Fiducitation: Global Custody Update, Vol.
III, February 2002
Author: Brian O’Keeffe
Date: February 12,
2002 © 2002 Fiducite.com, Inc.
Fiducitation: A
synthesis of public Internet resources on the topic.
Instructions: Use the Table of Contents to navigate the document. Each citation has up to four distinct parts: Annotation, Clip, Source, and Cached File. Our Annotation and Clip (text or graphic from source document) help you decide whether to view the document. The source document may be viewed by clicking on the Source URL or by opening the embedded Cached File. All information is attributed to its source.
This is a monthly update of Global Custody news concerning
the industry and the major participants: State Street, Morgan, BoNY, Citi,
Deutsche Bank, and Mellon. The major topics of the newsletter include General
News; Money Won/Lost; New Products; and Other Business. Note that for the Money
Won/Lost section this report will provide asset levels as available from public
sources (i.e. Globalcustody.net).
Chief among this month’s stories are a string of
acquisitions made by large custodians.
BoNY, State Street, and JP Morgan all bought complimentary service
providers or vendors that may have faced extinction otherwise. This is a trend that will likely continue,
as newer firms find it difficult to raise new capital, and established
custodians fear the loss of valuable vendors.
Most custodians fear another year of declining revenues due
to lower valuations of asset bases, and less active exchanges worldwide.
Because of this, there is likely to be continued consolidation, with the larger
firms buying smaller providers.
In the general news area, we have picked up on several
stories on emerging international issues that affect the global custody
business, including Indian market reform and the question of interoperability
between Omgeo and the GSTPA’s rival matching systems -- we’re betting that both will eventually interoperate and/or
merge into a single solution. Other general news items include issues around
central counterparties in the equities markets and around expansion of the Deutsche Boerse’s clearing system beyond German
borders.
Finally, you will find an interesting article that
summarizes a brewing feud between custodians (this article is from the
perspective of BNP, but other custodians seem to feel similarly) and
Euroclear. We will, of course, monitor
this as it develops.
Author:
Will India’s Overhaul Bear Fruit?
Annotation: Global Investor Magazine asks if the massive
securities overhaul in India is enough to allow custodians to make a viable
business out of Indian custody.
Clip: In the
competition to attract international investors into emerging markets, the
quality of market infrastructure can have a significant bearing on success or
failure. It was a lesson learned by India's market authorities during the
course of the early 1990s. Since then they have pushed through market reform
and overhauled market infrastructure in an effort to increase the country's
appeal to foreign investors
Source: http://www.globalcustody.net/news_latest/?global-investor,361
Cached File: 
Reaping the Benefits
of Central Netting.
Annotation:
Global
Investment Services magazine wonders why it has taken so long for Central
Counterparties to develop. The author believes that the demand and
infrastructure have been in place, and the services are finally matching the
technical capabilities.
Clip: Central counterparties (CCP) are nothing new. In the
guise of clearing houses they have been essential components to the futures and
options markets, providing the necessary tools for market users to be certain
that trading contracts will be fulfilled. However, it has only been in the last
couple of years that the equities markets have jumped on the bandwagon and
things have really started moving.
Source: http://www.globalcustody.net/news_latest/?global-investment-services,365
Cached File: 
PriceWaterhouseCoopers Questions Interoperability of Rival STP Systems.
Annotation:
PriceWaterhouseCoopers
recently published a report in which they questioned the readiness of two major
STP rivals to operate simultaneously. Any incompatibility could delay even
further the move to T+1 and STP.
Clip: A preliminary analysis by PricewaterhouseCoopers of
how Omgeo and the Global Straight-Through-Processing Association's rival
central matching services work details differences between the two STP models
that could hamper future attempts at interoperability, said industry sources
close to the matter.
Source: http://www.globalcustody.net/news_latest/?securities-industry-news,366
Cached File:
Deutsche Boerse, International
Depositories Face Threat
Annotation:
Dow
Jones Newswire highlights the trouble that the Deutsche Boerse will face if it
tries to extend its clearing system across borders.
Clip: For despite the prospect of gaining control over
clearing and settlement for the German domestic equity market, Deutsche Boerse,
like other operators of settlement and custody houses, will face a huge task in
trying to extend Clearstream's cross-border, post-transaction services within
Europe.
Source: http://www.globalcustody.net/news_latest/?dow-jones-newswire,363
Cached File: 
Most Recent Asset Size Information
Annotation:
Several
Custodians, most notably Northern Trust and BNP Paribas, have updated their
asset totals since our last report. BNP
lost $49 Billion in worldwide assets, while Northern gained $100 Billion.
