SECURITIES SERVICES: FURTHER READING Editor’s selection
The post-trade function has undergone a metamorphosis, fuelled by digitalisation, the emergence of new asset classes and industry reform. Here are our editorial picks from what has been a roller-coaster year
Managing evolving networks
The Network Forum (TNF) series of events are high points of the securities services community year, but during Covid-19, discussion could only happen virtually. After a three-year enforced hiatus, TNF convened in London on 13 and 14 June 2022, on the business day following the S&P 500’s descent of 3.5%, dropping to almost 20% from its peak. In short, the operating environment, as noted in one of the early panels, was “challenging”. This article provides a useful
barometer, with links to source materials of where infrastructure participants see some of the most dynamic changes. Examples include post-trade settlement acceleration towards T+1 and T+0, implementation of the EU’s Central Securities Depositories Regulation’s (CSDR) Settlement Discipline Regime (SDR), the role of big data in providing meaningful business intelligence, and the potential of tokenisation enabled by distributed ledger technology.
A brave new SDR world?
On 1 February 2022, the Central Securities Depositories Regulation's (CSDR) Settlement Discipline Regime (SDR) finally came into force, following two major changes to the deadline – which together amounted to a delay of nearly two-and-a-half years. The SDR affects all actors in the securities lifecycle, from investors to central securities depositories (CSDs), aiming to improve the safety and efficiency of securities settlement in the European Economic Area (EEA). To achieve this, the SDR introduced a set of measures to prevent and address failures in the settlement of securities. This article explains the new regime, and the postponement by the European Securities and Markets Authority (ESMA) of the mandatory buy-in regime under CSDR for market participants that fail to settle their trades within a set period. A later release from ESMA confirmed the postponement was for three years.
What will be the shape of digital custody?
The most commonly traded digital asset is cryptocurrency, and although sentiment around this had changed considerably by mid-2022 following market plunges, underlining the asset class’s volatility, some institutions, including hedge funds, family offices and wealth advisers, have been incorporating cryptocurrencies into their portfolios. Custodian banks are building digital custody solutions to help them.
In some jurisdictions (for example, China and India), the authorities have been swift to outlaw cryptocurrencies to safeguard investors. Meanwhile, the US is undertaking a review into whether stablecoins threaten financial stability, in what could be a precursor to tighter regulation. Others are not banning cryptocurrencies outright, but they are introducing protections to bring order to this largely unsupervised corner of the market. This article provides more details about digital assets, the risks, regulatory treatment and what custodians need to prepare for.
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