Scripless Securities Clearing and Settlement Infrastructure

KAS BANK clearing specialist on Euronext Paris

KAS BANK is the first General Clearing Member of Euronext that is able to provide clients of the three underlying Euronext exchanges with its services from one portal instead of from three different connections. KAS BANK commenced its clearing and settlement services on Euronext Paris in November, after successfully completing a pilot phase with securities broker Eduard de Graaff. Euronext members can now trade on all three Euronext exchanges and have their positions cleared and settled using KAS BANK as their General Clearing Member. As from February 2002, KAS BANK can provide all its clients in Europe and outside Europe with this service. In the coming months, KAS BANK will conduct several pilots in order to gain further experience in the French infrastructure. Due to its highly automated services, KAS BANK can provide this service without any further increase in costs.KAS BANK now offers its clients one clearing and settlement protocol for the Euronext exchanges in Amsterdam, Brussels and Paris. In connection with this, KAS BANK introduces its new, automated collateral system; clients can now reduce costs by using their collateral surplus for other liabilities. Aside from these expansions, KAS BANK also provides one uniform reporting structure for the three Euronext markets. Expectations are that clients will have a better insight into the increased transaction volumes and turnover around the first quarter of 2002.

For Global Custodian article on KAS BANK (previously KAS Associate) see “KAS’s Custody Niche Across the North Sea”, IT 2001.

ESF Members Vow to Battle On

Despite the exposure of its threat to build a European central counter-party (CCP) as a bluff, the European Securities Forum (ESF) has decided not to implement the sunset clause in its constitution. The clause, which would have wound up the ESF in April next year unless members decided otherwise, was overruled at a meeting on 30 November at which members renewed their “commitment to a pan-European capital market.” ESF is also promising “new arrangements to enhance the strength of its membership and the role of its own executive.”This is understood to mean the recruitment of senior investment bankers to the executive committee of the ESF; the establishment of a permanent secretariat; and especially the broadening of the membership of ESF to include non-investment banking interests such as fund managers, custodian banks securities depositories and especially the smaller players in various national markets. Details will emerge from a full meeting of members, which is now unlikely to be held before the New Year.Though an ESF spokesman describes broadening the membership categories into new areas as “pure speculation,” the step does reflect the relative failure of an investment bank-led ESF to mould the European securities market infrastructure in its own image. The promise to appoint more senior figures to the executive committee of the ESF recalls the embarrassing collapse of the ESF threat to build their own single European CCP if the London Clearing House (LCH), Clearnet and Eurex Clearing did not build one for them. At the meeting of the EuroCCP Working Group of the ESF on 28 June, the members simply refused to put up the money. As the minutes of that meeting put it, “there is a risk to the reputation of the industry if it appears to lose interest in a development for which it has lobbied the authorities … [a decision by ESF] to abandon its objectives it could damage its reputation and prospects for successful lobbying in the future.”Considered in that light, the decision to override the sunset clause was more or less inevitable. The chief focus of interest in European CCP developments today, of course, is the future of Clearstream – currently the subject of competing bids from Euroclear and Deutsche Borse. The ESF announcement today says the organisation “continues to believe strongly in a horizontal structure which separates the governance of clearing and settlement from trading platforms … It is important to maintain vigorous pressure for horizontal consolidation.” This puts ESF squarely in the Euroclear camp (whence it came, critics might say) in the battle for control of Clearstream between Deutsche Borse and the Brussels-based clearer. But ESF will also continue to lobby for the removal of the barriers to efficient cross-border clearing and settlement in Europe, itemised in the recently published Giovannini Group report.See Global Custodian Pre-Sibos issue Summer 2001 (“Three’s Company”, pages 42-47).

