new technologies is a volume, low-margin trades (which can development in the securities lending
continual and necessary process for be handled electronically) to the higher space to enable any new opportunities to
market participants. Ultimately, market value trades that require more market be seized quickly. Q

Securities Lending ISJ | Investor Services Journal

13th Annual European Beneficial

Owners Securities Conference
Catherine Kemp travels to Edinburgh to find a frank discussion on
securities lending industry
The 13th Annual European Beneficial Richard Steel, JP Morgan London, were Rule, explained again the position of
Owner’s Securities Conference was on the panel to give their testimonials. ISLA on short selling: “The impact of
held five days after new regulations, Audience members were encouraged short selling has been overstated,” he
temporarily restricting short selling, to speak out about problems that had said, “stock prices are fundamentally
and naked shorting on financial stocks, arisen and the question of whether these driven by news, not sellers... there had
were rolled out all over the world, and problems were systemic was addressed. clearly been a witch hunt.”
the week after the collapse of Lehmans, The overall impression from all He also said that ISLA had decided to
Merrill Lynch, and HBOS. sides was that the system had worked. put the new GSLMA agreement on hold,
Beneficial owners are the focus of Zimmerhansl said: “A core issue for while they review the way it had worked
the conference, which provides an beneficial owners, is that the story that in the Lehman bankruptcy. Apparently,
opportunity for securities lending these people are telling you in terms under the GSLMA lenders have 5 days
agents, and other service providers to of what they are doing, how they are to sell securities, which resulted I frantic
talk about changes in the industry to doing it, and the security that is inherent trading which was not good for the
their clients. This year, however, the within the product, is sound and proven. market and so there is a suggestion that
relationship was made more pertinent For people in the business of lending it will be revised to a longer period. Q
by the market turmoil. There was a stock, taking collateral, marking it to
tangible sense of the need to reassure market, and in the event of a default
and talk frankly about experiences over realising how much collateral is lost and
the last few weeks. buying those securities back, if you or
One commentator declared: “The your securities lending agents, or your
securities lending model is broken, the service providers have acted within the
hedge fund model is broken, and the time frame, nobody’s lost money.”
investment bank model is broken.” Jane Karczewski said: “In the
The conference was a fascinating Lehman’s scenario there was a lot of
round of debates as to whether the discussion about how we were going to
system had worked, had there been any bring the position out of the market,
significant losses, and fundamentally and everyone involved in that whether Conference summary: key points
whether beneficial owners would broker dealer, custodian, prime broker
continue to lend and what changes at Deutsche Bank would be able to The future is a collateralised world,
needed to be made to the system to put there hand up and say: ‘the bank there are serious question about the
make it work better. reacted very, very quickly’. Most future of unsecured money markets.
Mark Faulkner opened his panel positions were hedged, most people
debate with the words “We want to make did start to liquidate and cash out as While the hedge fund sector is going
sure that this panel is relevant to you the soon as they saw what was happening, through a tough time, it’s here
lenders of securities.” He then asked the and so beneficial owners were very well to stay
lenders in the audience to answer a series protected in that respect.”
of questions about the type of collateral However, there were questions When it all went wrong, the life boats
they accepted, whether they had changed around calculations, administration worked
margins in recent weeks and whether and who is responsible for calculations,
they had liquidated positions and had accounting, manufactured dividends Securities lending is not, and should
losses. None admitted to losses, however. and tax. never be, considered a risk free
Speakers Chris Poikonen, of eSec In a discussion, intended to be a business.
Lending , Jane Karczewski at Deutsche review of the Global Securities Lending
Bank, Roy Zimmerhansl ICAP and Master Agreement (GSMLA) David

Fund Administration ISJ | Investor Services Journal

Channel island update

Geoff Cook, CEO Jersey Finance, explains the firm’s broadening
horizons to Ben Roberts
money laundering checks to Jersey, rules [for investors] to get their
Jersey “which de facto means you can do your
administration in any of the major
heads around.
“For a certain group of clients they
jurisdictions”. He says Jersey Finance don’t need the corporate governance
launched the scheme on the back of due to a battery of advisers that have
consultation with prime brokers and done their own due diligence and
lawyers in London. Though the island supervised by the FSA – it added an
was well respected for its governance extra bit of bureaucracy. We’ve carved
and the “comfort” this can give to some out a regime for a high value business
investors in funds, it would need to with sophisticated investors and our
convince very large institutional investor regulators were keen we make it clear
or proprietary funds, perhaps with high that it is an unregulated product – what
net worth individuals, that it could you get is what’s on the tin.”
register funds and get them as quickly to Cook reports that the most common
market as possible. regulated fund is an expert fund, which
Servicing hedge funds has become can be set up within 72 hours of the
a vital offering to remain competitive. documents being submitted to the
Cook estimates that the Cayman Islands Jersey Finance Services Commission
have 50% of the hedge fund market, (JFSC). “That was our prime fast-track
In February, Jersey Finance launched and says recent research has hinted service for fund promoters launching
its administration service for that Europe is likely to follow the US funds through Jersey, but the regulator
unregulated funds on the island, partly pattern of large institutional investors would go through the fund launch
as an acknowledgement of the growing moving more of their asset portfolios documentation with a fine-tooth comb.”
influence of hedge funds. In the new into hedge and other perceived ‘higher When the market picks up, Cook
scheme, it is the lawyer creating the risk’ srategies to generate returns – says Jersey Finance would be in a strong
vehicle facilitating a domicilation, particularly pension funds. position to capitalise. “Our intelligence
and not the fund, which is regulated – He says Jersey Finance approached tells us a lot of promoters are stockpiling
reflecting a ‘lighter touch’ of corporate firms in London to ask ‘what would cash at the moment and their intention
governance that may be superfluous to it take for you to consider us for a is when they feel there’s a turn in the
certain funds. Eight months later, 18 greater proportion of your hedge fund market there is cash building up to buy
funds have been set up. Geoff Cook, traffic?’ “They said to us: ‘We respect assets at much lower prices than perhaps
chief executive, admits that a slow start you for your corporate governance and were available six months or a year ago.”
may be par for the course in today’s reputation and process and you have However, he adds that much of Jersey
economic downturn, but it remains reasonable strength-in-depth in fund Finance’s business derives from working
a bold and vital adaptation to fund administration capability, but you are with the City of London, rather than
servicing. probably not flexible enough.’” an all-out charm offensive to get hedge
“There was a flurry initially. I think Against this challenge, Jersey Finance funds to relocate. “Places like Jersey
we’ve done 18 but the lawyers we talked developed a “three-word mantra” for are facilitators for hedge funds. The
to have all got five or six funds in the its unregulated offering in servicing smart ideas come out of New York and
pipeline,” he says. Cook explains that high value business and sophisticated London in terms of the interesting and
the system is similar to one of its key investors: certainty, simplicity and innovative styles of investment. What we
administration rivals, the Cayman speed. “‘Certainty’ of establishment do is provide the vehicles to allow those
Islands. Funds will be domiciled in comes within the authorisation approval to go to market smoothly and easily.”
Jersey but can be serviced from any process. The ‘speed’ to market is lining But Jersey Finance has been looking
provider it wishes. The only requirement up a fund, get investors ready and deploy beyond London. As any business strategy
is that fund administration in an and acquire assets very quickly. And will tell you, he says, you must diversify.
equivalent jurisdiction has the same ‘simplicity’ means there are no complex The firm has been building contacts in

