Opinion & Analysis

On Thursday 28 April, Thomas Murray hosted a half-day event in Luxembourg entitled Post-trade risk roundtable: How to effectively identify, monitor and manage post-trade risk. The event sought to explore the regulatory hurdles faced by those involved with the funds industry, and how firms can mitigate risks in their post-trade networks.

Segregation of assets in accounts that bear the name of the owner is one of the unstoppable regulatory and commercial trends of our time. While custodian banks have invested considerable resources in the development of ingenious arguments against segregation, one third party lender is pleasantly surprised to find concerns about asset safety are increasing the attractions of its business model.

When Euroclear announced last month that it’s ESES CSD’s, those under its umbrella in the Netherlands, Belgium and, most importantly, France, would not be able to migrate to the European Central Bank’s single settlement platform for Europe, T2S on time to join Wave 2 in March 2016, it raised a number of questions and came as a big setback for the flagship programme.

They make up one chapter out of 12 in a set of recently revised rules published by just one regulator. Yet it would not be hyperbolic to describe the new client money rules set out in the Client Asset Sourcebook (CASS) of the United Kingdom Financial Conduct Authority (FCA) as one of the most excruciatingly detailed and prescriptive set of operational obligations imposed on investment firms, including asset managers, of any introduced since the financial crisis.

The major custodial banks have long advertised themselves as global. They engage with clients from around the world, holding and servicing the widest range of securities on the investors’ behalf.

On the face of it, this implies that the contractual terms between you, as an investor, and your custodian should be standardised, wherever you are located. In fact, this is not necessarily the case: the contractual positions offered by custodians to clients in one market may be significantly better than in another.

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