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VOLUME 3 No. 15 - Pre-Sibos 2006 ISJFORUM.

£ 25 - UK, ROW
$ 43 - Americas
INVESTOR € 35 - Europe, Mid-East, Africa








S ERVICES Welcome to the pre-Sibos edition of the magazine amidst
news of the growth and success of ISJ.
JOURNAL First, in this edition we focus on some of the future areas
of evolution of custody and securities services.
VOL 3 No. 15 - Pre-Sibos 2006 Brian Bollen takes Singapore by the horns and looks at
some of the near and long-term opportunities (in
competition with Hong Kong) amid turbulent times in the
Asian markets.
In Africa following recent legislative changes and
modifications to its pension law, ISJ examines the pension
fund landscape. Also in Italy we look at what the future
holds for custodians and services providers in that country.
South Eastern Europe is also on the menu as we focus
in on Turkey and Greece, looking at the growth of the
markets, the future collaboration of the Turkish and Cypriot
financial systems and regulatory change in the securities
space following the European Union’s spread.
Not able to resist the football fever that has gripped us
over the last few weeks, our resident disaster recovery expert
delves into how our office work/play balance can change
around times of national sporting events…….roll on The
Our panel discussions in this edition look at the latest
developments in the Prime Brokerage sector and also focus
on consolidation in the Nordic region and
a rare moment? why this is seen as future growth area for client servicing.
Here at the magazine this year’s ABC audit has proven
ISJ’s exponential growth with our number of readers reaching 160 per cent of that of
the next largest publication in this sector. So please give yourselves a firm pat on the
2006 PPA MAGAZINE AWARDS back whilst I extend a hearty ‘thank you’ for your continued support for the magazine
PUBLISHER OF THE YEAR over the past year.
HIGHLY COMMENDED June also saw the second ISJ Student Essay Awards that drew some of the best talent
MEMBER - PERIODICAL PUBLISHERS ASSOCIATION and drive from tomorrow’s people in the securities services industry to The Dorchester
on London’s Park Lane. Many
congratulations to our winner, Nathalie Aubry, whose essay ‘The Impact of Regulation
on Securities Services’ can be read on page 60 and many thanks to Citigroup and ABN
AMRO Mellon who kindly sponsored the event.
Finally, we welcome Ben Katzler to ISJ, experienced in the field - and known to many
of you, Ben is an asset for our team.
Analysis for the Audit Issue Vol 3, No 14 distributed June 2006. Deputy Editor - Alan Duerden

Managing Editor: Mark Latham (

Deputy Editor: Alan Duerden (
Contributing Editor: Brian Bollen. Contributors: Christine Senior, Rekha Menon, Keith Ford

Publishing Manager: Nicola Barker-Moseley (

Account Managers: Kenny Thomas (
Nicholas Parsons (,
Ben Katzler (
Directory Sales: Monique Theart (
Operations Manager: Katerina Dimitrova (

Publisher: Justin Lawson ( investor

Chairman: Mark Latham (
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WWW.ISJFORUM.COM ISSN 1744-151X. Printed in the UK by Pensord Press


VOLUME 3 No. 15 - Pre-Sibos 2006
£ 25 - UK, ROW
$ 43 - Americas
€ 35 - Europe, Mid-East, Africa
1 Editorial Technology
S ERVICES 41 peterevans
6 News - The Tech Touch
- Roundup of global news
THE Funds 42 Nordic Custody
THE NEW ROAD FOR SINGAPORE CUSTODY 12 Domicile Report - Panel Debate
Jersey Ireland Cayman
Securities Lending
NORDIC CUSTODY - EXPERTS Special Report 52 Analyse This
13 The Neighbours - Expert Impressions
- Turkey & Greece
Legal & Compliance
VOL 3 No. 15 - Pre-Sibos 2006 Pensions 56 Class Actions
15 Italy - In a Class Of Their Own
- The Italian Job
ISJ Essay Award 2006
18 Lothian Pension Focus 60 The Winning Essay
- Strategies, Scottish Style - The Impact of Regulation
on Securities Services
20 Africa
- The Lion Sleeps Tonight Regulars
66 Events
24 Singapore - Cover Story - Where & When To Go
- Switzerland In Asia?
67 Meet The Future
Data Services - Its All In A Days Work
27 Proxy Voting
- X Marks The Spot 68 Mandates
- And Relax......
30 Prime Brokerage 69 Disaster Recovery
- Panel Discussion - Fever Pitch

34 Bermuda & Cayman 70 People Moves

- Taking a Dip - Moving & Shaking

Download ISJ back issues at 38 SIBOS Preview 72 ISJ Directory

WWW.ISJFORUM.COM - Leading Vendor Profiles - Directory of Securities


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requirements may become. Are asset Services Authority, regarding the regu-
Letters to the Editor managers, custodians and brokers latory implications of a change in
ready for this challenge just yet? ownership of the London Stock
That debate is still very much open. Exchange. We agree with his analysis
of the issues and would have concerns
Geoff Harries, director of STP product if in the longer term the Exchange
management at CheckFree Software were no longer subject to UK regula-
tion as a Recognised Investment
AUTOMATION OF CHANGE As users of the London Stock
Exchange, our members consider that
MiFID: the market works well for participants,
As we enter the third quarter of
THE CHALLENGE TO 2006, the dramatic upturn in for- that is, issuers, members and end-
SECURITIES PROCESSING tunes witnessed by the securities investors. The regime is based on
market during the first half of the market-developed solutions that have
Regulatory initiatives such as MiFID year appears to be gathering consider- evolved and generally kept pace with
are attracting a lot of debate. When able momentum. the sophistication of the market. The
the new European regulations come To such an extent that a few bro- FSA plays no small role in this. By
into effect in November 2007, it will kers of our acquaintance say they are virtue of its role as Competent
become much easier for exchanges now doing so well that they feel under Authority for listing, and more specifi-
and depositories within the Eurozone enormous pressure from their clients cally through its oversight of the sec-
to offer trading and settlement servic- to be seen to reinvest substantial ondary market activities of the
es for all Eurozone securities. In the resources into new technology and Exchange, there has over time devel-
spirit of open markets and competi- improving the services and value that oped a well-judged regime that offers
tion, this makes sense: let the mar- they offer. appropriate, suitably flexible regula-
kets decide if there is a more effi- tion that takes account of the very dif-
cient or cheaper venue for execution
and settlement.
“Is the scene now ferent profile and needs of the market
The principles of competition and set to move into STP
open access that the new regulation
mandates for capital markets trading solutions and “We would have
and settlement are sound. However, automation of concerns if in the
they also mean that more assets are
likely to be traded and settled in mul- currently manual longer term the
tiple venues. This seemingly simple
flexibility has created more than a processing areas?” Exchange were no
few operational headaches. With more Is the scene now set for financial longer subject to UK
settlement locations comes more risk
and the challenge is that there are a
institutions to move into STP
(Straight Through Processing) solu-
large number of firms that simply do tions and general automation of cur-
not have the kind of flexible and rently manual processing areas? I Any change in ownership should not
rules-driven transaction management believe we could actually be in for a prejudice these strengths and we
systems needed to accommodate the big change. Until now, it’s been very would have concerns in particular if
market practices that come with new much a buyers market, with supply the FSA’s role and influence were
sources of liquidity. more than matching demand. diminished as a result of encroach-
With demand at current levels, STP ment by non-domestic regulatory
“Seemingly simple software implementations can be authorities, the trading arrangements
provided by the Exchange were sub-
flexibility has created scheduled at a time to suit the pre-
cise needs of an organisation. So now ject to non-market-led change that
more than a few it’s becoming increasingly important does not fully take into account the
needs of end-users of the market, or if
to make sure you keep ahead of the
operational crowd, to retain full control of any any new owner sought to rationalise
its existing business with that of the
headaches.” planned investments.
Exchange without full consultation
Approaches to exception manage- Harvey Colborne, Principal Consultant with market participants and the
ment that attempt to fix a problem in of Mondas PLC endorsement of users of the market.
isolation without feeding back into
inventory management and decision Richard Saunders, Chief Executive,
processes risk missing the point alto- Investment Management Association
gether. The real purpose of the trans-
action settlement process is to have IMPLICATIONS FOR THE
accurate, timely information on secu- LONDON STOCK EXCHANGE If you are effected by, or have an
rities positions available at all times – opinion on, any aspect of investor
either locally or globally, no matter The IMA has noted the statement services get it off your chest, write to...
how many settlement locations are published on 12 June by Callum
involved or how complex regulatory McCarthy, Chairman of the Financial