Source: http://www.globalcustody.net/
Cached File: 
Last Month’s Asset Size Information
Source: http://www.globalcustody.net/
Cached
File:
State Street Acquires Interest in BYALLACCOUNTS, Plans to Integrate Offerings
Annotation: One of the month’s numerous acquisitions,
State Street purchased a stake in BYALLACCOUNTS as a mean to flesh out their
service offerings to wealth management clients.
Clip: State Street
Wealth Manager Services provides complete, integrated and customized solutions
for their clients serving all segments of wealth management. "This
agreement clearly underscores our commitment to continually advance and
customize solutions to meet the rapidly evolving needs of global investors as
they develop business strategies to grow or build a wealth management
business," said Anne Tangen, head of State Street's Wealth Manager
Services business. "Being ahead of the curve is key to State Street's
success and we're pleased to introduce this comprehensive and integrated
solution to the market."
Source: http://www.statestreet.com/company/media/press_release/20020107_1.html
Cached File: 
Bank of New York Extends Global Equity Execution Capabilities Through Acquisition
Annotation:
Another
sign of the consolidation of the industry, BoNY purchased this unit of Credit
Lyonnais, and CL abandons this portion of its business.
Clip: G-Trade Services, a leading provider of wholesale
execution services including electronic direct access trading in 22 markets and
basket trading capabilities in 65 markets worldwide, is the executing and
clearing broker for non-U.S. equities executed through the Bloomberg Tradebook
system. G-Trade has developed a fully automated platform for the
straight-through-processing of orders, beginning with order placement and continuing
through execution and clearance and settlement of the trade.
Source: http://www.bankofny.com/Pressrel/index_2024.htm
Cached File:
Bank of New York Introduces Clearing Compass
Annotation:
BoNY
has introduced a new clearing interface for brokers.
Clip: The intuitive navigation features of BNY CLEARING
COMPASS help brokers maximize productivity, while its robust functionality and
ability to deliver real-time information support enhanced decision-making. It
is a portal to a wide variety of products and services and facilitates
efficient communication with correspondents, providing one source for
procedures, forms, operations bulletins, product and service announcements, and
product information.
Source: http://www.bankofny.com/Pressrel/index_2021.htm
Cached File:
JP Morgan Unveils New Forex Tool
Annotation:
JP
Morgan has introduced a new foreign exchange forecasting tool for its global
custody clients. Global Custodina.com has a somewhat humorous report on the
features timing in light of Morgan’s exposure to Enron.
Clip: As Morgan points out, the use of economic fundamentals
to predict near-term FX direction has come under increasing scrutiny in recent
years. Rising volumes of data about global cross-border - much of that data
supplied by custodian banks tracking the investment and trading activities of
their clients - have weakened confidence in trade balances, interest rate
differentials and such like as reliable guides to exchange rate movements.
Source: http://www.globalcustodian.com/main.jsp?type=newsshow&id=620
Cached File: 
Finance Asia Names State Street Best Securities Lender
Annotation:
Finance
Asia magazine has named State Street the best securities lender in Asian
markets. Despite its relative youth,
FinanceAsia is a well-respected publication, and its awards are highly valued.
Clip: As
reported by the magazine, "In a year which has seen a record number of the
region's central banks and portfolio managers put their assets into stock
lending programmes, State Street has picked up many of these accounts,
providing lenders with a safe, reliable source of additional income to their
portfolios." The magazine continued, "State Street's edge comes from
its inventory management and control system that operates on a single worldwide
platform giving borrowers access to its global book of assets in all time
zones. Customers also praise the bank for its reporting capabilities, giving
them real-time updates on their portfolios."
Source: http://www.statestreet.com/company/media/press_release/20020111_1.html
Cached File: 
BNP Paribas Declares War on Euroclear
Annotation:
BNP,
as well as some other, unnamed, custodians, are growing increasingly angry with
the tactics of Euroclear. Euroclear is chartered to act as a communal,
not-for-profit organization, and a number of banks are angry with its
increasing ruthless competitive tactics.
Clip: Voicing this
hostility explicitly and in public, as opposed to implicitly and in private,
has so far proved a step too far for BNP Paribas. Nor is it without risk,
especially with the ICSDs comfortably astride the high moral ground. But a
presentation to a London conference on Tuesday by Jon Lloyd, head of sales and
relationship management at BNP Paribas Securities Services, suggests that the
agent bankers are at last overcoming their native caution. To be sure, the speech
needs to be read carefully – indeed, many who actually heard the presentation
missed its import entirely – but it contained not only a devastating attack on
the ICSD view of the world but a fierce defence of the role of the agent bank
in European clearing and settlement.
Source: http://www.globalcustodian.com/main.jsp?type=newsshow&id=584
Cached File: 