Jim Micklethwaite
05-27-2009, 09:52 AM
At the recent CSD10 conference in Budapest, there appeared to be a definite mood of trepidation about what the future holds for Central Securities Depositories (CSDs), particularly in the Eurozone.
Many CSDs' have been hit hard by the downturn in volumes and loss of asset values in their markets which has raised concerns about their dependence on core settlement and custody revenues. The economic crisis appears to have brought into sharp relief the CSD's need to evolve, but the questions of how or what services to diversify into are still seen as a 'minefield'. CSD's cannot afford to tread too hard on the toes of their local owners in order to expand into new areas of business. Prof Alberto Giovannini identified this 'Boundary problem' as one that may become more acute in the future.
In the Eurozone, the now seemingly unstoppable advance of the Target2 Securities (T2S) project means these issues are real and must be tackled within a definite time-frame (i.e. by the 2013 launch date of T2S). Most Eurozone CSD's are understandably nervous about the prospect of losing their core settlement revenues to T2S, but with the recent defeat of the Euroclear User Choice Model argument, it now appears inevitable. Their task now is to resolve how to reinvent themselves by moving up the value chain to service end investors and or issuers directly, taking a side step into other asset classes (funds, derivatives), or even apply lateral thinking and technology to the problem by establishing themselves as national depositories or communication hubs for other areas of business information unrelated to capital markets.
Whatever the talk about new opportunities for CSDs in the future from this global shake-up, the fact is that the comfortable position enjoyed by CSDs in many markets is being challenged, and these entities will need to become leaner, meaner and more competitive to survive.
Many CSDs' have been hit hard by the downturn in volumes and loss of asset values in their markets which has raised concerns about their dependence on core settlement and custody revenues. The economic crisis appears to have brought into sharp relief the CSD's need to evolve, but the questions of how or what services to diversify into are still seen as a 'minefield'. CSD's cannot afford to tread too hard on the toes of their local owners in order to expand into new areas of business. Prof Alberto Giovannini identified this 'Boundary problem' as one that may become more acute in the future.
In the Eurozone, the now seemingly unstoppable advance of the Target2 Securities (T2S) project means these issues are real and must be tackled within a definite time-frame (i.e. by the 2013 launch date of T2S). Most Eurozone CSD's are understandably nervous about the prospect of losing their core settlement revenues to T2S, but with the recent defeat of the Euroclear User Choice Model argument, it now appears inevitable. Their task now is to resolve how to reinvent themselves by moving up the value chain to service end investors and or issuers directly, taking a side step into other asset classes (funds, derivatives), or even apply lateral thinking and technology to the problem by establishing themselves as national depositories or communication hubs for other areas of business information unrelated to capital markets.
Whatever the talk about new opportunities for CSDs in the future from this global shake-up, the fact is that the comfortable position enjoyed by CSDs in many markets is being challenged, and these entities will need to become leaner, meaner and more competitive to survive.