News - Europe Middle East Africa

but due to the current position of the Ltd (Karla Derivatives), has joined the
futures market investor returns will be Financial Tradeware/EGP Member
lower than the change in commodity Administered Closed User Group (MA-
prices. If cash flows into commodity mar- CUG). Registered in the Bahamas, Karla
kets remain high, there is a risk that com- Derivatives opened in July 2005 and is a
modities futures will stay in contango. Strategy European macro hedge fund that
trades in a variety of stocks, bonds, future
Frankfurt - Dresdner Bank is to cut 2,480 and options, and money market instru-
jobs by 2008, half of which will be from its ments. Alberto Fontana, Managing
back office operations, it has been Director of Financial Tradeware, said: “We
announced. The move comes as part of a are uniquely positioned to offer the MA-
market offensive in which the bank CUG service for companies who can bene-
intends to ‘safeguard its long-term suc- fit from low-cost SWIFT connectivity. We
cess’ by ‘simplifying’ its hierarchies, struc- offer the highest level of security, efficien-
tures and processes. Of the 2,480 jobs cy and reliability associated with SWIFT
that are to be cut, half will be in transac- Network with the benefit of affordable
tion processing and loan processing. “We fees for Hedge Funds such as Karla
intend to use these job cuts to keep the Derivatives. Our MA-CUG is an excellent
overall cost base stable and grow our offering for hedge funds with these chal-
income at a faster pace than the market,” lenges.”
said Herbert Walter, Chairman of the
Board of Managing Directors of Dresdner London - National Australia Bank UK
Bank. (NAB UK) has appointed Xchanging to
manage indirect spend and transactional
Market Infrastructure Technology procurement processing on behalf of
Frankfurt - Deutsche Borse has signed a London - Exchange Data International and Clydesdale Bank and Yorkshire Bank. The
‘Memorandum of Understanding’ with the AIM Software have entered into a partner- deal covers all of the indirect spend trans-
China Foreign Exchange Trade System & ship to provide price, static and corporate acted by Clydesdale Bank and Yorkshire
National Interbank Funding Center actions data from EDI via AIM Software's Bank both wholly owned subsidiaries of
(CFETS) to enhance cooperation concern- reference data management platform NAB UK. As part of the partnership,
ing financial markets development in GAIN, which offers clients a range of func- Xchanging will also manage the banks'
China. Under the MOU, both parties have tions for the automatic processing of data transactional procurement activity.
agreed for Deutsche Borse to contribute and securities information. The combined
to the development of sophisticated inter- offering helps financial institutions min- Custody & Outsourcing
bank and foreign exchange markets in imise the costs and risks associated with London - Royal Mail Pension Plan has
China. “Deutsche Borse Group looks for- back office processes and improve opera- consolidated £2.2 bn of assets with
ward to enhanced cooperation with tional efficiencies. “The expertise and JPMorgan Worldwide Securities Services
CFETS,” said Ulrich Becker, Deutsche know-how of both companies will help in a move to bring all of its segregated
Borse Managing Director Corporate companies reduce overall costs by assets under one global custodian. Royal
Development, responsible for group activ- increasing the reliability and the efficiency Mail Pension Plan has approximately £22
ities in Asia. of their data processing.” said Josef bn in assets and JPMorgan has acted as
Sommeregger, Head of Business global custodian for Royal Mail Pension
London - A survey released by Morgan Development of AIM Software. Plan since 1999.
McKinley has shown that job vacancies
continue to rise within London’s financial Paris - GL Trade has announced that Fortis Zurich - Credit Suisse Group has
services industry. New job vacancies with- has extended their existing contract with announced that it has entered into a
in London’s investment banking and the group to provide connectivity to Asian definitive agreement for the sale of
financial services industry continued to markets via GL NET, GL TRADE’s order Winterthur Swiss Insurance Company to
rise in May 2006, up 19.4% compared to routing and data feed network. “We are AXA for a cash consideration of CHF
May 2005 and average basic salaries con- pleased that FORTIS relies on GL TRADE 2.3bn. AXA will acquire 100% of
tinued to push above the £50,000 mark to enable its Asian clients to have access Winterthur and the deal is expected at
for the third consecutive month. to European and US markets and vice year-end 2006. Leonhard Fischer, CEO of
versa,” said Franck Peltier, GL TRADE Winterthur, said: “The sale of Winterthur
London - Pension funds that currently Managing Director NEA-SEA. “This deal is to AXA is a significant step for the clients
invest in commodities should be aware the logical evolution of a long term part- and employees of Winterthur as well as
that they could lose money by following nership.” for the Swiss market. By joining AXA,
the traditional passive futures approach to Winterthur's businesses will be best posi-
investment according to Mercer Funds & Administration tioned for future growth.”
Investment Consulting. More institutional London - Financial Tradeware plc has
investors, including pension funds, are announced that Bahamas based Hedge
now showing interest in this asset class, Fund, Karla Derivatives Strategies Fund WWW.ISJFORUM.COM


News - Americas

Market Infrastructure compute regulatory capital as per the GMO, the Boston-based institutional
Boston - According to a new report by Advanced Internal Ratings Based asset manager. The new GMO sub-
Aite Group, LLC, the financial services Approach of the Basel II Accord. Speaking advised funds will be available through
industry will spend about US$15 bn on on the relationship, Pete Carlson, Senior financial advisers and will join other John
brokerage, clearing, and exchange fees in Vice President, Director of External Hancock offerings within John Hancock's
2006. In reviewing recent trends, the Aite Reporting at Wachovia said: “We chose 401(k) retirement plan division. “We look
Group expects the financial services Reveleus for the completeness and flexi- forward to serving those who invest with
industry will sustain a Compound Annual bility of the Reveleus Basel II Solution and John Hancock,” said Tony Ryan, partner
Growth Rate (CAGR) of 18.95% over the its ability to meet our current and future and head of global client relations and
next four years, based on increased trad- requirements.” sales for GMO. "Since our founding in
ing activities and expansion into global 1977, we have focused on managing insti-
markets and alternative investments. New York - Risk Control Limited has tutional assets. John Hancock's historical
“While financial services firms still have a announced the launch of its Risk strength serving financial advisers and
very long way to go, the market is driving Controller individuals complements our capabilities,
renewed efforts in STP,” said Adam solu- and allows us to reach a broader base of
Honore, author of the report, “As trade investors.”
volumes continue to rise, cost will also
climb.” New York - JPMorgan Worldwide
Securities Services has announced that
Technology ProShares has selected the firm to
New York - Thomson Financial provide a full range of fund services
and the Toronto Stock Exchange including accounting, administra-
have announced an alliance to tion, transfer agency and custody
deliver market data, analytics services. JPMorgan will be sup-
and competitive information porting ProShares in its launch of
to investor relations profes- eight new exchange-traded funds
sionals in Canada through the (ETFs), which are based on
launch of TSXconnect. indexes such as the Standard &
Thomson will also become a Poor's 500, the Nasdaq 100 and
content provider and sponsor the Dow Jones Industrial
of market data to the TSX Average. “ProShares selected
Broadcast Centre, which is also JPMorgan to provide a full range of
a satellite location to Canada’s custody services because they have
financial news outlets. The plat- the people, technology and experi-
form enables IROs to monitor the ence to help us make the launch of
performance and trading activity of ProShares Exchange Traded Funds a suc-
their stock and that of their peers and cess,” said Michael Sapir, CEO of
identify current shareholders. In addition, ProShare Advisors LLC.
they can monitor earnings and research tion
domestic and international trading instru- from the Custody & Outsourcing
ments. SIA Technology Management Conference Boston - Mellon Financial Corporation
2006. The solution was engineered to has announced that its Global Securities
New York - JPMorgan Worldwide measure risk over a wide range of instru- Services (GSS) group has been named
Securities Services has announced that ments. It uses sophisticated modelling custodian and provider of value-added
Charles Schwab Investment Management techniques to analyse trading scenarios services for Makena Capital. Mellon will
(CSIM) selected the firm to provide out- and compute both portfolio and enter- provide domestic and global custody,
sourcing services for separately managed prise-wide risk measures. With this level monthly valuation of the securities in
accounts included of approximately $180 of information, it is hoped that firms can Makena's portfolio, securities lending and
bn in assets. JPMorgan Managed Account make informed decisions on the efficient foreign exchange support. “Both newly
Solutions is providing CSIM with a variety allocation of capital across divisions and created investment management firms
of separately managed account outsourc- have the ability to devise return efficient such as Makena and well-established
ing services designed to automate back trading strategies and remain informed managers are looking to us for value-
office functions such as shadow account- on the effect these strategies have on added services to go along with our core
ing, account reconciliation, new account their overall risk profile and the capital custody offering,” said Vince Sands, pres-
setup, performance calculation and required for reserves. ident of Mellon Global Securities
account maintenance. Services, U.S. “We continue to invest in
Funds & Administration our advanced technology infrastructure so
Mumbai - Reveleus has announced that Boston - John Hancock Financial Services, we can provide the types of services that
Wachovia Corporation has selected the Inc. has announced that its mutual funds sophisticated investors such as Makena
Reveleus Basel II Solution. Reveleus will unit has added seven mutual funds as a Capital require.”
provide a solution enabling Wachovia to result of a sub-advisory relationship with
“A masterpiece! The story hinges around BNP Paribas Securities Services, who are always coming up
with new and ingenious ways of providing their clients with a winning solution. In this book, we uncover the
secrets of their success: their on-the-ground presence in Europe and Australasia means they are perfectly
placed to address the full range of their clients’ business needs, on a global scale.
BNP Paribas Securities Services - close to clients, close to markets. ”
BNP Paribas Securities Services is authorised and regulated by the CECEI & AMF in France and is regulated in the conduct of its designated investment business in the UK by the Financial Services
Authority. BNP Paribas is a diversified financial services group operating under the trademark BNP Paribas and offering products through various affiliated entities, including in the U.S., BNP Paribas
Securities Corp., a NASD registered broker/dealer and a member of SIPC.
News - Asia Pacific

deemed to have an insufficient trade management system

for the prevention of transactions deliberately made to form
an artificial market price that does not reflect the actual sit-
uation. TSE has also requested that HS Securities submit a
business improvement report regarding the inspection of
trading monitoring, establishment of an appropriate trad-
ing monitoring system and verification of how managing
directors are involved in the trading monitoring system.

Shanghai - The Shanghai Stock Exchange has rounded off

compilation of the "SSE Guidelines for Internal Control of
Listed Companies.” Since 2003, the repeated exposure of
out-of-line issues involving the senior management of listed
companies has stirred the securities market. The
Guidelines are regarded by the industry as the Chinese ver-
sion of the "Sarbanes-Oxley Act" and a blueprint of the
Guidelines is expected to promote listed companies to
establish an effective transparent regulatory mechanism for
improving the quality of listed companies in China.
Market Infrastructure Technology
Shanghai - HSBC has received approval from the China Singapore - i-flex solutions has announced that The Hong
Banking Regulatory Commission (CBRC) to open a branch Kong and Shanghai Banking Corporation Limited (HSBC)
in Xi'an, enabling HSBC to provide banking and financial has selected FLEXCUBE Investor Services as the software
services from Xi'an to support China's ‘Go-West’ cam- solution for its Transfer Agency (TA) and Investor Servicing
paigns. Preparations are under way to inaugurate the Xi'an business. An agreement has been signed between the com-
branch within the year, upon further receipt of the opera- panies and HSBC’s Institutional Fund Services (IFS) busi-
tional licence from the CBRC. Richard Yorke, CEO China at ness will deploy FLEXCUBE with its Investor Services mod-
The Hongkong and Shanghai Banking Corporation Limited, ules across its markets in Asia and the Middle East. Kishore
said: “We see great potential in the region which has Kapoor, CEO, i-flex solutions pte ltd, said: “HSBC is a
attracted considerable overseas and domestic investments tremendous opportunity for us to showcase our compre-
in recent years. HSBC looks forward to supporting the hensive solutions and this contract has further reinforced
development of the local economy and meeting customers' the position of FLEXCUBE Investor Services as the leading
needs for international financial services." new generation Transfer Agency and Fund Distribution
solution in the global market place.”
Sydney – The Australian Stock Exchange (ASX) joined with
Australian custodians and SWIFT to work towards improv- Custody & Outsourcing
ing the automation of the corporate action processing
cycle. This industry partnership will launch in July 2006 Sydney - RBC Dexia Investor Services has been selected to
with an intra-day corporate action service via SWIFTNet in provide custody, investment administration and unit reg-
the ISO 15022 format. This SWIFT corporate action service istry services for Denning Pryce’s newly launched Equity
forms part of the new range of reference data and corpo- Income Fund. “We were impressed by RBC Dexia Investor
rate action services, ReferencePoint, that was recently Services‚ extensive knowledge and experience with deriva-
launched by ASX. Colin Scully, ASX Deputy CEO and Group tives, as well as their reputation for excellent client service,”
Executive, Markets said: “ASX is pleased to introduce this said Michael Pryce, Founder and Director of Denning Pryce.
new service. It reflects the benefits of engaging with leading “We are confident that we have selected the best partner in
international organisations and industry partners such as the marketplace to help us successfully launch this fund
SWIFT and the custodians to provide industry leadership and help to grow our business over the long term.”
and deliver innovative new services to meet industry chal-
lenges.” Mumbai - ICICI OneSource has announced that it is to
invest in setting up outsourcing centrers in Northern
Hefei - DBS Asset Management will acquire a 33% stake Ireland, creating around 1,000 jobs over the next two years.
from the existing shareholders of Changsheng Fund The investment, supported by Invest Northern Ireland (INI)
Management Company Limited. DBSAM will become a is expected to deliver over
strategic shareholder of Changsheng and acquiring stakes £28 million in salaries to the local economy by 2008.
from all three existing shareholders of Changsheng, includ- Ananda Mukerji, MD & CEO said: “We are delighted to be
ing 8% from Guoyuan Securities Company Limited, 13% in Northern Ireland and value the support and encourage-
from Anhui Provincial Innovative Investment Company ment we have received from Invest Northern Ireland.
Limited and 12% from Anhui Provincial Investment Group Northern Ireland has a proven track record in providing a
Company Ltd. The shares will be acquired for a total cash large pool of talented people and an extremely conducive
consideration of RMB174, 900,000 (approximately S$34.4 business environment and we intend to leverage this to
million). global advantage.”
Tokyo – The Tokyo Stock Exchange has imposed a censure
penalty on H.S. Securities Co., Ltd. as the company was FREE NEWS DAILY AT WWW.ISJFORUM.COM