Fund Administration ISJ | Investor Services Journal

China and India to capitalise on new with the ‘stick’ of regulatory uncertainty For a group of
wealth seeking proximity to Europe that in London in driving this Far East
wishes to avoid the bureaucracy of the marketing. Cook says the unresolved clients they don’t
EU and UCITS legislation. “The Chinese issue of non-domiciles tax the mooted
economy has been so strong that the changes to fund and taxation treatments,
need the corporate
authorities have been happy to release there have been a few moves “that would governance. We’ve
value out of China through corporates,” be potentially unfriendly as far as Jersey
he explains. “If they want to do that in is concerned”. carved out a regime
Europe it makes a lot more sense for Jersey Finance, and the island, has
them to come to Europe and list on retained its attractive traits of flexibility
for high business...
exchanges as a Jersey vehicle.” and speed in its administration, which we make it clear it
Cook says that of the Chinese has a knock-on benefit to reducing
companies that have listed on Aim to cost for new clients – wherever in the is an unregulated
date 75% have listed through Jersey world they arrive from. “We’ve geared
structures. This means they can enter up our visiting programme to articulate
the European market, raise capital what we have on offer,” he says. “We’ve
for an initial public offering of shares worked hard at building our fund
and begin both private and public administration and ticked all the boxes.
acquisitions. He adds that the interest Our main focus for 2009 is getting our
from India includes a lot of private message out into the market. We will
wealth and trusts. But the ‘carrot’ of also keep revisiting that question: what
surplus Asian balance sheets seeking a else are you looking for?” Q
European presence was also combined

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Fund Administration ISJ | Investor Services Journal

Peter Niven, CEO of Guernsey Finance, writes of the push to succeed
in the credit crunch
cluded the emergence of new investment of confidence in the wider markets to
schemes such as distressed debt funds put the business into place.
and distressed property funds and the In some respects this reduced growth has
indication is that the move to niche asset been beneficial because it has given us
classes will continue during the credit all a chance to take stock. For example,
crunch. Guernsey firms have responded industry practitioners have been able
by developing their capabilities to facili- to make sure that service levels on the
tate the more difficult administration substantial business that has been taken
of these funds – examples include the in over the past few years are as high as
use of an off-Island centre of excellence possible.
within a large group or by establishing a In addition, it is an opportunity for
specific operation outside the Island. time to be spent on initiatives which
Today, world-renowned managers, will build on recent developments such
for example, Investec and Dominion as our new ‘fast track’ registered funds
(retail), EQT and KKR (private equity); regime, new company law and new com-
Kenmore and F&C (property); and Man pany registry and introduction of a zero
and Fauchier (hedge funds/funds of rate of corporate tax as standard. Now
hedge funds), have the operation of their we are looking to establish a specific
Writing in Investor Services Journal funds facilitated in Guernsey. During the regime to attract hedge funds. On top
earlier this year I commented how last year or so there has been the addi- of this we are talking with key decision
Guernsey’s funds industry was continu- tion of BNP Paribas, Capita and Citco to makers in London about what else we
ing its strong performance despite the the significant list of administrators in might do to make ourselves even more
changed global economic scene with the Guernsey, which already included bou- attractive as a place to do business.
sub-prime crisis and its fallout. I was tique providers such as IAG and Bourse, Guernsey Finance is also stepping up
confident that the island was well placed as well as globally recognised names like its promotional and marketing activi-
to continue in such a vain, although only Northern Trust, HSBC, Royal Bank of ties. In October we will be hosting the
time would tell. Canada and State Street that also offer Guernsey Funds Forum in London –
Six months later performance custody services. The number of fund which is our principal source of business
remains robust, despite the difficult managers based on the Island is also ex- – and following this up with a private
market conditions created by the panding and now includes major private equity funds dinner debate in Edin-
credit crunch. The latest figures from equity players Terra Firma and Permira, burgh. We are also starting to refine our
the Guernsey Financial Services Com- plus more recent arrival Odey Wealth. plans for targeting the Zurich/Geneva,
mission (GFSC) show that overall funds In addition, the Channel Islands Stock US and Middle East markets in 2009. All
business reached a record GBP207.2 Exchange (CISX) has seen continued of this is additional to further develop-
billion at the end of June – up GBP3.4 growth and now has more than 2,800 ing the jurisdiction’s brand in China.
billion (1.7%) over the second quarter security listings.
of the year and up by GBP51.6 billion The right conclusion
(33.2%) from the same time in 2007. Enhanced offering It is this marketing and promotional
While we are still seeing funds busi- activity alongside the continued de-
Robust growth ness coming into the island, flows have velopment of attractive products and
Traditional funds remain well represent- slowed during the past few months. This pragmatic regulation that is helping
ed among our flows. However, the major reflects the fact that there is still a lot of sustain new flows into the Island during
growth continues to be in alternatives international corporate wealth out there the difficult market conditions while
such as funds of hedge funds and par- looking for a structure – and that is what also ensuring we are ready to go when
ticularly private equity, as well as more we in Guernsey are so experienced and confidence returns and business
esoteric asset classes. This shift has in- skilled at catering for – but there is a lack levels increase. Q

Middle East Fund Administration ISJ | Investor Services Journal

A fund hub in construction

The diversification away from oil has bolstered the Middle East fund
services market, writes Catherine Kemp

The spike in oil prices over the last on foreign exchange or repatriation Tahir Jawed, managing partner of
couple of years has provided some huge of capital, operational support and Maple and Calder’s Dubai office, says
budget surplices for all countries in the business continuity facilities, as well this intention inspired the creation
Middle East. But some countries have as international standard regulatory of the DIFC: “Dubai is forced to be a
begun to diversify away from oil and and legal infrastructures. The DIFC service based economy because it doesn’t
related business into service industries. is regulated by the Dubai Financial have anywhere near as much oil as other
Dubai - the hub of the region - was Services Authority (DFSA), which is countries, like Abu Dhabi. That’s why it
built on the back of the oil industry, modelled on the UK’s FSA. has expanded into tourism, real estate
although its oil reserves are expected to The Dubai authorities have and financial services, and why it is so
be exhausted in 20 years. Oil and natural transformed the economy from a accommodating to foreign business,
gas accounted for less than 6% of the heavy industry- based to a service- whereas Abu Dhabi, Kuwait, Qatar,
Emirate’s revenues as of June 2007. based economy and intend to become Saudi Arabia, are more conservative
The Dubai International Financial a financial giant, competing with because they don’t need anybody.”
Centre (DIFC) was opened four Bahrain as a centre for Islamic finance The fund services industry in Dubai
years ago to attract foreign business, and act as a gateway into the Middle is still new with only a few firms within
offering firms tax-free profits, 100% East for international financial services the DIFC licensed to provide fund
foreign ownership, no restrictions companies, banks and investors. administration services. Apex Fund

