Buttonwood International Group released the fourteenth annual, 2008 Industry Forum survey; discussion topics covered are the pan-European securities market and latest developments in the emerging markets.
A number of new initiatives are reshaping the pan-European landscape of cross-border securities trading, clearing and settlement. Understanding the future impact of these changes is essential to the foreign investor and service provider in the new pan-European market. At the current time, the tangled web of European securities infrastructure appears to embrace an inefficient processing solution with very high start-up and processing costs.
Global custodians did not agree on the impact of multilateral trading facilities (MTF’s) on their business model. Some believe that the post-trade process of the custody business will not be impacted, while other custodians highlighted a number of concerns. Sunk development costs toconnect to multiple MTFs is clearly at-risk in a crowded field which is expected to shake-out in the near future.
Also, the proliferation of central counterparties (CCP) for the clearing of cross-border trades raises questions about the CCP’s risk controls and financial adequacy.
The European Central Bank has embarked on a new securities settlement platform in the Eurozone, named T2S.
Further harmonization in Europe was reported to be possible by addressing the functionality of asset servicing offered by CSDs. The current approach of separating asset servicing and settlement processing was viewed as inefficient and costly.
The expanding role of international central securities depositories (ICSD) was not considered to be a competitive threat to the global custodian’s franchise. The key market differentiator ─ which favors global custodians ─ is the ability to tailor asset servicing products to a client’s specific needs.
The second survey topic explored the pitfalls of investing in the emerging markets. Over 20 emerging markets were considered to be noteworthy.
Of particular interest in this year’s survey are positive developments in Botswana, Cyprus and Thailand. On the other hand, a handful of countries – notably, India – were singled-out as the most difficult emerging markets. The insights gained provide the foreign investor with useful information about the nuances and pitfalls of investing in the EMs.
D.C.