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your international brokerage and cross-border custody relationships. At
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Domiciles Report

Jersey, Ireland and Cayman

comment on the outlook

Graeme McArthur Deirdre Norris Valia Theodoraki

Jersey’s funds sector continues to grow, Dublin continues to be an attractive centre From its start as a listing facility for Cayman
with the statistics for the first quarter of for investment funds, despite increasing Islands’ specialist products, mutual funds
2006 announcing further record levels for labour costs and the relocation of fund and debt securities, the Cayman Islands
the Net Asset Value of Funds under admin- administrators around the country. Stock Exchange (CSX) has emerged as an
istration of £156billion - an increase of 50% Irish domiciled funds are mostly divided innovative, global gateway to accessing cap-
compared to the same period last year. into UCITS and Non-UCITS funds. As an ital markets in just over eight years.
A more detailed analysis of these recent OECD (Organisation for Economic 2005 was of particular significance for the
statistics confirms that whilst there is Co-operation and Development) country, CSX, as its ongoing efforts to build a com-
growth across the board, the main engine is Ireland is recognised for its high standards prehensive listing facility combined with a
the alternative investment classes of private of regulation and service levels. The coun- high level of market activity produced one
equity, property, fund of funds and, of try also allows for the distribution of UCITS of the most successful years in its history.
course, hedge funds. funds into other European countries. An important achievement was surpassing
Much of this current momentum in the The Irish financial services industry is 1,000 approved listings. Reaching this
funds industry is the result of the successful regulated by the Irish Financial Services milestone less than eight years from incep-
implementation of the Expert Fund regula- Regulatory Authority. tion is a testament to the confidence that
tions last year, but the island has not stood Rather than ‘sitting on’ investors from a the global marketplace has in the CSX.
still as the recent introduction of Incorpor- regulatory point of view, the Irish The CSX continued to benefit from strong
ated Cell Company legislation has shown. financial regulator operates a flexible sys- fund activity in the Cayman Islands, with the
The other key development taking place is tem of regulation, which assumes that Cayman Islands Monetary Authority report-
the broadening of the funds industry in the sophisticated investors who invest a certain ing another year of double-digit growth in
island. Jersey is a base for a number of amount of money accept the risks that go fund licences for 2005.
Fund Managers and recently there have along with that. The key advantages of Cayman’s fund
been numerous enquiries from fund pro- Investment managers are increasingly industry continue to be the depth of expert-
moters and managers currently located out- outsourcing non-core functions such as ise in global finance, delivered by world-class
side the island who are now considering fund accounting, administration, investor law, accounting and fund administration
using Jersey as a physical base for their services, and trustee and custody services. firms. Cayman’s legislative framework
international fund management activities. This trend places Dublin-based service allows for sophisticated investment tech-
The funds sector is actively marketing providers in a unique position to look after niques, including substantially leveraging
itself as a jurisdiction of choice for hedge these managers’ assets. portfolios, making loans of securities on an
fund managers with key considerations for Opportunities within the Irish financial unlimited basis and investing without
such firms including, current financial and services industry are guaranteed as more restriction in any currency or instrument.
business regulations as well as fiscal rules institutional investors enter the alternative Cayman-registered funds now number
and housing regulations that apply in Jersey. investments arena. more than 7,000 and the CSX experienced a
As well as Jersey’s reputation as a well The hedge funds market is growing 25 per cent increase in fund listings from
regulated jurisdiction, factors such as prox- rapidly by the day and will present huge the previous year. With a combined market
imity to the UK , culture, language and opportunity in the future. capitalisation of more than USD89 billion
schools will all work in Jersey’s favour in and an international cadre of issuing com-
attracting hedge fund managers and their panies, broker members and listing agents,
families to relocate to the Island. the CSX’s position as a leading offshore
exchange remains solid.
Graeme McArthur, representative of the Jersey Deirdre Norris, is director of marketing and By Valia Theodoraki, CEO, Cayman Islands
Funds Association and Managing Director of communications, Dublin Funds Industry Stock Exchange, Cayman Islands
Northern Trust in Jersey Association. ISJ staffers contibuted to this report.


To find out more, visit

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jurisdictions above or be available to you. This material has, to the extent required, been approved for purposes of the UK Financial Services and Markets Act 2000 by Royal Bank of Canada Investment Management (UK) Limited,
71 Queen Victoria Street, London, EC4V 4DE, which is authorised and regulated by the Financial Services Authority. ™Trademark of Royal Bank of Canada used under licence. BKI/05/158
Special Report - South Eastern Europe

Capital Markets, HSBC in Greece

The South Eastern part of Europe believes, it is hard to shake off the
is still defined as an ‘emerging’ emerging market image.
“Greece is not an emerging market in
part of the world, but growing many ways,” he states. “When the Greek
market was upgraded in 2001, in many
economies and EU membership desks it stayed in the emerging markets
could see it rise as a jewel in group. We even received an award at
HSBC Athens as the best custodian in an
Europe’s crown. Emerging Market and we were
supposedly a mature market by 2001.”
It is not with bitterness that Kanarisk
says this, but with an understanding that
until recently the Greek market has been
the only one in the South Eastern part of
Europe to really stand out and so people’s
perceptions of this area of Europe is that
it is still very under developed.
“Surrounding Greece we have no EU
members and no mature markets,” says
Danarisk. “Turkey, Bulgaria, Romania,
Macedonia, our neighbourhood is an

emerging one at best, but for Greece to
expand, the only way is to look close to
Alex Kartalis, BNP Paribas echo’s this
sentiment and believes that the Greek

Neighbours market has come on leaps and bounds

since its inclusion in the European
Union. “Greece is advanced compared to
other markets, the size of the market is
quite big here, of course we are small in
The South Eastern part of Europe comparison to the ones in Western
has been in the doldrums of recent Europe but it’s trading practices and legal
years. On the fringes of an econom- framework are in a very advanced stage
ically successful and slick operating compare to the other markets.”
Western Europe, the East has been The capital markets area in Greece is
lagging behind somewhat. quite advanced compared to the size and
In many countries, high rates of the maturity of the other markets in the
inflation and shaky political and region and this is mainly because of its
social systems have been responsible participation in the European Union.
for repressing the economic New administration of the exchange in
development of the East. The tide is Greece is set to make Athens the hub for
changing now however, with the South Eastern European region and
inflation rates in the region at this is naturally very much supported by
historical lows and new government the financial world in Greece.
influences allowing countries “I think this strategy makes sense
branded with emerging market because I do not see what would add to

“Surrounding Greece we have no mature

markets. Our neighbourhood is an
emerging one.”
status to fight for their right to the value of the exchange if we were to
European Union membership. link up, for example, with Euronext. I
In 2001, the Greek market was think our liquidity would disappear and I
upgraded in its status from being an don’t see any benefits for the market. It
emerging market, but as Dinos makes sense to create a hub in the
Bottom, right? Kanarisk, Head of Treasury & region,” says Kartalis.


Special Report - South Eastern Europe

The Greek exchange is linking up with The Underdog substantial.”