Middle East Fund Administration ISJ | Investor Services Journal

Services was the first to open an office management office based in Dubai, says:
in the DIFC in July 2006, providing full
service fund administration and is one
“The market has shown some rapid
growth in recent years, mainly driven
The spoils
of the only firms to provide independent
fund administration.
by the retail side, by Islamic money
funds. It’s people who from a religious of oil: A
According to Jawed, most funds in the perspective feel more comfortable
region have tended to be domiciled in giving their money to a religious-based regional
the more traditional fund centres such as institution and to investments based on
the Cayman Islands. Maples and Calder,
one of the first arrivals to the DIFC in
religious principals.”
Under Islamic finance law, certain
2005, specialises in this area. activities are “Harram”, or banned in
“It’s all pretty new,” he says. “The Arabic, such as usury. Islamic finance
Saudi Arabia: 260 billion barrels
DIFC has only been running for four is based more on the concept of risk
of oil reserves - 24% of the world’s
years and people have only been here sharing and getting paid for the risk
proven total petroleum reserves.
for three, you wouldn’t expect fund taken, rather than making money from
administrators to come in first. There lending and getting interest or collateral
Qatar: 15 billion barrels, while
are now quite a few funds up and for it.
gas reserves are estimated to be
running and being administered and An Islamic money market fund,
between 800 trillion cubic feet to
so are attracting more and more fund describes Ringrow, might have 20
80 trillion cubic feet.
administrators.” contracts in their pre-shipment of trade
At a recent seminar held by the finance. So, for example and investor
Oman has limited oil reserves that
DIFC on the emerging opportunities pays for a shipment of sugar, pre-
are expected to run out in the next
for the development of a regional funds financing at a certain rate and then
few years.
industry, Nasser Al Shaali, CEO of when the shipment comes they get a
the DIFC, said: “The asset and funds higher rate.
Abu Dhabi has 90% of the UAE’s
management industry is still young but Jawed says: “There’s quite a bit of
oil and is one of the world’s largest
due to the vast wealth concentration flexibility in people’s interpretation, but
producers of oil.
in the region, we can expect the GCC I think as the market develops you are
to become an international centre for going to get more conformity because
Kuwait has proven crude oil
asset management in the next decade. people are having to trade. There is no
reserves of 104 billion barrels, an
Managed funds, and in particular Sharia point in making something Shariah
estimated to be 10% of the worlds
compliant funds, are attracting a wave of compliant for one investor knowing
new, more sophisticated investors.” that it won’t be Shariah compliant for
The appetite for Islamic finance anybody else.”
Bahrain petroleum accounts for
products among retail investors within The Accounting and Auditing
about 60% of export receipts, 60%
the region and those living abroad is Organisation for Islamic Financial
of government revenues, and 30%
enormous. According to The Times Institutions (AAOIFI) based in Bahrain
of GDP however oil reserves are
newspaper, September 16 2008, the acts as a discussion forum aiming to
Global Islamic finance market is growing create a market standard. For a product
at 15% a year and is expected to be to be tradable it has to be acceptable to
Dubai produces 240,000 barrels of
worth USD 1,000 billion by 2010. And as many investors as possible. This move
oil a day and substantial quanti-
in the UK it as grown to more than GBP towards the standardisation of Shariah
ties of gas from offshore fields.
500 million, and a recent Mintel report compliance will further enable growth of
The emirate’s share in UAE’s gas
said that 400,000 Muslims in Britain the funds market throughout the region.
revenues is about 2%.
held Islamic products. While not all economies focus on
Rod Ringrow, senior vice president Islamic Finance as a defining feature
at State Street, which has an asset of their economy, most business in the

Middle East Fund Administration ISJ | Investor Services Journal

The asset and region is done on a Shariah compliant significant natural resources in Bahrain
bases. The Kuwait Investment House, for and provide about 60% of budget
fund management example, invests heavily in the industry. revenues. Bahrain was the first Persian
Kuwait has one of the world’s largest oil Gulf state to discover crude oil but now
industry is still reserves, and according to research by has limited reserves and so has stabilised
the Kuwait Financial Centre, the Kuwait its oil production to about 40,000
young but due to asset management industry is currently barrels per day, and reserves are expected
worth USD75 billion and by 2010 shall to last 10 to 15 years. The Emirate
the vast wealth be worth USD 140 billion. has therefore, worked to diversify its
Raghu Mandagolathur, senior vice economy away from oil into banking,
concentration in president-research Kuwait Financial heavy industries, retail and tourism and
Centre, says: “Shariah compliant is now a banking and Islamic finance
the region, we products are becoming much more centre.
popular and well received by almost all Mandagolathur explains that Kuwait
can expect the investment segments in the region. But has received a lot of interest from hedge
from a strategy point of view, it’s only fund managers. The authority wants
GCC to become a few countries like Bahrain especially, high quality institutional investors like
and Dubai which are developing the pension funds to join the market, but is
an international infrastructure required to promote very aware that investment institutions
Islamic finance industry.” only start to take an interest, when
centre for asset Mandagolathur explains that markets are included in the MSCI
fund administration is not a very Indices. They predict this will start to
management in the active industry throughout all Gulf happen over the next two to three years.
Cooperation Council (GCC) countries. Foreign interest is a key drivers for
next decade This is because mutual funds are still a growth of accessibility and services in
relatively small segment compared to these economies. “Kuwait has a growing
the managed accounts segment. And asset management industry because
the managed accounts segment doesn’t the investors are there,” Jawed explains.
Nasser Al-Shaali, require much fund administration “Investors from anywhere else in the
services, because they cater to high net world will not go to an asset manager
CEO, DIFC worth clients. But the growth of the in Kuwait, but an asset manager may set
mutual fund segment will create a need up in Kuwait because he wants to have
for fund administration services. access to Kuwait’s investors, who have
Bahrain is a centre for growth in the plenty of money at the moment. But you
mutual funds industry, according to wouldn’t get a clearing bank setting up
Ringrow. Bahrain claims to have over in Kuwait - they’d go to Dubai.
USD10 billion of mutual funds, as a Qatar has opened the Quatar
result of their legacy as an offshore unit Financial Centre, and the authorities are
and in 2008, Bahrain was named the also trying to use some of revenue from
world’s fastest growing financial centre oil and gas to diversify into technology
by the City of London’s Global Financial and plastics. Abu Dhabi has diversified
Centres Index. Islamic funds registered into other industries. Since the slump
with Central Bank of Bahrain grew in oil prices in 1998, Oman has placed
by 78.5% to USD1.3 billion, invested a greater emphasis on other areas of
through 87 funds, compared with industry. Q
USD750 million and 80 funds in 2006.
Petroleum and natural gas are the only

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shareholders, Crédit Agricole S.A. E:custodyservices@handelsbanken.se
Asset Servicing Custody & Clearing and Natixis. Our services combine A: Blasieholmstorg 12,
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The introduction of the SWIFT relationship manager. Handelsbanken cash letters
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CACEIS, with EUR2.3tr under countries, as well as settlement and P.zza della Scala 6
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Managing Director Italy
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Website: www.sma.co.uk AA- by S&P, which reflects the C: Annika Larsson intesasanpaolo.com
significant financial support of our