T+1 Conference At Toronto Stock Exchange

The Canadian Capital Markets Association (CCMA) is holding a half-day conference on December 12th at the Toronto Stock Exchange on the latest T+1 developments, including three white papers.Those who are interested in attending can now register to the T+1 workshop online. Just click on the following URL

http://registration.andlogistix.com/ccma/

Fintuition Extends Operations to New York

For the first time since its creation in 1996, Fintuition Ltd, the London-based specialist Securities Finance training company, is to offer its courses in North America. In 2002, Fintuition will be offering its Global Collateral Management course in February and its Equity Finance & Structured Products course in April with both courses being run for a second time in September. All the courses will take place in NYC and will be limited to 16 participants each.Alison Brooks, Managing Director, said “I am pleased to be bringing our specialist training courses to my home country and we are confident that the courses will be as well-received in the US as they have been in Europe”.Alison Brooks and Fred Gander from Dewey Ballantine will be course directors for the Equity Finance course and Christian Karg from JP Morgan in London will be director of the Global Collateral Management Course.

Full details of dates and on-line booking is available from

http://www.fintuition.com

For further details please contact Jonathan Gollow, Business Development, Fintuition Ltd +44 (0)20 7388 6363 or

jonathan.gollow@fintuition.com

Kas Associatie N.V. Wins First Mandate

KAS Associatie N.V. has been awarded its first UK custody mandate by the GBP 145m Norwest Holst Group Staff Pension Scheme following its launch into the UK market earlier this year. Norwest Holst, part of VINCI, the world’s largest company in construction and related services, have appointed KAS to provide custody services to a UK Equity mandate managed by GMO Woolley Limited.KAS launched their custody services in the UK initially focussing on the smaller and medium sized pension fund market, an area many feel is under serviced in the UK. KAS does not impose any minima criteria business or fee levels.Ian Ratoff, Head of UK Institutional Investors said:”Launching into the UK has been a very exciting time for KAS and we are delighted that the Trustees of the Norwest Holst Group Staff Pension Scheme have chosen us to provide custodial services to their pension scheme. This mandate win supports our views that there is a real demand for custodians to service smaller and medium sized pension schemes which some players may ignore.”

See “KAS’s Custody Niche Across the North Sea”, pp 16-17, Global Custodian, IT Issue 2001.

Money Market Mutual Fund Assets January 3

Total money market mutual fund assets stood at $2.306 trillion for the week ended Wednesday, January 2, 2002, the Investment Company Institute reported today. Fund assets decreased $40.84 billion from a revised $2.347 trillion for the previous week ended Wednesday, December 26, 2001. The revision is due to data adjustments and a change in the number of funds reporting. Assets of Money Market Mutual Funds (billions of dollars) Retail: Assets of retail money market funds decreased by $7.75 billion to $1.088 trillion for the week ended Wednesday, January 2, 2002. Taxable money market fund assets in the retail category decreased by $7.36 billion to $896.85 billion; the tax-exempt fund assets decreased by $392.2 million to $191.33 billion. Institutional: Assets of institutional money market funds decreased by $33.09 billion to $1.218 trillion for the week ended Wednesday, January 2, 2002. Among institutional funds, taxable money market fund assets decreased by $32.62 billion to $1.133 trillion; the tax-exempt fund assets decreased by $466.7 million to $84.33 billion. ICI reports money market fund assets to the Federal Reserve each week. The Institute also provides other statistical reports

http://www.ici.org/newsroom/stats_trends.html

on investment companies, including monthly reports on five broad categories of mutual funds.

The Hennessee Hedge Fund Index Increases by 1.6% in December 2001

The Hennessee Hedge Fund Index increased by 1.6% in December 2001, bringing its year-to-date return to 4% net of fees, significantly outperforming most major US and international equity indices, but lagging Lehman’s bond index, which increased by 8.98% over the year. MORE at

http://www.plansponsor.com/content/News/Index

Hedge Funds Still Outperform Global Equity Markets

Despite posting their worst performance since 1996, hedge funds still outperformed global equity markets, according to early data from Allenbridge Hedge Info – which estimates that single-manager funds rose 4% last year, while funds of funds gained 3.6%. MORE at

http://www.plansponsor.com/content/News/Index

Delaware Mutual Funds Go For “eDelivery”

Shareholders of Delaware Investments’ mutual funds can now elect to receive fund materials electronically, rather than hardcopy. The new Delaware eDelivery allows shareholders to receive annual and semi-annual reports, statements, prospectuses and other documents online at

www.delawareinvestments.com/edelivery

Hedge Funds Rocket in 2001

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Hedge funds proved a better bet for investors in 2001 – with the average US hedge fund rising by 5.6% net of fees over the year, according to data from Van Hedge Fund Advisors International. Offshore hedge funds performed even better than their domestic counterparts, averaging a 7% net gain for the year.