Cyprus, who recently joined the Turkey is seen as a big part of the equa- Before the law was passed a only state
European Union. The two countries are tion for the South Eastern European pension fund system existed in Turkey
setting up a common financial platform region. It is the biggest country in the however the system was not efficient and
and the Cypriot market has adopted all region with a population of about 70-80 legislation has been changed to give it a
the regulations, systems and trading prac- million, has a large economy and with more professionally managed approach
tices from the Greek market. Through the government pushing to become a for the funds and administration side and
this cooperation, Greek brokers will be member of the European Union the it is planned to bring the pension fund
able to become remote lenders in the country is a growth area for the future. system inline with European legislation.
Cypriot exchange. “The Turkish capital market has been Currently the primary investment
For custodians in Greece this is a posi- improving on a yearly basis and we have vehicle for pension funds in Turkey is
tive step as they will be able to provide seen this in the number of companies fixed income securities as high rates of
remote clearing and settlement and open to the public through initial public inflation in the country have meant that
other custody services in the Cypriot offerings. The market capital has corporate bonds and bond sector have
market. This is a move that BNP Paribas increased substantially over the last five been quite under developed but this is
will pursue and their Greek arm has to ten years and most importantly likely to change in the future.
applied to the bank in France to get a Turkey is now in negotiations with the “With the new pension system, the
license for operating in Cyprus. instruments that the funds
“For us it is an opportunity because can invest in are enhanced.
there are cultural links, language links “Turkey is seen as a big part of Not only the fixed income
and technical links,” explains Kartalis. securities, but also equities,
“Additionally, Cyprus has recently the equation for the South long-term and short-term
joined the EU so they had to reform
and upgrade their legal framework so
Eastern European region” deposits and derivatives will
be used. Securities that are
now it provides a level of market not only issued and quoted
transparency and safety, quite similar to European Union and in the process of on the Istanbul stock exchange but also
the standards of the European Union.” adjusting all its systems and regulatory quoted outside the Turkish market will
The exact date for this move with the infrastructure to meet with the also be possible for those newly estab-
Cypriot market has not yet been decided European requirements,” believes lished pension funds,” says Ibrahim.
but the plans are hoped to go ahead later Ibrahim, HSBC. While many aspects of the Greek mar-
this year. In January 2006 a new tax law came ket seem to be advanced compared to
“How much of this move the authori- into force in Turkey that has helped accel- the markets of other countries in South
ties are going to be ultimately successful erate the pace of banking reform in the Eastern Europe, like Turkey, the Greek
in, we don’t know, but certainly the col- country. Under the new law, substantial market is not yet mature enough for
laboration with Cyprus, is certainly a changes have been realized regarding the pension fund services. Currently there is
first step forward,” says Lianna Biniaris, taxation of interest income and capital no provision for private pension funds
Senior Relationship Manager, Custody & gains from securities and other financial and the state pension funds that operate
Clearing, HSBC Greece. instruments. Now, the income retained in the market have to follow very conser-
The authorities in Greece are also look- from securities and other financial instru- vative and restrictive investment policies.
ing to expand into the Balkan countries ments is taxed at a single rate of 15%. The market is yet to open up in this
in the same way and have them purchase “As a sub-custody provider in the mar- space as pension funds are currently
the Greek system as well. But as Biniaris ket we also provide tax services for non- only allowed to invest small parts of
explains, this may be limited to fixed domestic institutional investors. their assets in the stock market.
income instruments as the Greek market Basically, the tax calculation and pay- Big players in the market target finan-
currently only uses Swift in its fixed ments has been given to the local sub- cial foreign institutions, which make up
income market. custodians, so therefore HSBC as a serv- 95% of their revenue. This does not
Whilst the Greek government are look- ice provider is providing those services mean that local clients are neglected, but
ing to expand into other countries there to institutional investors,” says Ibrahim. they are not really the target market
is mixed feeling as to how successful this Pension funds are a new product for behind the expansion of the region.
move will be due to the complexity of HSBC in Turkey as the first pension fund While Greece is undoubtedly leading
the different markets and socio-political was only established a couple of years the way in South Eastern Europe, other
structures in the countries around ago. The Turkish private pension law was countries such as Cyprus and Turkey
Greece. “If you look at Euronext, it is a drafted in 1999 and was implemented in will come into their own in the months
combination of markets in very similar 2002. This is a milestone for Turkey, and years to come. With many countries
countries, very similar in terms of wealth allowing a voluntary, defined contribu- in this part of Europe striving to make
and market discipline and unfortunately tion scheme to work in tandem with the the necessary legislative and economic
for us, our neighbours are in a different current state social security scheme. changes to compete for European Union
situation than we are so it is a bit diffi- “For the time being, local pension funds status it seems like the doldrums years
cult to make cooperation easily,” says are not mandatory, however if local pen- are coming to an end and new time
Biniaris. sion participation becomes mandatory beginning.
then the collective savings will be quite ISJ


Pensions - Italy

Under the previous Prime Minister,

Anyone who follows football will have Silvio Berlusconi, the pensions law in
heard of the corruptions in the Italian Italy was reassessed and plans made to
increase the age of retirement from 2008
pemier division, Serie A, that have onwards. A strong manifesto however,
brought the centre-left government of
forced the relegation of some of its Romano Prado into power, leaving
Burluscoli to lick his wounds after
top flight clubs. defeats in general, local and regional
elections in April and May.
The new Prodi government has said
Its political stance is not much better however that the rate at which the retire-
ment age with rise, post-2008, is still
with its new Prime Minister already in open for debate but other pensions
need of a major boost. reforms could surface before then.
One such reform will see a change in
the law around severance pay. “In Italy,
each year you work, your employer
Does this apparant shakey structure accrues one months full salary,” explains
follow through into Italy’s financial Massimo Cotella, CEO, 2SBanca. “When
you resign, that full amount is paid to
securities world? ISJ investigates. you in cash.” Pension law reform will
give individuals the opportunity put that
severance pay into the company pension
fund where is can be used to generate
income growth.
It is expected that 50% of employees will
elect for their pension funds to accept this
severance pay option that will generate
approximately EUR 6 billion in revenue
for the pension fund industry in Italy.
There is a slow pace of pension reform

The Italian Job in the country and that is holding the

market back in an alternative invest-
ments space that is very regulatory
restrictive for investors and service
providers alike.

The regulators in Italy are quite strict
and in their determination to protect the
ultimate investor, and some investors
have found it easier to establish funds
elsewhere in Europe where some of the
regulations are more relaxed.
“With the last directive the regulators
accepted some of the European rules but
yet they are more demanding in terms of
administration than they are elsewhere,
and to tell you the truth, the fiscality
does not favour Italian funds as sup-
posed to Luxembourg funds or Irish
funds,” says Massimo Cotalla, CEO,
The number of domestic investors is
thought to be shrinking as they look for
more attractive returns and better tax
structures in other centres such as
Luxembourg or Ireland where the regu-
lators are not as stringent.
Jean-Marc Crepin, Head of State Street


Pensions - Italy

in Italy, acknowledges that Italian domi- doubled staff numbers in Milan.

ciled funds have been moving away from Companies are drawn to Italy to become
the country but does not feel that it is pan-European players in the custody and
necessarily because other locations are securities market that shows how far the
much more attractive. previously very traditional and retail
“A lot of people believe that this is based Italian market has come.
because there is a fiscal advantage to buy “The recent evolution in terms of offi-
funds abroad but this is not exactly cial regulation seems to favor the devel-
true,” he says. “The performance advan- opment of a new market, through the
tage that one can have between an possibility to offer integrated fund and
Italian fund and a foreign fund is not securities services. Specifically, this new
that big, but over the last twelve months market should receive a big impulse
EUR 50bn have moved out of Italian from the asset management companies
domiciled funds into offshore funds.” to fully outsource both fund administra-
So what is making investors relocate to tion and transfer agency, with the aim to
other parts of Europe, Italy’s stringent reduce costs and to better perform the
regulatory framework? service,” says Elisabetta Pellichero, Head
of Transaction Services, Banca Intesa.
“The recent evolution Challenge
in terms of official With mutual funds and pension funds
making up the majority of alternative
regulation seems to investment funds in Italy, a lot of funds
favor the development have trade unions attached to them
through employers. With the regulators
of a new market.” being extremely stiff on protecting the
end investor, this can make things quite
“Definitely not,” Crepin believes. “I difficult and slow. Due to this set up,
don’t think the rules are that different in there is an educating process needed for
Italy for the retail investor than abroad. investors’ as they don’t understand the
The Italian asset managers are as good as need for taking risks and want guaran-
the foreign asset managers. It’s true that teed returns on their investments. In
in the past it was probably quicker to light of this, there has to be a compre-
open a fund structure in an offshore hensive approach by service providers to
location than in Italy but even now in ensure that there is a strong level of
Italy it doesn’t take that long to open service, secondly that it is able to be
new funds or have an asset manager done at a very low price and thirdly that
authorised.” all the risks are highlighted and solu-
The rules by the bank of Italy have tions given. Building confidence in the
been loosened up a little in recent years. market will definitely be a key factor for
Investors previously had to own or buy service providers in the future.
EUR 1 million if they wanted to invest in One of the challenges that service
a fund. This has been reduced to EUR providers in Italy also face is the small
500,000 and has caused some growth in volume of pension funds that the coun-
the alternative investment arena in Italy. try is involved with. “The market is still
One problem with this base rate however very fragmented,” says Crepin. “There
is that it is the same for retail investors are 100’s of pension pools all with a
and institutional investors alike which small amount of assets so it is difficult
means that some retail investors are for them to achieve a good performance
priced out of the market. because the administration costs and
That said, the Italian market is a management costs are high.”
growth market and is attracting the The servicing of alternative investment
attention of the large custodians and big funds is still done at very low volumes,
players in the securities space. Citigroup, however, the change in pension legislation
BNP Paribas and Societe Generale have which is due to take effect in 2008 is
all been drawn to Italy and are now hoped to revolutionise this and potentially
dominant players in the Italian market. open up a lot more investment in the mar-
On the fund administration side State ket. Service providers in Italy ware waiting
Street are also now key players in the to embrace this legislation and hope to
market after acquiring Deutsche Bank’s pounce on any opportunities that opening
global custody business in 2001 and up of the market will bring. ISJ


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Pension Profile - Lothian Pension Fund