ISJ Directory of Services
and e-commerce operation more than a century of providing
- The largest customer base of any services in this field.
financial services group in the region
Santander’s cutting edge technology
enables it to offer a comprehensive
T: +47 2248 6238 array of innovative services Société Générale Securities Services
KBL, leading service provider in Contact: in a broad range of markets. offers institutional investors,
the Luxembourg fund industry, Anne-Lise Kristiansen Santander currently has full local asset managers and financial
offers one-stop shop facilities to Head of Sub-custody and Clearing capabilities in Iberian and Latin intermediaries a comprehensive
E:mail American markets along with a range of financial securities services:
international fund promoters.
anne-lise.kristiansen@nordea.com franchised presence in many others. custody, clearing & trustee services,
Product structuring (of SICAV, FCP,
Santander`s experience and product fund administration, asset servicing
SIF, SICAR, SEPCAV, …), global and transfer agency. SGSS currently
custody services as well as an range ensures that every aspect
ranks 3rd European custodian and
efficient fund administration and of the securities business is fully
9th worldwide custodian (Source:
transfer agency infrastructure contemplated.
Globalcustody.net) with EUR 2,580*
are some of our fields of expertise billion in assets held and valuates
that will bring added value to the T: Europe: (34) 91 2893932 / 28 4,354* funds representing assets of
management of your assets. T: USA: (1212) 350 39 02 EUR 405* billion (as of June 2007).
For all kinds of Undertakings W: santanderglobal.com
for Collective Investment going E: globalsecurities@ Sébastien Danloy
from plain vanilla cash, money- gruposantander.com Global Head of Sales,
market, equity and bond funds to Investor Services
sophisticated alternative, venture Société Générale Securities Services
capital/private equity, pension T: +33 (0)1 41 42 98 65
RBC Dexia Investor Services offers E: sebastien.danloy@socgen.com
pooling and funds of hedge funds,
a complete range of investor W: www.sg-securities-services.com
KBL offers expert legal, fiscal and
technical advice as well as access to services to institutions worldwide.
the global markets. Our unique offshore and onshore
solutions, combined with the
Business Development – expertise of our 5,200 professionals SEB is the leading provider of
Investment Fund & Global in 16 markets, help clients grow securities services in the Nordic
Custody Services 43, boulevard their business and sustain enhanced and Baltic area. We are committed
Royal L-2955 Luxembourg performance through efficiency to custody and clearing processes
Stéphane Ries improvements and robust risk for the wholesale market. We hold Financial Asset Services is the
E: stephane.ries@kbl-bank.com management practices. securities worth over 560 bn EUR custody and investments-servicing
Sandra Cortese and provide services in more that 75 division of Standard Bank, providing
E: sandra.cortese@kbl-bank.com Equally owned by RBC and Dexia, the markets, 10 of them under the SEB a unique suite of services to
Stéphane Pesch company ranks among the world’s sophisticated investors in South
name (Sweden, Norway, Finland,
E: stephane.pesch@kbl-bank.com top 10 global custodians with USD Africa and eight sub-Saharan
Denmark, Luxembourg, Germany,
T : (352)4797 3512 2.8 trillion in client assets under markets.
Estonia, Latvia, Lithuania and
F: (352)4797 73910 administration. Ukraine).
www.kbl.lu Standard Bank has assets under
rbcdexia.com custody to the value of ZAR1.56
We offer a full range of securities trillion and an overall market share of
services including corporate action approximately 40%.
T: +44 (0) 20 7653 4096 and information services, securities
F: +44 (0) 20 7248 3946 lending and services to remote Standard Bank’s unique selling point
Contact: Tony Johnson members of the Nordic and Baltic lies in its consultative approach to
Head, Sales & Relationship stock exchanges. We continuously relationships combined with the
Management develop new products in connection bank’s commitment to custody and
E: antony.johnson@rbcdexia-is.com with clients and partners to ensure investment administration services.
Nordea is the leading financial Address: 71 Queen Victoria Street, we deliver the high-quality products
services group in the Nordic and London, EC4V 4DE, UK our clients demand. We always strive A:Standard Bank
Baltic Sea region and operates Financial Asset Services
to make the processes more efficient.
through three business areas: With a history of over 150 years in
3rd Floor
Nordic Banking, Banking & Capital the securities industry; we know the 25 Sauer Street
Market Products and Savings & Life market and our clients well. Johannesburg 2107
Products. T: +2711 636 6615
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Santander is Spain’s leading
- The leading financial services group financial institution and the largest
in the Nordic and Baltis Sea region bank in the euro zone by market
- A world-leading Internet banking capitalization. Our commitment
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Institutional Assets under Custody: tailored to their specific information Fitzroy House
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Standard Chartered has a history and maintains
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to ensure high levels of process administration and related services worldwide
Fund Administration automation. to all type of onshore and offshore custodian (Source: Globalcustody.
CACEIS is responsible for over funds combining high quality, net) with EUR 2,731* billion in
EUR1.75 trillion held under custody, independency, technology, timely assets held and valuates 5,158*
and over EUR850 billion under calculation with flexibility, funds representing assets of EUR
administration. experience, custom-made solutions 499* billion (at end March 2008).
and competitive rates. Our services
International: Olivier Storme include: fund set-up and corporate
T: +352 4767 2847 services, NAV calculation and other Sébastien Danloy
E: olivier.storme@caceis.com accounting services, R&T agent and Global Head of Sales
Apex Fund Services Ltd is a global other investors and compliance Société Générale Securities Services
hedge fund administration solution France: Patrick Lemuet services. For more information visit T: +33 (0)1 41 42 98 65
for hedge funds and private equity T: +33 (0)1 57 78 03 34 our website: www.imfcfundservices. E: sebastien.danloy@socgen.com
clients located in 12 separate E: patrick.lemuet@caceis.com com W: www.sg-securities-services.com
jurisdictions across the globe. W: www.caceis.com
The company uses the software www.imfcfundservices.com
solution, PFS PAXUS, which is a fully t +31.20.644.4558
integrated hedge fund accounting f +31.20.644.2735
system combined with web-based Mrs. Consuelo Nardon
reporting to allow clients and e: consuelo.nardon@imfc.nl
investors to access their information Rivierstaete Building, Amsteldijk
24/7 securely online. We will tailor 166, 1079 LH Amsterdam,
all solutions to meet your needs and Netherlands
Drawing upon an extensive track
our continuing focus on the quality
record of proficiency, dependability
of service and the relationship with
and responsiveness, Swiss Financial
each and individual client ensures
Folio Administrators Limited, part Services acts as administrator as well
that we retain our ethos of providing
of the Folio Group of Companies as registrar and transfer agent of
a personalized service rather than a
supplying fund administration, funds investing in a broad range of
generic solution.
company management, director financial instruments. These include
Highly qualified and experienced
services and insurance management, futures, foreign exchange, equities,
staff, mirrored with top tier As one of the world’s leading third-
is the leading fund administration options, bonds and other funds.
technology and competitive fee party fund administrators, PFPC
company in the British Virgin
structures make Apex Fund Services has over 30 years of experience
Islands. We perform accounting and
Ltd the clear choice for your fund delivering personalised solutions
We specialize in servicing the needs administration services for diverse
administration needs. to the global marketplace. PFPC
of start-up to medium sized hedge fund types domiciled in, but not
services an international client base
funds, covering all aspects of fund limited to, the United States,
C: Peter Hughes from the United States, Luxembourg,
formation, structuring and on-going Bahamas, Cayman Islands, B.V.I. and
Group Managing Director Ireland and Poland, and from a
operations. Ireland.
T: +1 441-292-2739 presence in the Cayman Islands and
We work closely with an extensive
F:+1 441-292-1884 London.
number of banks, brokers, Swiss Financial Services
E: peter@apex.bm
custodians, auditors and lawyers (Ireland) Ltd.
John Bohan
to ensure that our clients receive Block 4B,Cleaboy Business Park,
Group Manager of Operations C: William J. Salus
the best independent advice Old Kilmeaden Road,
T: +353 21 4633366 A: PFPC, 301 Bellevue Parkway
and structures. Waterford, Ireland
F: +353 21 4633377 Wilmington, DE 19809 USA
T: +353 51 351180
E: John@apexfunds.ie T: 302.791.2000
Daniel Cann, Director F: +353 51 871595
E: information@pfpc.com
Adrian Maher
C: Fergus McKeon
William Harris, Director E: amaher@swiss-financial.ie
A: PFPC Riverside Two
Sir John Rogerson’s Quay
Dublin 2, Ireland
Folio Administrators Limited
T: +353-1-790-3500
CACEIS is an Investor Services Folio House, Road Town
E: Information@pfpc.com
company with six offices across British Virgin Islands
Europe. Owned in equal parts www.folioadmin.com
by Crédit Agricole and Natixis, T: 284 494 7065
F: 284 494 8356 Fund Services is a dedicated fund
CACEIS provides Custody, Fund
administrator providing customized
Administration and Corporate Trust
and flexible services for traditional
services to demanding Corporate Société Générale Securities Services
and alternative investments.
and Institutional clients. We have offers institutional investors, asset
Our comprehensive range of services
considerable expertise in Cross- managers and financial
for investment funds includes fund
Border Fund Distribution Support as intermediaries a comprehensive
set-up, registration and support
well as Alternative Investment and range of financial securities services:
around the world, fund accounting,
Private Equity servicing. Clearing, Liquidity Management,
NAV calculation, risk control
Our staff have the language skills Custody and Trustee, Fund
Established in 2002, IMFC Fund and reporting. We have practical
and industry knowledge to develop Administration, Asset Servicing,
Services B.V. is a boutique hedge experience with registering funds in
business relationships into strong Fund Distribution Services and
fund administrator and a trustee 28 jurisdictions.
partnerships and our powerful IT Issuer Services. SGSS currently ranks
with its offices in Amsterdam and We provide a flexible offering from
systems are constantly updated 3rd European custodian and 7th
Sydney. IMFC offers third parties the full range of services, including