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More at http://www.plansponsor.com/eprise/main/PlanSponsor/News/Markets/VanHedge

Kirby Quits Bolero to Re-Join Reuters

The longstanding rumour that Tony Kirby, executive director of the Global Straight Through Processing Association (GSTPA) during its fund-raising stage, was poised to leave bolero.net – the faltering trade documentation standardisation project backed by SWIFT and the Through Transport Company – look set to be confirmed this coming Tuesday. Kirby takes up a new position as head of STP Marketing Activity at Reuters on 28 January. It means Kirby re-joins the firm at which he made his debut in the securities industry, before joining SWIFT and then the GSTPA. His job will presumably be to Forge better links between the Reuters information businesses and its transactional services. There is an obvious opportunity for Reuters to provide pricing and other data to the GSTP/axion4 and Omgeo virtual matching engines. At Bolero, Kirby was director of Global B2B services, and a member of the executive committee.

Also read an article in IT Issue of Global Custodian

The Electronic Trade Enablers

Deposits to Unit Investment Trusts Increase by $1 blon

Deposits to Unit Investment Trusts increased by $1 billion in October 2001, significantly below a year before when deposits were up $2.8 billion, according to figures compiled by the Investment Company Institute (ICI). Unit investment trusts, or UITs, are investment companies that purchase fixed portfolios of selected stocks or bonds. MORE at

http://www.plansponsor.com/content/News/Markets/uit1001

Shock Horror: The Biggest Bank in the World is Japanese

Figures published today by Bankersalmanac.com include the surprising revelation that the Sumitomo Mitsui Banking Corporation, the top-rated agent bank in Japan in the 2001 Global Custodian survey of major markets, is now the biggest bank in the world. The Japanese bank, enlarged by the merger of Sumitomo and Sakura banks in April last year, sports total assets of over $905 billion. Deutsche Bank, which headed the leaguer table last year, is second with assets of $883 billion. Last time the table was drawn up, Sumitomo Mitsui did not even make the top ten.Another Japanese bank, Bank of Tokyo Mistsubishi, he Japanese triumph is vitiated by the possibility that many of the assets are in fact liabilities, in the shape of unresolved bad debts, and the fact that Sumitomo Mitsui must re-pay Yen 1.5 trillion borrowed from the government as part of its re-capitalisation programme. These considerations apply across the Japanese banking sector, whose combined assets of $7.9 trillion make Japan the biggest banking sector in the world, ahead of Germany ($6.5 trillion) and the United States ($4.6 trillion). Interestingly, the top ten in the Bankersalmanac.com league table includes only one American bank: Bank of America. The other seven are all European.

Top Ten World Banks

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Source: Bankersalmanac.com

Scripless Securities Clearing and Settlement Infrastructure

SEC will allow the creation of a scripless securities clearing and settlement infrastructure for the commercial paper market if additional safety nets are created. On the condition that additional safety nets are created to ensure transparency, the Securities and Exchange Commission (SEC) said it will allow the creation of a scripless securities clearing and settlement infrastructure for the commercial paper (CP) market. Following a joint presentation made by the Investment Houses Association of the Philippines (IHAP) and the Philippine Central Depository (PCD), the corporate regulator approved in principle the proposed scripless securities settlement of CPs. SEC chairperson, Lilia R. Bautista, noted that while the commission expresses no objection to the proposed system, it will ask the proponents to submit regular and detailed reports on the issuers and the investors that go through the scripless system. IHAP and PCD said the SEC’s endorsement would encourage financial institutions and investors to use the proposed system for outstanding CP issues. Under the proposal, PCD will create the book entry system, providing participants with individual accounts constituting each participant’s CP holdings for one or more issues.

Also refer to Rick Butler’s “Squeaky Wheels”, Global Custodian, Fall 2001

on inadequate settlement infrastructure for European commercial paper market.