pressure on employers over their contri- structure and whether we are comfort-
bution rates. able with it or not.”
Strategies, She commented: “Employers are con-
stantly telling us they can’t handle the
continuous raising of the contribution
Who manages the money
Lothian manages some of its UK equi-
Scottish style rate, which is understandable. We con-
ducted a review at this time to manage
the balance of risk and return.”
ty portfolio internally, with the remain-
der in the hands of Martin Currie.
Overseas equities are managed by Axa
Rosenberg and BlackRock (European
New investment strategy equities); Goldman Sachs Asset
Shortlisted for two The latest review resulted in a new Management and Oppenheimer (US);
investment strategy which has received Baillie Gifford (Pacific including Japan),
honours in leading approval. This is still in the process of Wellington (global) and Lloyd George
pensions awards, being implemented. The main change
has been to reduce the total equity allo-
(emerging markets). Henderson Global
Investors manages the fixed income
Christine Senior talks cation from 80 per cent to 75 per cent, portfolio, and Standard Life Investments
and then to abandon the fifty-fifty handles the property portfolio. The Bus
to Lothian Pension UK/overseas equity split by reducing UK fund’s balanced portfolio is managed by
Fund about the equities to 20 per cent and increasing
overseas equities to 45 per cent. Lothian
Baillie Gifford, and SSgA manages the
Scottish Homes Fund.
pattern of investments includes alternatives within its equity
portfolio, so the remaining change was
Three currency managers were
appointed in April this year: Record
in the North. to up its allocation to alternatives from Currency Management, AG Bisset, and
5 per cent to 10 per cent. JP Morgan. The brief is for them to
The switch of emphasis to overseas manage currency risk in the portfolio
THE LOTHIAN PENSION FUND equities is to open up the portfolio to but also to add value through active
INCORPORATES THREE FUNDS - THE MAIN opportunities in faster growing global currency management.
FUND PLUS LOTHIAN BUSES FUND AND economies. “The overseas allocations Socially responsible investment
THE SCOTTISH HOMES FUND. CURRENTLY recognise the importance of emerging Lothian’s SRI policy is to use engage-
THE MAIN FUND IS WORTH AROUND £2.7 markets, such as the Chinese economy - ment with the companies it invests in,
BILLION, WITH THE BUS FUND VALUED AT with less than 3 per cent of the world and it implements this strategy through
£180M, AND THE SCOTTISH HOMES FUND, capital market but 13 per cent of GDP F&C’s reo product. Drever is firmly
NOW CLOSED, AT £125 MILLION. outputs,” said Ms Drever. But another against negative screening: “We don’t
THE MAIN FUND COVERS AROUND 125 issue was the risks inherent in the UK believe in screening. We want to encour-
EMPLOYERS – THE LOCAL AUTHORITIES OF equity market. “There is a lot of concen- age our managers to have an effective
EDINBURGH, EAST AND WEST LOTHIAN, tration in the UK market: ten stocks rep- dialogue with all these companies to try
AND MIDLOTHIAN, PLUS SOME VOLUNTARY resent about 49 per cent of the and change their minds and adopt best
ORGANISATIONS, COLLEGES, UNIVERSITIES FTSE100,” she added. practices. An exclusion policy is not
AND OTHER NON-PROFIT-MAKING ORGANI- The new target allocation in overseas conducive to that,” she said.
SATIONS. MEMBERS NUMBER JUST OVER equity puts 15.4 per cent in North
58,000 IN THE MAIN FUND, AROUND 4,000 America, 9.6 per cent in Europe, exclud- Custody
FOR THE LOTHIAN BUSES FUND AND 2,000 ing the UK, 13.5 per cent Pacific, includ- The fund appointed a new custodian,
FOR SCOTTISH HOMES. ing Japan, and 6.5 per cent in emerging Citigroup this year, to replace the Bank
markets. of New York. As well as handling the
ALM review global custody Citigroup also manages
The scheme undergoes a full ALM Alternatives a securities lending programme for the
review once every 10 years, (with an The breakdown of where the increased fund. “We are always looking at income
interim review after each three yearly allocation to alternatives will go is still a as a matter of course,” said Ms Drever.
actuarial valuation), but the market col- matter for discussion. Likely destina- “We want to make effective use of all
lapse following so soon after its 1999 tions are private equity, private finance the assets we have, and stock lending is
review prompted further action. initiatives, commodities, and activism one way to do that.”
“There was a tremendous change in funds – like the Hermes UK Focus The biggest impact on the scheme in
investment markets and I was very con- Fund, and clean energy funds. Hedge the near future will be from the new
cerned that what we decided in 1999 funds are currently not on the list, but Local Government Pension Scheme
was still valid with the market taking a they may be in the future. which is still a matter of debate between
dive,” said Geik Drever, Head of “Our current agreement is for PFI the government, employers and unions
Investment & Pensions. “So we com- infrastructure funds and private equity but is expected to come into effect in
missioned another full review in 2002.” where we are in funds of funds,” said 2008. Drever hopes this will be positive
Currently the main issue for Drever is Ms Drever. “We have to do a lot of for the fund. “Our main issue is the
to increase stability in the fund, to ease research before we invest. We look at sustainability of the scheme going for-
everything to see whether it fits into our ward, to make it affordable.” ISJ


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Pensions - Africa

money except for investment and the

Th asset representation is kept with the
lan e Afr custodian who settles transactions made
c d ic on the investment.
in onsi scape an p Despite this reform however, outside
r t d e investment coming into the country to
conegulahe pa ered has nsio invest in pension fund vehicles has been
spr tin tor st, fai bee ns scarce and has not been helped by limits
ing ent y re ho rly n put on Nigerian pension funds to invest
Ala bo co for wev blea abroad by the government. “While there

wil n D ard uld ms er k is no provision at the moment for

d s ue for pro ac , rec domestic pension funds in Nigeria to

invest outside, there is provision for it
ide der gro vid ross en in the Pension Reform Act 2004 but it
. nt wth e a th t will take a presidential decree in order
ake . e to facilitate the opening up of that
sa piece,” says Steven Faulkner, United
wa Bank of Africa.
lk o There has been an emergence of cer-
tain Nigerian funds, two of which were
nt created by the United Bank of Africa.
he Currently a bond fund, cash fund, equi-
ty fund and balanced fund exist, with a
number of index funds being intro-
duced from outside the country but it
will take a while, maybe months for
them to gain credibility.

The Lion “The successful

economies and stock
Sleeps Tonight markets of Africa have
drawn foreign investors
to the region.”
After many years of economic and factor in making the continent a location
social instability, the result of civil wars that is attractive to investors. “I think pension funds will find some
and political corruption, Africa is The successful economies and stock of these vehicles more attractive than
somewhat stabilising itself. markets of Africa have drawn foreign taking direct exposure to particular
In a recent report by the Organisation investors to the region and foreign direct bond or equities themselves,” believes
for Economic Cooperation and investment (FDI) has increased tenfold Faulkner, “but I don’t see a massive
Development (OECD) it is estimated that over the last twenty years and is believed investment externally into pension
Africa’s economy grew by almost 5% last to be somewhere in the region of $20 funds per-se.”
year, and is expected to increase by a fur- billion now. Nigeria’s secondary bond market is
ther 5.8% in 2006 and 5.5% in 2007. This So, with an increase in investment from due to be re-launched this August with
sustained economic growth is due to a outside the continent and an ever more 15 primary market makers and is sure
number of factors which include the buoyant economy is this stream of to attract investment to this sector. With
global demand for oil and other raw success flowing through into other areas the Niara relatively stable against the
materials for industry. The soaring prices of the financial markets? Dollar and traditional interest rates of
of particularly oil and minerals has 14-16 per cent the returns are attractive
brought windfall gains for oil-exporting Pension Fund Reform compared to traditional alternative
countries in Africa, however economic In Nigeria the growth of the pension investments.
growth is not limited to just the countries funds industry goes back to 2004, and the “I think a lot of people are waiting
producing these commodities. Pension Reform Act, that enshrined to see what happens in the elections
In other countries on the continent, twelve pensions fund administrators next May, to reduce the risk,” says
slicker running economies has caused a (PFA’s) and 4 pension fund custodians Faulkner, “but from the people we have
fall in inflation, which now averages 8% a (PFC’s) to safeguard against financial seen in the investment bank and broker
year, despite the increasing price of oil. impropriety. Where a PFA opens an dealer community, there has been huge
Political stability has also been a key account it will not have access to the interest.”


Pensions - Africa

South Africa is undergoing pension give some diversification to pensions ble, defined contribution plan structure.
reform through the Pension Finds Act. fund investment scope.” In response to the Black
The alternative investment market in The socio-political landscape has Empowerment Act there has been a
the country is healthy with a large, and changed in South Africa in the past growth of Black Economic Empowered
growing hedge funds industry of decade and through the Black (BEE) companies on the investment
around 70 funds worth $7 billion of Empowerment Act of 2003 has become front and the emergence of empowered
assets. The pension funds industry is more inclusive of people that were pre- brokers and fund managers in the pen-
limited, under Regulation 28 of the sions industry and asset management
Pension Fund Act, in the extent of industry. The Black Empowerment
investment into certain asset classes. “There was a real need Initiative works on a scorecard basis and
There was a real need to update the
Pension Fund Act in South Africa to
to update the Pension any company that wishes to benefit
from government mandates needs to
allow investments into other asset class-
es other than bond, cash,
Fund Act in South prove that they employ the requisite
number of empowered vendors and
equity and property investments that Africa to allow suppliers in their business.
had essentially been the focus, however “For example, a pension fund would be
the Act remains very restrictive at investments into other obliged to consider the appointment of
allowing investment into other
investments such as derivative type
asset classes.” BEE fund managers and brokers in the
market, and similarly on the
products and hedge fund products. viously disadvantaged. This reflects on administration side,” says Johnstone.
“This is being reviewed, although it is the pensions industry in terms of its It is unsure what affect initiatives like
not yet completed,” explains Janet participants, with more people now this will have on the wider scope of the
Johnstone, Chief Representative, The contributing to pension funds because pension funds industry but they defi-
Bank of New York in South Africa. they have sufficient disposable income. nitely support the increased volumes
“Opening up the pension fund market South Africa has moved from defined that administrators have to cope with in
to include alternative investments will benefit pension plans to the more flexi- the ever-consolidating market.