ISJ Directory of Services
Old Kilmeaden Road, administration services, but also
Waterford, Ireland the ability to produce daily dealing
T: +353 51 351180 NAVs.
F: +353 51 871595 Custom House is authorised by the
Adrian Maher 9 Irish Financial Regulator under
Section 10 of the Investment
Intermediaries Act, 1995, which
authorisation does not extend
to the Chicago and Singapore
representative offices.

Custom House Administration &

Corporate Services Limited
A: 25 Eden Quay, Dublin 1, Ireland
Designing custody solutions
Fund Services is a dedicated fund
T: +(353) 1 878 0807
administrator providing customized
F: +(353) 1 878 0827
and flexible services for traditional
C: dermot.butler@
– for the Nordic region
and alternative investments.
Our comprehensive range of services
C: david.blair@
for investment funds includes fund
One region
set-up, registration and support
around the world, fund accounting,
ww.customhousegroup.com One custodian
NAV calculation, risk control One point of entry
and reporting. We have practical
experience with registering funds in
28 jurisdictions.
We provide a flexible offering from
the full range of services, including
Private Labelling, to selected Fund Services holds a leading
functions. Through our leading position in the area of hedge fund International Road Town
administration with specialized Finance Centres Tortola
fund administration architecture,
teams around the world. We offer British Virgin Islands
multi-source pricing and powerful
a complete range of services T: +1 284 494 1509
compliance tools, we offer a tailored,
including accounting, NAV F: +1 284 494 1260
cost effective service.
calculation, shareholder services, W: www.bviifc.gov.vg
banking and credit facilities. The British Virgin Islands has
Luxembourg: Jean-Paul Gennari, tel. created a progressive and
With specialist expertise in both
+352-44-1010 1 single manager and fund of hedge transparent environment for the
Switzerland: Markus Steiner, tel.
Prime Brokerage
fund administration, services establishment and regulation of
+41-61-288 4910 can be provided for both onshore mutual/hedge funds and their
and offshore funds. Through functionaries. By the end of Q3
W: www.ubs.com/fundservices our comprehensive range of 2006 the BVI had recognised or
C: Andre Valente services and products, leading registered more than 4,000 funds,
T: + 41 61 288 6269 edge technology platforms and and licensed some 700 managers
E: andre.valente@ubs.com superior client service, we work in and administrators, making the
A:UBS Global Asset Management - partnership to offer the solutions BVI a leading domicile of choice for
Fund Services, Brunngässlein 12, you need.
investment business.
PO Box CH-4002 Basel, Switzerland Benefits of conducting investment
Cayman Islands: Darren Stainrod, Newedge Global Prime Brokerage
tel. +1-345-914 1076 business in the BVI include: Group is a global, multi-
-Fast-track registration and disciplinary, solution-
Ireland: Don McClean, tel. +353-1- licensing system - funds can be providing team dedicated to
Hedge Fund Administration registered in a few days.
436 3636 delivering superior services to
Canada: Heather Budd, tel. +1-416- -Presence of qualified, experienced alternative investment industry
971 4708 legal, accounting & administration participants including hedge
practitioners. funds, commodity trading advisors
Luxembourg: Jean-Paul Gennari, -A well-developed corporate (CTAs), fund of hedge funds, family
tel. +352-44-1010 1 professional infrastructure. offices, and institutional investors
-Modern, robust and cost-effective (insurance
Switzerland: Markus Steiner, tel. regulatory and corporate regimes.
Custom House, which is one of companies, banks and pension
+41-61-288 4910 -BVI private and professional funds
the world’s largest independent funds).
fall outside the scope of the EU The Newedge prime brokerage
alternative investment and hedge W: www.ubs.com/fundservices
Savings taxation Directive. team offers a global range of
fund administrators, was awarded C: Andre Valente
-Segregated Portfolio Companies brokerage services
a SAS 70 Type I in May 2007 and a T: +41 61 288 6269
E: andre.valente@ubs.com - also known as Protected Cell covering a wide range of asset
SAS 70 Type II in December 2007.
A: UBS Global Asset Management, Companies - can now be formed classes including equities, bonds,
Custom House offers a round-the-
Fund Services, Brunngässlein 12, as mutual funds under the BVI currencies,
world, round-the-clock service
PO Box CH-4002 Basel, Switzerland Business Companies Act 2004. commodities, and their related
from its office in Dublin and
representative offices in Chicago British Virgin Islands listed and OTC derivative products.
and Singapore, enabling it to International Finance Centre We also offer an innovative
provide, not only complete global Haycraft Building portfolio-based cross-margining
1 Pasea Estate solution, a dedicated account