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Pensions - Africa

Service Side happen in the next year or 18-months, if In the public domain the pensions
In South Africa, consolidation has only to facilitate the investment that was market in Nigeria has a way to go in
been seen amongst custodians with coming in from outside.” terms of the central data and records
additional services such as investment The recapitalisation of the banking regarding pension funds. National
administration, compliance monitoring sector was an initiative set up by the insurance numbers, or RSA numbers
and performance measurement Nigerian Government which put in still have to be generated and one of the
increasingly. Some of the pension funds stricter regulations that decreed that challenges for Nigeria moving forward
in the market are now more directly banks had to have 50 billion Niara (the is getting the RSA beneficiaries
involved in the appointment of service equivalent of USD 200 million) and that reconciled with the pensions they have
providers, and are notably moving forced banks to either go under or accrued under heritage government
towards the appointment of a single merge with another. schemes. Until this happens the pension
custodian. Consultants continue to Twenty-five banks leapt the hurdle in monies cannot be released to the PFA’s
provide advisory and acturarial services December last year and the general for them to invest and consequently
to pension funds as well as providing consensus is that there will be further about 60 billion Niara is still awaiting
performance measurement and consolidation down to as few as 16 release from the government.
transition management products. banks. “The top 5 or 6 are going to In South Africa the shift from defined
“What we are seeing now is more of a benefit to defined contribution pension
need for the appointment of single
custodians who provide a wider range
“One of the challenges funds has made the general public more
aware of their responsibility for their
of services such as custody, investment for Nigeria moving own financial futures. “People are really
administration, performance starting to take an interest in the returns
measurement and transition manage- forward is getting the that are generated, and in the costs that
ment, as opposed to the fund managers
choosing multiple custodians,” says
RSA beneficiaries are having to be absorbed by pension
fund administrators and the fund man-
Karen Wall, Vice President, Investor reconciled with the agers who are appointed,” says
Services at The Bank of New York. Johnstone. “There is a much greater
Transition Managers operating in the pensions they recognition and ownership by pension
market are providing pension funds
with the ability to effectively manage
have accrued.” contributors to the financial dynamics.”
In turn Johnstone believes that this will
the restructuring of investment control up to 90% of assets in the lead to tougher decision-making on the
portfolios in a way that minimises risk country,” says Faulkner. part of pension fund trustees.
and costs for the asset owners. The Nigerian Government has also Coupled with this, governance and
Securities lending has become a low encouraged local banks to partner with transparency issues are key within the
risk and effective way for pension funds western banks to manage foreign cur- South African market and the Financial
to enhance returns on their portfolios rency reserves and part of that will Services Board (FSB) has taken steps to
without additional costs. Income mean that there will be a transfer of ensure that fund managers and adminis-
generated from securities lending additional securities service skills that trators have the best interests of
programmes can typically offset are already on the ground to facilitate investors at heart.
custodians’ costs. and compliment the actual management
In Nigeria outside entities have been of the foreign currency there. Growth
offering securities services for the last It is evident that Africa is growing
20 and this has been dominated by one The Future economically and its financial markets
South Africa player in the market that In the near future it is envisioned that are able to support more complex prod-
people have used because of the lack of a presidential decree will be passed so ucts and funds. It seems however, that
service providers. that the domestic pension funds market the policies in place have quite a restric-
This is set to change however, with the in Nigeria will be able to access say 10- tive impact on the economies, none
recapitalisation of the banking sector 15 per cent of that fund to markets more so than in the pensions arena.
back in December 2005, Nigeria has outside Nigeria. “I think the key chal- Legislative reform has stimulated
gone from 89 banks to 25 with the top lenge with regard to Nigeria is to get monies being paid into pension funds
five or six offering securities services. In some more traction going,” says from the domestic market place, yet in
many cases these banks have a Chief Faulkner. “I think that it would make the same breath legislation has restrict-
Operating Officer from one of the large sense while these institutions have ed custodians in the ways in which that
banks such as HSBC, Citibank or Credit appointed global banks to help with the money can be used in foreign markets
Suisse and have brought in the expertise management of the foreign currency to grow the economy further. Whilst the
on securities processing from outside. reserves, it would make sense for them African continent is enjoying something
“Im not sure that we will see a rash of to be appointing those same global cus- of a boom period off the back of the
Western Banks queuing up to offer todians to look after the assets of their commodities market maybe it’s time for
securities services,” believes Faulkner. domestic customers who had then diversification rather than bundling all
“But that’s not to say that it wouldn’t decidedto invest internationally.” the eggs into one basket. ISJ


Pensions - Singapore

market in Singapore is competitive, but

Singapore has show optimistic being the only Asian bank, with Asian ori-
growth in the securities services gin and orientation, we believe that we’re
really a niche player in the Asian market.”
sector. Brian Bollen get to grips Casting an eye back on recent history,
Richard Surrency notes that prior to 2004,
with the country that is hailed as Hong Kong was considered the financial
the ‘Switzerland in Asia.’ centre of Asia (excluding Japan) due to its
open and transparent legal system and
established financial services infrastructure.
Having seen the dominance of Hong Kong

in the Asian financial services realm,
Singapore undertook a significant push to
create a ‘Switzerland in Asia,’ designed from
the ground up to attract the growth markets
of the future, being Hedge funds, private

banking, and trust services.
“This initiative was largely an effort to
expand Singapore’s traditional services sec-
tor away from electronics and manufactur-
ing towards higher value services, largely to
reduce concentration in areas such as elec-
The Singapore investor services market ment stood at around S$600bn at the end of tronics that had been adversely affected
is confident and optimistic about near and 2005, continuing the trend in recent years of during the Asian financial crisis,” he com-
long term opportunities within the region, above-inflation growth, notes Arjun ments. “By 2004, Singapore had made
despite recent turmoil in global markets Bambawabe, who looks after HSBC’s securi- sweeping changes to its banking laws creat-
and, in particular, Asian markets. The out- ties services business in Singapore. He pin- ing a structure that was seen as more strin-
look is not universally rosy, and the country points business trusts and shipping trusts as gent than Switzerland. Today, Singapore is
faces challenges as well as opportunities, but two interesting areas of future development, the operational hub for over 35 global pri-
a number of market participants take a as the market attempts to replicate the vate banks, compared to 20 in 2000, open-
broadly optimistic view of the recent past investment experience of real estate invest- ing up substantial opportunities for investor
and the short- to medium-term future. Says ment trusts with higher yields. services organisations to service and sup-
Richard Surrency, The Bank of New York, port these activities on a global scale from
“In the domestic Singaporean market, “Singapore is the Singapore. ”
He identifies several trends in the market-
opportunities are beginning to appear out-
side of the traditional government-linked
operational hub for place that have had, and will continue to
investment base, and regional opportunities over 35 global private have, a positive impact on the investor serv-
ices business in Singapore and Asia. “First
continue to develop as Asian markets con-
tinue opening up their investment markets banks, compared and foremost, we are seeing regulatory
changes around the region that have begun
to both external and internal players.”
Yow-Fee Lee, senior vice president, State
to 20 in 2000.” to allow institutions to take advantage of
Street investor services in Singapore, adds: "Asset allocations to Asia are increasing as traditional value-added products such as
“There has been an increase in portfolio the region has improved in its corporate securities lending. Both Singapore-based
investments by institutional investors into governance coupled with strong perform- institutions, as well as other regional mar-
the region and global capital markets. As a ance,” observes Priscilla Soh, Head of kets (most recently India and the
result, investment management and hence Securities Services, SouthEast Asia at Philippines), have amended legislation
demand for securities servicing is growing Standard Chartered Bank. "We expect that allowing public and private sector institu-
strongly.” to continue. Despite recent short-term mar- tions access to this valuable service.
The story repeats itself elsewhere, ket corrections and the rebalancing of the Although securities lending has been avail-
though not always precisely, or wholly MSCI Indices in May, the longer-trend is able as an investment option for domestic
optimistically. “As a global custodian oper- undoubtedly positive. Singapore's emer- institutions, we have begun to see a trend
ating in Singapore, we do see fund man- gence as an alternative to Dublin and towards securities lending as a ‘required’
agers here doing a fair bit of asset gather- Luxembourg for GDR issuance and the suc- product within the investors arsenal.”
ing,” says Lawrence Au of Northern Trust cess of new asset classes for investment will Institutional investors are gaining greater
Global Investments. “But there remain be a further contributing factor." exposure to wider asset classes such as Asian
issues and concerns. Singapore acts on the “With the influx of capital into Asia, the fixed income, corporate credit, derivatives,
basis of banking secrecy laws. If it begins outlook for Singapore, strategically posi- commodities, and alternative investments
to experience the same pressure to open tioned at the crossroads of Asia, certainly adds Yow-Fee Lee. “For retail investors, we
up as Switerland did, how will that affect looks positive,” adds Elizabeth Chia, manag- are seeing an increasing interest in REITs
business here?” ing director of Securities & Fiduciary investments, structured products, and off-
In the meantime, assets under manage- Services at DBS Bank. “The investor services shore funds which are registered and dis-


Pensions - Singapore

tributed in Singapore. There is also an where recent changes to foreign investment lished providers. “In Asia we have seen the
increase in exchange-traded funds availabil- regulations allowed Indian citizens to invest entry of Brown Brothers Harriman into the
ity in Singapore and in the region. We are US$ 25,000 per annum overseas. One only Chinese market, as well as Northern Trust,
also seeing a growing number of hedge needs to see the recent 30% fall in the however these should not be considered
fund managers establishing their hedge Indian market to recognise that the oppor- new players as their services have always
fund management offices in Singapore.” tunity to diversify one’s holdings is a vital been offered in Asia for many years. The
Significant growth has also been seen in part of an efficient investment market. expectation is that most custodians will
Collateral Management services, supporting “In Singapore specifically, the rapid have already set up in Asia as this is a major
vital capital and liquidity opportunities growth of back and middle office services growth area for assets, versus the more sta-
throughout Asia via Tri-Party Repo, for global institutions taking advantage of ble markets of Europe and the US.
resumes Richard Surrency. The develop- the banking reforms has led to an extremely “Consolidation may begin to occur in
ment of this market in Asia, albeit in its tight labour supply in the local market, par- domestic markets. however this analysis has
infancy, has been strong as Asian institu- ticularly for experienced personnel. been consistent for the past ten years and
tions realise the benefits of these products “Many institutions in Singapore have seen has never come to fruition.”
as a low risk investment platform and an vital positions remain open for over six Singapore continues to offer growth
efficient means of fulfilling short and medi- months, sometimes over nine months, sim- opportunities since it has become a centre
um term capital requirements, he com- ply due to a shortage of experienced per- for wealth management and hedge funds,
ments. “It is our expectation that once this sonnel in the local market.” adds State Street’s Yow-Fee Lee.
product becomes more widely understood, “Consequently, we expect to see more serv-
a significant market will emerge as it has “Hong Kong remains a ice providers and specialist service providers
done in the US and European financial entering the market.
markets,” he notes. strong financial centre “Due to the heightened awareness of cor-
“Global Funds Services have also been
selling well across the entire region, as fund
but environmental porate governance, investors participate
more actively in proxy voting. In addition,
houses begin to open and distribute their issues are beginning the increased awareness of the transaction
funds in multiple jurisdictions across Asia.” costs of investing and the desire to generate
In an effort to manage risk within their to impact its ability to incremental revenue has created the
portfolios, investors across Asia have
begun to employ comprehensive and
attract top tier talent.” demand for transition management and
securities lending, respectively.
sophisticated risk management solutions, While the regulatory changes designed to “As Singapore continues to become a
says Richard Surrency. Custodians have attract the private banking community to regional financial centre for wealth manage-
responded to this need by integrating Singapore are hailed as a critical component ment and hedge funds for which the gov-
advanced analytics and performance meas- of Singapore’s success, other factors con- ernment has been actively promoting, we
urement solutions into their custody and tribute too. “I would extend this discussion anticipate Singapore will continue to estab-
administration solutions available over into a lifestyle decision by professionals as lish its prominence in these segments.The
their traditional client reporting systems. to where they wish to reside,” says Richard Singapore government is also thinking of
“Supplementing traditional investor serv- Surrency. “Hong Kong, once the crown ways to further liberalise national pension
ices products is the development of alterna- jewel of Asia, remains a strong financial fund by offering low cost products, and to
tive investment solutions specifically centre but environmental issues are begin- further attract global investment managers
designed for an investor service organisa- ning to impact its ability to attract top tier setting up in Singapore.”
tions client base,” he continues. “Today, talent. The pollution from China is hitting So what does the future hold? “Despite the
Asian clients can expose themselves to a critical levels, and is a regular topic of dis- growth and sophistication of the investment
wide range of investment solutions to meet cussion within the community, especially industry, the Singapore market is still rela-
their requirements, including alternative for expatriates with children.” tively small compared to other markets such
investments including hedge funds, REITs, Looking ahead, Richard Surrency con- as the U.S. and Europe,” says Yow-Fee Lee.
ETFs and alternative debt programmes. By tends that Singapore will continue to “While we are optimistic about the potential
offering these investment alternatives to demonstrate consistent growth, particularly growth and the outlook in the securities
their underlying client base, custodians are in the fund services, securities lending, risk, servicing industry, service providers are also
able to manage the entire lifecycle of the and collateral management areas. “Our cautious in terms of deploying global tech-
investment, from management through to expectation is that fund services will be par- nology due to the scale of the industry. With
custody, a model that has seen significant ticularly strong as Singapore domiciled an increasing number of new products in
growth within Asia, particularly within cen- funds houses begin to establish funds run the market, such as hedge funds and private
tral banks, pension funds, and private banks. from Singapore but sold into regional mar- equity, there is pressure to have more service
“The largest issues today surround the kets. New prospects should be encouraging providers to support these new products.
availability of offshore investment options as well, Singapore is attracting sizeable new Singapore is often considered to be an opti-
within the Asian marketplace. Many mar- institutions into the market and we expect mal location to establish investment and
kets in Asia remain highly regulated, and this trend to continue.” securities servicing business and as a spring-
although global investment dollars are well Richard Surrency does not, though, envis- board to tap into the growing securities
received, these markets do not reciprocate age significant changes to the line-up of servicing opportunities available in the
by offering global investment opportunities service providers, whether through an Southeast Asia region.”
to their citizens. Examples include India, influx of new players or the exit of estab- ISJ