ISJ Directory of Services
management desk, hedge fund their businesses with great efficiency T: US- +1 617 204 4500
start up services, quantitative Securities Lending on a global basis in all securities T: UK- +44 (0)20 7469 6000
information on the hedge fund finance markets. Used by borrowers C: Christopher Jaynes
industry, capital introductions and lenders throughout the world, E: info@eseclending.com
services, and recently prime the EquiLend platform automates W: www.eseclending.com
brokerage services to Sharia formerly manual trading and post- A: 175 Federal Street, 11th FL,
compliant hedge funds. trade processes. Using EquiLend’s Boston, MA 02110, US
Newedge is a major new force in complete end-to-end services
finance, resulting from the merger reduces the risk of potential errors A: 1st Floor, 10 King William Street,
of the two brokerage firms - Calyon and eliminates the need to maintain London EC4N 7TW, UK
Financial and Fimat - on January costly point-to-point connections
2nd, 2008. Newedge is wholly owned while allowing firms to drive down
by Calyon and Société Générale, unit costs. Firms can then free more
Data Explorers Limited, a specialist
with both companies having 50% resources to expand their business
and independent company, offers
ownership and grow trading volumes without
impartial quantitative measurement
increasing costs. This makes the
of securities lending performance
Philippe Teilhard de Chardin, EquiLend platform a cost-effective
services to the global securities
Global Head of Prime Brokerage choice for all institutions, regardless
financing industry. We help our
T +44 20 7676 8536 of their size.
clients monitor and understand the
Vincent Tournant, relative performance of their lending
Head of Business Development T: US- +1 212 901 2224
activity and risk, and turn raw
T +44 20 7676 8171 T: UK- +44 (0)20 7743 9510 Eurex is one of the largest
lending, borrowing and collateral C: Michelle Lindenberger
Duncan Crawford, data into useful, actionable derivatives exchanges and the
E: michelle.lindenberger@equilend.com
Head of Capital Introductions information. We also provide proxies leading clearing house in Europe.
W: www.equilend.com
T +44 20 7676 8504 for short selling information. Wherever you are located, we
A: 17 State Street, 9th Floor
E: pbinfo@newedgegroup.com Working with the industry we New York, NY, 10004 provide you with access to the
www.newedgegroup.com/ ensure information flows are A: 54 Lombard Street, London, EC3V 9EX benchmark futures and options
primebrokerage appropriate and peer groups market for European derivatives.
relevant. We are not involved in Eurex also offers short term
transactions. funding products, such as Eurex
All of our services: Performance Repo. Eurex Repo is among
Payments & Settlements Explorer, Transaction Explorer, Risk the forerunners in providing
Explorer, Index Explorer and Report integrated trading and clearing for
Explorer are web based and available repo transactions. Eurex’s latest
to clients over the internet. innovative marketplace is called
Eurex SecLend.
United Kingdom (London) Eurex SecLend. Europe’s leading
VocaLink is the payment transaction 2 Seething Lane, investment banks participate
specialist. Trusted by the world’s London, EC3N 4AT eSecLending is a leading global as borrowers in the Eurex
top banks our automated payment T +44 (0) 20 7264 7600, provider and administrator of SecLend marketplace, acting as
system processes over 90 million F +44 (0) 20 7392 4004 customized securities lending principal brokers, dealers and
transactions per day. The VocaLink United States (New York) programs and they have grown to intermediaries. They all benefit
switching platform powers the 75 Rockefeller become one of the largest lending from Eurex’s leading state-of-the-
world’s busiest ATM network and Plaza, 19th Floor agents in the marketplace. Their art trading and processing services.
provides end-to-end management of program has been adopted by For Eurex, service and technology
Europe’s largest ATM estate, while New York some of the world’s largest and innovation is not just a buzzword.
the Real-Time Payments platform 10019, USA most sophisticated asset gatherers New trends are being transformed
provides the central infrastructure T +1 212 710 2210 including pension funds, mutual into inventions through the
for the UK Faster Payments service. F + 1 212 710 2212 funds, investment mangers and adoption of advanced trading
The VocaLink EuroCSM delivers Julian Pittam insurance companies. eSecLending’s practices. Find out more on www.
reach for our clients throughout the T +44 (0) 207 264 7616 approach has introduced investment eurexseclend.com.
SEPA and beyond with a range of E:julian.pittam@dataexplorers management practices to the
value-added services that leverage .com securities lending industry, offering W: www.eurexseclend.com
our know-how and technical beneficial owners an alternative T: +41 58 854 2066
capabilities. VocaLink is the partner New York: to the custodial lending model. F: +41 58 854 2455
of choice internationally, working Richard Allin Through eSecLending, beneficial E: info@eurexseclend.com
with BGC to process Sweden’s T +212 710 2210 (ext 353) owners have achieved optimal
automated payments. E: richard.allin@data returns, greater transparency and Eurex Zurich Ltd., Selnaustrasse
Find out how we can help your explorers.com increased control over their program 30, 8021 Zurich, Switzerland
business at www.vocalink.com www.dataexplorers.com as compared to traditional lending
VocaLink models.
Drake House eSecLending maintains offices in
Homestead Road Boston, London and Burlington,
Rickmansworth Vermont. Securities Finance Trust
Hertfordshire Company, an eSecLending company,
WD3 1FX EquiLend is a leading provider of performs all regulated business
trading services for the securities activities. Additional information FINACE® is the only fully integrated
T: +44(0)870 1650019 finance industry. With its robust about eSecLending is available solution today which supports
F: info@vocalink.com suite of automated trading tools, on the company’s website, www. the future business model within
W: www.vocalink.com EquiLend enables its clients to scale eseclending.com. the area of Securities Finance