Data Services - Proxy Voting

A new age for voting cards and posting than on talking to the
companies about investor concerns.”
For once in the investor services
world, it wasn’t for the lack of appropri-
ate technology, she recalls. “The tech-
nology was there to make electronic vot-
Proxy voting has ing a reality, but there were very few par-
come under scrutiny ties prepared to pay for the extra IT
development needed to make electronic
of late. But with voting a reality.”
Sarah Wilson, Managing Director of
heightened interest Manifest, thinks along similar lines. “It
from investors in the is very regrettable that electronic proxy
voting has not received the resources
voting process could and the backing from regulatory authori-
ties that it deserves,” she comments.
the tide be about to “Shareholders are being disenfran-
change? chised across Europe, but awareness is
growing, and development is ramping
There is still however a long way to go
ISJ reports. before the market moves anywhere near
perfection, opines Glen Good, a director

Marks the Spot

Electronic proxy voting has taken a of the international shareholder com-
quantum leap forward over the past munications business at ADP. “In many
decade, and continues to change the countries voting entitlement is not
way in which investors engage with the clearly defined. In the UK, for example,
companies they invest in. Don’t take companies are required to notify share-
our word for it; this is the view of holders whose names appear on their
Michelle Edkins, a Managing Director of register but there is no obligation to
Governance for Owners, which was advise beneficial shareholders. It
established by a number of former becomes a commercial decision for the
Hermes staff in late 2004 as an inde- nominee company owners, normally
pendent partnership between major custodian banks and retail brokers,
financial institutions, shareholders and whether to forward meeting information
executives dedicated to adding long- to, and facilitate the return of any voting
term value for clients by exercising own- responses by, beneficial shareholders.”
ers’ rights. “We have advanced hugely “Over the past few years there has
from when I first joined Hermes 10 been a significant growth in interest in
proxy voting, in particular there is a
“The technology strong desire to ensure voting is, and
remains, both easy and transparent,”
was there to make says Nigel Colgan, Senior Product
Specialist & Vice-President, ABN AMRO
electronic voting Mellon Global Securities Services.
“Most pension funds we speak to are
a reality.” extremely interested in the voting
years ago,” she says. “Back then we did- process, and in how we can facilitate a
n’t vote outside the United Kingdom at simpler and more streamlined voting
all and even within the UK you could mechanism for them. Technology has
spend longer filling in proxy voting definitely played a key role in reducing
the paperwork and cutting the time it


Data Services - Proxy Voting

takes investors to provide notification of between direct electronic voting via the decreased from 40% in the previous
their voting intentions. It has become internet, and electronic proxy voting year to just 16%,” adds Sarah Wilson.
easier for them to access and lodge using an intermediary that has seen a “UK voting has more or less doubled
their votes without question.” gap in the market and built a business since Manifest was created in the mid-
“That said, there is a lot more that out of the distribution of voting materi- 1990s.”
needs to be done before we reach an als to registered shareholders and man- If the Euroclear-driven harmonisation
acceptable level of transparency from aging the resulting votes back to the of European clearing and settlement
the voter’s perspective.” The only prob- issuer. “This allows investors to access continues, the CREST system could be
lem with automation, argues Hendrik their entire portfolio in one place, and leveraged up to provide a platform for
Jan Boer, Head of Sustainable Equity encourages them to vote. End-to-end other European markets, suggests
Investment at ING Investment global electronic proxy voting for insti- Robin Arita, a Managing Director
Management, is that the introduction of tutional investors is still a distant aim, responsible for the global custody prod-
automation has introduced more links but the industry has made significant uct management team at The Bank of
into the processing chain. “This creates strides in the past five years but the New York, in New York. “Good corpo-
delay, and means that in practice we quantum leap required to make this a rate governance is certainly a priority,
might still only have a day or two to reality will only be driven by adopting a which makes proxy voting a priority,”
decide how to vote any individual best of breed standard through legisla- she says. “Automation reduces errors,
stock,” he says. tion.” and mitigates risk, as Paul Myners indi-
Key steps in creating the new reality The increasing ease with which elec- cates in his report which included an
included the work carried out by ADP in tronic votes can be cast, combined with electronic voting recommendation -
the USA, to enable a number of funds growing moral and regulatory expecta- with a focus on the use of CREST's elec-
there to meet growing regulatory and tion that shareholders will exercise their tronic voting platform.”
quasi-moral requirements to vote the shareholding rights, would seem to be This is of more than academic inter-
stock they owned, and the launch of having a positive impact on investor est, argues Edkins. “The most impor-
online voting by BP, under the company behaviour. The Shareholder Voting tant point about electronic proxy voting
secretaryship of Judith Hanratty. “This Working Group, chaired by Paul Myners, is that it enables you to devote more
showed the way for other companies to issued its second progress report on the professional resources to talk to compa-
work with their registrars to make elec- voting process in the UK, observes nies about change, rather than filling in
tronic voting secure and effective,” says Michelle Edkins, in her contribution to forms. It’s less about casting a vote for
Sarah Wilson. the sake of cast-
Fast forward sev- ing a vote, and
eral years and “The average voting level was 61.06% at AGMs more about cast-
SWIFT currently ing a vote intelli-
has nine mes- held in 2005 by FTSE All Share issuers.” gently.”
sages in the test- She goes on to
ing stage to make the process even eas- the ICGN Yearbook 2006, discussing note that the preliminary results of a
ier and more widespread, subject to UK Corporate Governance since July study of the Hermes UK Focus Fund
buy-in from issuers, and banks, she 2005. suggest that investor engagement
comments. “The Group was set up in response to results in changes in companies that
The mechanisms in place today are concerns that votes were getting lost, cause a positive share price reaction
largely electronic proxy voting mecha- which was undermining confidence in and result in out-performance by the
nisms, rather than direct electronic vot- the system and resulting in lower partic- stocks in the portfolio. At a time when
ing, note the authors of a report on the ipation,” she notes. “The findings of every basis point of return is arguably
subject in Australia, Richard Alcock, the progress report were that voting lev- more important than ever, who in their
Andrew Daly and Caspar Conde, updat- els have increased (from 50% in 2003 to right mind could argue with that?
ed in February 2006. These mecha- 61% in 2005) and that electronic voting Edkins does however utter one word
nisms typically require instructions to and communication had significantly of caution, reminding us that enabling a
be submitted to a proxy collection increased. This ties in with anecdotal procedure to take place electronically is
agency that receives the instructions evidence that companies are making not in itself the complete answer. “The
and passes them on to a person who much better use of their websites for question of whether electronic proxy
will execute the instructions at the providing information on the annual voting can bring about a change in a
meeting. “The vast majority of online general meeting and corporate gover- company’s behaviour depends on how
voting systems retain a reliance on nance matters generally.” intelligently the voting decision is taken.
proxy mechanisms, and there is only a The most recent figures available from A downside is that people can automate
small amount of evidence that proce- CREST show that every single one of the the whole process, so that instead of
dures have been implemented allowing FTSE100 companies has now signed up taking a decision after analysis of the
shareholders directly to cast a vote at for its electronic proxy voting service facts, they will set up their systems to
general meetings,” they say. and that the average voting level was vote in accordance with the analysis of
Simon Coleman, Director of 61.06% at AGMs held in 2005 by FTSE their proxy research adviser, even if it’s
Operations at RBC Dexia, is only one of All Share issuers. “Conversely, the pro- not the right thing to do in terms of
many to draw a clear distinction portion of votes cast by paper long-term value creation.”


The Global Vote
Processing Solution
“Neither issuers nor investors want informed
voting swamped by uninformed voting,” says Sarah
Wilson. “This is the problem with ADRs. Corporate
management can wield enormous political, social
and economic power, and they need to be held to
account,” adds Glen Good. “The first step is to get
investors to vote. The next step is to have them
provide reasoned voting, to think about how they
use their votes.”