ISJ Directory of Services
and Collateral Management. The global securities financing industry. We securities lending and repo for over Luis F. Rolim
architecture of FINACE® is based on help our clients monitor and understand 250 clients. Through our Loanet, Marketing Manager - EMEA and Asia
a stable, leading edge technology the relative performance of their Global One, Martini and Astec Pacific Accuity
lending activity and risk, and turn raw
platform, which was developed with Analytics products and services, we 1 Quality Court
lending, borrowing and collateral data
performance and robustness as the into useful, actionable information. We provide comprehensive business Chancery Lane
focus of design. With flexibility also provide proxies for short selling solutions and information with London WC2A 1HR
at its core, customer-driven information. worldwide reach for equities United Kingdom
extensions and modifications can Working with the industry we ensure or fixed income securities t: +44 20 7014 3454
be quickly and easily applied to the information flows are appropriate financing. These solutions – all in f: +44 20 7061 6478
standard component set. and peer groups relevant. We are not an integrated, exception-based e: Luis.Rolim@AccuitySolutions.
involved in transactions.
processing architecture – includes com
All of our services: Performance
T: +41 (0)44 218 14 14 Explorer, Transaction Explorer, Risk order routing, pre-trade analytics, www.AccuitySolutions.com
F: +41 (0)44 218 14 18 Explorer, Index Explorer and Report trading, position management,
E: info@finace.ch Explorer are web based and available to operations, accounting, settlement
A: COMIT AG, Buckhauserstrasse 11, clients over the internet. and reconciliation.
CH-8048 Zurich, Switzerland
W: www.finacesolution.com T: +44 20 7220 0961 Email: securities.finance@sungard.
F: +44 20 7220 0977 com
C: Rupert Perry
E: rupert.perry@pirum.com Contact: Switch board: +44 (0) 208
A: Pirum Systems Limited 081 2000 Marketing: +44 (0)208
37-39 Lime Street 081 2853
London, EC3M 7AY
JPMorgan’s Securities Lending W: www.pirum.com Visit: www.sungard.com/loanet
program is unparalleled due in no www.sungard.com/globalone
small part to the Firm’s breadth www.sungard.com/martini www.
of capability, financial strength, astecgroup.com
professional expertise and seamless
operations. Advent Software EMEA,
established in 1998, provides
Our program enables investors to Technology trusted solutions for the front
access a broad spectrum of lending through to back office operations,
markets, with based on a true real-time fund/
a diverse borrower base, offering Santander is the only Spanish portfolio accounting platform,
a broad indemnification against financial institution with a team to the investment management
borrower default, while achieving exclusively dedicated to securities community throughout Europe,
very competitive bids for their finance & with the purchase of Middle East and Africa. Advent
securities - all of this in an Abbey in 2004 has expanded its has an established network of
environment designed not to capacity on a Global basis with offices across the region serving
compromise the activities of their trading teams in London (UK) & a growing client base of asset
fund managers. As one of the Connecticut (USA). managers, hedge fund managers,
founding members of EquiLend, a Santander’s leading local prime brokers, fund administrators,
global automated platform for capabilities in Spain, Portugal, wealth managers, private banks
borrowers and lenders, JPMorgan is UK, USA & Latin America, along Accuity is the leading provider of and family offices who continue
at the forefront of technology and with its solid balance sheet & data, software and services that to improve their businesses using
is ideally placed given its integrated combined with the state-of-the-art enables banks and corporations Advent’s suite of integrated
lending, custody and accounting technology, provides its clients with to maximise payment efficiency investment management solutions.
platforms. the broadest range of solutions and AML compliance for financial Advent Software EMEA is part of
in securities lending & financing, transactions. Advent Software Inc. (Nasdaq:
New York: William Smith including availability across all Our Payment Solutions are ADVS), a global organisation that
T: 212-623-5664 assets classes, as well as access to designed to deliver the critical has been providing solutions
E: william.z.smith@jpmorgan.com uncommon emerging markets. payment information necessary to to the world’s leading financial
improve payment straight through professionals since 1983. Firms
London: Michael Fox W: www.gruposantander.com processing rates. Our Compliance in more than 50 countries using
T: 44 207 742 0256 T: (3491) 289 39 42/54 Suite offers a complete range of Advent technology manage
E: michael.uk.fox@jpmorgan.com E: securitieslending@ caution lists and screening tools investments totaling more than US
gruposantander.com that defend against participation in $8 trillion.
Sydney: David Brown illicit financial activities. Accuity’s
T: (61-2)92504606 Strategic Services Group provides T: +44 (0)20 7631 9240
E: david.ldn.brown@jpmorgan.com businesses with consulting, F: +44 (0)20 7631 9256
W: www.jpmorgan.com/wss training and services. E: emea@advent.com
Securities Lending
Since 1836 we have helped A: One Bedford Avenue,
businesses around the world and London WC1B 3AU, UK
our role as the Official Registrar of W: www.advent.com
the American Bankers Association
(ABA) Routing Numbers since 1911
has enabled us to compile and
Data Explorers Limited, a specialist and Around the world, USD9 trillion maintain the most authoritative
independent company, offers impartial in securities financing is managed and comprehensive database of
quantitative measurement of securities on SunGard’s proven solutions for
lending performance services to the global bank information available.
international and U.S. domestic

ISJ Directory of Services
attribution (ex-post and ex-ante), as funds, plan sponsors, and insurance
well as multi-lingual client reporting companies. Eagle is committed to
and factsheets. This suite of products providing enterprise-wide, leading-
can be used either as stand-alone edge technology and professional
applications or ASP hosted solutions. services for investment accounting,
The Company has approximately data management, and performance
45 employees in offices located measurement. Eagle’s product suite
in Europe (Paris, London, is offered as an installed application
Aquin are the market leader in
Luxembourg). Offices in Asia or can be hosted via Eagle ACCESS,
investment compliance software
and North America are under Eagle’s application service provider.
with MIG21® powered by Aquin
consideration. The Company is Eagle Investment Systems LLC is a
LawCards® for global compliance
headquartered in Paris. division of The Bank of New York
including UCITS III and SEC 1940.
Mellon Corporation. To learn more
The company has built its
A: BI-SAM Ltd about Eagle’s solutions, contact
reputation on solid compliance DST International is the world’s
1 Cornhill sales@eagleinvsys.com or visit www.
and IT experience in long term premier vendor of technology
London EC3V 3ND eagleinvsys.com.
relationships with its clients. solutions to the global investment
T: +44 (0)20 3008 5834
Aquin services a blue-chip management community with
F: + 44 (0)20 3008 5831 W: www.eagleinvsys.com
client base of the world’s leading over 700 clients in 55 countries,
E: marketing@bi-sam.com T: +44 (0) 20 7163 5700
investment and 1500 employees in 19 of the
W: www.bi-sam.com F: +44 (0) 20 7163 5701
management companies, hedge world’s leading financial centres. A: Mellon Financial Centre 160 Queen
funds, fund administrators and Our wide range of asset management Victoria Street London, EC4V 4LA
custodians. These include Citi, solutions meet the needs of fund
State Street, BNP Paribas, Credit managers, dealers, settlement
Suisse, CACEIS Investor Services, staff, custodians and record
Allianz Global Investors, Pioneer keepers operating as international
Investments and Commerzbank. The asset managers; from front office
company has its headquarters in Broadridge Financial Solutions,
simulation, opinion management
Frankfurt, Germany with subsidiaries Inc., with over $2.0 billion in
and modelling functions, through
in Boston, London, Paris, Dublin, revenues and more than 40 years
data management, dealing and
Luxembourg and Zurich. of experience, is a leading global
settlement to custody and corporate
provider of technology-based
actions. The suite of products can
Annette Lindinger outsourcing solutions to the
be used either as stand-alone
press@aquin.com financial services industry.
applications or brought together in
T: +49 69 21 93 66 600 Our systems and services include
flexible combinations according to
F: +49 69 21 93 66 650 investor communication, securities
specific needs.
Mainzer Landstr. 199 processing, and clearing and
60326 outsourcing solutions. We offer Financial Tradeware provides
T: UK +44 (0)20 8390 5000
Frankfurt am Main advanced, integrated systems Boston +1 617 482 8800 integrated solutions for medium to
Germany and services that are dependable, Hong Kong +85 225 812 880 small sized Investment Management
W: www.aquin.com scalable and cost-efficient. Our F: +44 (0)20 8390 7000 firms, Fund Managers and Hedge
systems help reduce the need E: info@dstintl.com Funds, covering the full trade life
for clients to make significant A: DST House, St Mark’s Hill, cycle. It is part of the Dharma Group
capital investments in operations Surbiton, Surrey, KT6 4QD of companies and benefits from the
infrastructure, thereby allowing W: www.dstinternational.com joint contributions and experiences
them to increase their focus on within the group of market traders,
core business activities.The product business analysts, financial services
listings will still stay the same apart professionals and skilled Microsoft
from Securities Data Management Certified programmers.
needs to be replaced by the The company has developed a suite
following: of applications that integrate and
SWIFT Service Bureau - provides Straight Through Process (STP) real-
fast-track access to the SWIFT time trading, back office administra-
network for full range of SWIFT tion, accounting and compliance.
messages including securities, Ultra.net®, S-Messenger® and
BI-SAM is a leading provider of
treasury, derivatives, payments and H-Fund® are the company’s flagship
analytics software, client reporting
corporate actions, all in a complete products all based on Microsoft.NET
and data management solutions
service environment. infrastructure. The company also
to the investment management
offers a Member Concentrator for
Broadridge Financial Solutions hosted SWIFT connectivity and Mem-
Our integrated and innovative
The ISIS Building ber Administered Closed User Group
solutions have already been adopted
193 Marsh Wall (MA-CUG) services for Corporates
by many renowned asset managers in
London E14 9SG UK Eagle Investment Systems LLC is a and Hedge funds. For more informa-
France, Belgium, Luxembourg, UK,
T: +44 (0) 20 7551 3000 global provider of financial services tion see: www.f-tradeware.com
Hong Kong and Singapore who have
E: info@broadridge.com technology, serving the world’s
assets under management ranging
W: www.broadridge.com leading financial institutions.
from 10 to 450 billion Euros.
Eagle’s Web-based systems support
The B-One suite of products
the complex requirements of firms
covers: performance measurement,
of any size including institutional
performance attribution (equities,
investment managers, mutual
balanced and fixed income), risk
funds, hedge funds, brokers, public

ISJ Directory of Services
derivatives, commodities, fixed office software needs of the fund
W: www.f-tradeware.com income and foreign exchange. industry.
T: +44 (0)20 7493 2773 Dedicated to post trade securities Fully Integrated Fund
F: +44 (0)20 7495 4858 operations, GL RIMS is your Administrator consists of three core
C: GrahamBright comprehensive real time securities programs:
E: info@f-tradeware.com post execution processing solution, ~ NTAS, the New Transfer-agency
A: 31 Dover Street covering middle office, settlement System
London W1S 4ND UK and accounting requirements. Its ~ E*TAS, Electronic Transfer
wide use of automation enables Agency System
global capital markets organisation ~ GRID, Global Reach Interface
to achieve maximum STP. It is a Daemon
flexible, highly scalable and easy to Other programs, such as PTAS, KIT,
install platform with a new Service and KORS available separately,
Oriented Architecture feature complement the core competency
that allows smooth and efficient Information Mosaic is a global of Fully Integrated Fund
connections with other third provider of advanced custody, Administrator.
parties within a company. corporate actions and wealth
Elemes NM is your partner in
management solutions to the T: 001-201-291-7747
global agent bank custodian
www.gltrade.com global securities industry. F: 001-201-291-7808
network management providing
Information Mosaic’s business C: Mr Ras Sipko
a global view of your relationship
GL TRADE professionals leverage decades of E: ras@kogerusa.com
network in a powerful and easy
Cheapside House financial industry expertise and KOGER USA
to use package. It includes diary,
134-147 Cheapside technical knowledge to deliver 12 Route 17 North
invoice verification, document EC2V 6BJ London UK complex projects on time and Suite 111
management, multi-entity views, Tel: +44 207 665 6200 within budget. Since inception, Paramus
reporting, account information Email: marketing@gltrade.com the company has utilized the most New Jersey, NJ 07652, USA
incorporating fee and rate
modern technology to develop W: www.kogerusa.com
structures, contacts, notes and
solutions to run on a scalable,
supports eFee – electronic fee
single platform. Today, Information
invoicing technology.
Mosaic’s supports clients from
Unrivalled extensibility allows you
offices in Boston, Dublin, London,
to develop your own functionality
Luxembourg, New York and
with your in-house development
Singapore. Currently, six of the
team. Misys provides integrated,
top 10 global custodians deploy
Information Mosaic solutions comprehensive solutions that
Flexibility does not stop with the deliver significant results to over
IGEFI is the foremost provider of worldwide.
software, our commercial terms 1,200 financial institutions globally.
offer adaptable pricing to suit software solutions for international Our buyside solutions help asset
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Foresight ISJ | Investor Services Journal

ISJ talks to Chris Smith, head of business development at Euro Millennium,
about regulation execution, clearing and the impact of dark pools

1. The market for products that I wouldn’t define what happened as

can provide a fully linked up system a break up. There will always be a
is hyper competitive in Europe. In role for the major exchanges, which
constructing and marketing Euro will be complimentary to execution
Millennium, how important was venues like Euro Millennium who
the stress-testing of this kind of rely on a well-understood reference
functionality for serving buy- and price. The “lit” books such as the
sell-sides and linking execution to London Stock Exchange thus play a
settlement? vital role in the market.

We worked closely with our advisory 5. What similarities with the US

board, including buy-side and have you seen in Europe with regard
sell-side member firms, to deliver trading appetites and styles that
Euro Millennium based on clients’ enhanced the creation of a European
specific requirements. Additionally, equivalent dark pool?
providing clients with a dark pool
that efficiently linked execution to In both the US and Europe
settlement was very important in the institutional firms are under
development of Euro Millennium and drove our decision to increased pressure to achieve best execution and reduce overall
partner with BNP Paribas Securities Services, a market leader transaction costs. By enabling firms to trade anonymously,
in pan-European cross-border post-trade services. dark pools are able to deliver reduced market impact and price
improvement which makes them an attractive place to trade.
2. Stock exchanges such as those in Budapest, Warsaw
and Prague continue to increase in trading volumes. Do you 6. A key strength of dark pools is the reduction of market
anticipate rolling out Euro Millennium to covering these impact, particularly if bulk trades are executed bit by bit. Do
countries in the next few years? you think this is more important with volatile markets?

Euro Millennium launched in early 2008 and is now Yes it is. The market “sensitivity” increases in volatile markets
successfully trading in UK, German, French, Dutch, and the market impact of trades is likely to increase in such
Portuguese and Belgian stocks. We plan to continue expanding conditions. By remaining anonymous, a dark pool helps
the reach of our pool and will continue to launch additional minimise market impact and offers a better market price.
markets in response to our clients’ needs.
7. MiFID demands best execution, but do you see a significant
3. How did the link up with BNP Paribas evolve and why were difference in the oversight in Europe compared to the US?
they chosen for clearing and settlement?
Yes. In the US, the SEC’s Reg NMS established the rules,
We chose BNP Paribas Securities Services as our partner whereas in Europe, the rules established by MiFID are being
to offer a highly cost effective pan-European clearing and implemented by a number of national regulators. Another
settlement service. BNP Paribas is one of the leading providers key difference is the requirement in the US for exchanges to
of clearing and settlement agent services in Europe. Our provide inter-market links. This requirement doesn’t exist in
selection was based on their proven track record and success Europe and therefore the obligation to achieve best execution
in providing settlement services across European markets. falls entirely on brokers and those firms servicing clients.

4. Is the recent seven-hour blow-out of the London Stock

Exchange a neat symbol of the break up of the traditional
trading and liquidity sources in Europe?