“The first step is to get

investors to vote. The next is
to have them think about how
they use their votes.”
One experiment in electronic proxy voting that
looks set to be intriguing is that launched in Japan
late in 2005 by ICJ, a joint venture between the Complete outsource solution
Tokyo stock exchange and ADP. “It’s still in the early
embryonic stage but it is developing quite rapidly,”
says Shaik Ismail Hakim, Senior Vice President, Web based convenience
Custody and Clearing, at HSBC in Japan. “We know
that late last year there were just five issuers
participating in it, out of Japan’s 3,000-plus plus All electronic investor tools
listed companies. Today, there are around 100-150
companies participating. While intermediaries are
interested in it, it’s not necessarily more efficient for
them. People are adopting a wait and see attitude.” Multi-custodial product
There is something in it for issuers who want
shareholders to vote, he argues. It is an efficient,
easier channel in a system that requires substantial Comprehensive reporting
paper processing and is cumbersome for foreign
While shareholder voting ranks alongside
motherhood and apple pie as good and wholesome, Over 90 active markets
the fact is that in Japan, about 2,000 meetings will
be held on the same day in June every year. This
makes it all but impossible for people known as Over 2600 institutional investors
Sokaiya. The horror of embarrassment in Japanese
society and corporate life enabled the Sokaiya to
hold companies to ransom in return for not making Global client service
trouble at shareholder meetings. Today, the Sokaiya
are literally a dying breed, but the system designed
to thwart their ambitions now faces the prospect of
renewed shareholder activism, if electronic proxy
voting truly catches on.
But Shaik Ismail Hakim believes the impact of
electronic proxy voting on enhancing corporate
governance will not be huge. “It’s not a big issue in
Japan,” he says. “Foreign institutional investors go
via the global custodian or broker route, so they
already have a voting channel. What electronic proxy
voting gives them is more time to analyse facts and
consider issues in a company’s performance. While
this will give the perception of better corporate gov-
ernance, it won’t actually help to improve it; you’re
only talking about two or three days advantage
through the electronic platform.” ISJ
Funds - Prime Brokerage Panel

Prime Brokerage
Our panel of experts discuss the Michael Brian
evolution of prime brokerage
Michael Brian, Head of Equity Prime Brokerage, Europe,
Barclays Capital. He is a Director in Barclays Capital’s Prime
Services team and responsible for sales and service across
Europe. Brian joined Barclays Capital in May 2003 from Merrill
Lynch where he was Head of Sales for Equity Finance and Prime
Brokerage in Europe.

David Aldrich, Managing Director, The Bank of New York. David Aldrich
He is responsible for the management of the hedge fund and
broker/dealer businesses across Europe. Prior to joining the
bank, Aldrich was at JPMorgan Chase in London, where he was
head of sales and relationship management of the securities
clearance and collateral management business lines in Europe.

Angela Henderson, Director, Global Prime Services, Deutsche

Bank. She is responsible for sales to hedge fund managers, is
based in London and joined Deutsche Bank in 2000. Previously
she set up and ran the legal department at Citco Fund Services Angela Henderson
Europe, having responsibility for funds of funds structuring and
general advice to the fund administrator and its directors.

What are the latest issues to affect the prime brokerage key issue affecting the prime brokers is one of competi-
sector? tion. This is driving the development of better technology,
Brian: The dynamic nature of our client-base dictates that designed to be used by hedge fund clients of the big
the prime brokerage business is in constant evolution. Hedge brokers, and this factor is also causing spreads to narrow.
funds differentiate themselves by their ability to move quick-
ly and expect their service providers to be responsive and Henderson: As hedge funds advance further into emerging
flexible in dealing with change and innovation. markets the importance of a global presence increases.
The last year has seen hedge funds increasingly using Deutsche Bank capitalises on its global reach by offering
derivatives across asset classes, seeking to exploit the boom clients access to markets in over 70 different countries
in commodities and looking for access to emerging mar- through its prime services platform and continue to add
kets. Access to bank loans is another area where hedge new markets to our range. Recently, we have added access
fund demand for product has grown exponentially to Pakistan, Lebanon, Kazakhstan and Israel and found
In response, current key initiatives at Barclays Capital financing solutions for opportunities in Russia and Turkey.
include further building out our centralised clearing plat- With a limited number of opportunities in the straight-
form for derivatives including foreign exchange, interest forward listed securities markets we are finding that the
rate swaps, OTC commodities and CDS and continued star hedge funds are using more complex products to dif-
investment in our market-leading cross-margining solu- ferentiate themselves. Clients expect a full-service prime
tion to include new products. broker like Deutsche Bank to provide full asset class cover-
age, including bank debt, OTC options, private placements
Aldrich: The Bank of New York is not a player in the and access into new markets and regions, as well as effi-
Prime Brokerage area for the simple reason that some of cient cross-margin capabilities.
the Bank’s biggest revenue producing clients are the large
US and European prime brokers. From our perspective the On that basis, how important are additional or added-


Funds - Prime Brokerage Panel

value services to your offering in this sector? nology is crucial to being able to provide more advanced
Henderson: Clients appreciate the ability to address and services such as cross product margining capabilities.
resolve complex financing propositions with experienced Deutsche Bank allows clients to view their entire portfolio
financiers. This applies to hedge funds at every stage of (equity, debt, FX, OTC, futures) online and have the ability
their development, be it at the beginning, when they are to drill down on each position to retrieve the appropriate
deciding how to structure their businesses, one to two margin calculation. This has allowed us to maximise not
years in as they start to encounter more complex transac- only the product coverage and, most importantly, capital
tions and as mature businesses when their strategies efficiency for clients, but also the degree of transparency
become more sophisticated. and predictability of our margin requirements.
Capital Introduction is an established additional service Maintaining the quality of our product within this fast
and we work intensively with early stage start up funds moving and innovative business requires heavy investment
right up to multi-billion dollar funds. Larger firms seek in technology.
help to diversify their investor base with capital from
investors such as pensions and endowments, a service that “As the industry becomes more
we have specialised in offering. Proprietary information
has become a key differentiator, our hedge fund capital mature it is increasingly dominated by
group is renowned for its annual Alternative Investment
Survey which is based on its own research covering more
larger alternative investment groups
than two thirds of the alternative investment community. that are more institutional in outlook.”
When clients choose a prime broker they are
increasingly looking at the overall relationship with their Brian: Technology is an integral and key component of
firm of choice, rather than focussing only on the essential any prime brokerage solution. This is particularly relevant
financing and balance sheet strengths. The ability to in the competitive arena of trade execution where trades
deliver the whole firm, as well as a robust product is worth tens of trillions of dollars per year are now executed
valued highly by clients. electronically.
At Barclays Capital, we seek to differentiate ourselves via
Brian: Historically, in a more immature hedge fund indus- our e-commerce trading technologies under the banner of
try, prime brokers sought to differentiate themselves via ‘BARX’ that provides over 3,000 of our clients direct mar-
ancillary services such as capital introductions, ‘start-up’ ket access to global equity, fixed income, foreign exchange,
services and free technology solutions. futures and commodity markets.
As the industry becomes more mature it is increasingly We are also very focused on automating the processes
dominated by larger alternative investment groups that are around our prime services business to ensure scaleability.
more institutional in outlook. They are no longer depend- In particular, the STP technologies supporting cash and
ent upon investment banks for technology products or synthetic prime brokerage, credit intermediation and
introductions to investors and are keen to receive more cross-margining products.
transparent unbundled services. They also have the
resource to isolate and look more closely at the core prime Has there been an evolution in the types of strategies you
brokerage solution provided by the investment banks. see hedge funds pursuing and how has this affected the
At Barclays Capital we have always focused on providing prime brokers?
excellence in operational service and transparency around Brian: The most obvious trend has been towards a more
margining and financing. We believe that this is where we discretionary multi-strategy approach with managers allo-
genuinely ‘add value.’ cating funds dynamically across asset class, as opportuni-
ties arise. This has tested prime brokers ability to service
Aldrich: The large Prime Brokers are all competing to have and margin our clients across a combination of cash and
the biggest and broadest service offering. Key factors derivative products in multiple asset classes, including new
include capital introduction and trading technology. Also areas such as leveraged bank loans. At Barclays Capital, our
important is reporting and client service is a core differen- multi-asset class prime brokerage platform and cross-mar-
tiator. gining product have allowed us to benefit from this devel-
How important is technology in keeping ahead of the During an extended period of low volatility, arbitrage
competition? strategies appeared crowded and many underperformed.
Aldrich: Technology is of prime importance for two rea- Hedge fund investors gravitated towards more directional
sons; one it allows brokers to offer more exciting and fundamentally driven managers. It will be interesting to
value-added trading tools to their trading counterparts, see how the equity market correction and increased
and two, it acts as an effective barrier to entry for smaller volatility in May and June impacts that particular trend.
players, who do not have the revenue streams to compete The desire to find returns has also seen investors more
with the dominant players. willing to look at areas such as emerging markets, high
Henderson: It is essential to invest in technology to keep yield and commodities.
ahead of the competition and to capitalise on Deutsche In general, a more challenging returns environment acts
Bank’s strengths. There are the given areas of web report- as an incentive to hedge fund managers to look more
ing and delivery of information but the background tech- closely at their prime brokers from a ‘value’ perspective.
Funds - Prime Brokerage Panel

Institutional investors increasingly expect their hedge utilise new technology to address cross-collateralisation
fund managers to demand a high level of transparency and and margining questions from multi-strategy hedge funds.
to scrutinise and justify the fees charged by prime brokers.
Brian: I think it varies by prime broker. Some prime bro-
Henderson: The hunt for alpha during recent years has kers who built their business exclusively around equity
taken some hedge funds into less liquid assets, markets strategies have struggled to create a cohesive multi-asset
and instruments, such as private equity, PIPEs, real estate, class product offering.
bank loans, distressed debt, unlisted securities, and emerg- At Barclays Capital, we have always serviced bonds and
ing markets. Clients look to their prime brokers not only equities via one legal contract, operating platform and
for basic access to these new areas but also for financing. service team.
Investment banks such as Deutsche Bank who have the
expertise and balance sheet to accommodate these oppor- What other challenges do you see in the coming months
tunities are clearly providing an added-value service and and years?
are thereby able to remain ahead of the competition. Brian: The expectation is that hedge funds will continue to
receive significant inflows. Capacity constraints in certain
“The requirements from prime brokers strategies and markets will lead to hedge fund managers
identifying and exploiting opportunities in new areas. It is
have clearly changed as a result of the imperative that we maintain a good dialogue with our
explosion in the use of derivatives.” clients to allow us to develop our products to address their
future requirements.
Aldrich: The strategies are constantly evolving and the key We will also need to continue to commit extensive
issue is the development of new derivative products, which resources to enhancing the technologies that support our
is a wonderful profit opportunity for brokers for whom clients trading, clearing and financing activities.
these are much higher revenue producers than vanilla In order to retain our client service position in a
securities. Additionally the increased pace of investment in business that continues to experience dramatic growth,
emerging markets, including new markets in Africa, poses we need to work hard to retain and recruit the most
interesting challenges for the brokers, in terms of valuation talented individuals.
and network management.
Aldrich: The competition for clients is driving spreads
Is the increased derivatisation of assets problematic for down, and this in itself causes demand for larger and
prime brokers? larger volumes to be added to the books.
Aldrich: Derivatives are the main engine of profit growth
for the bulge bracket prime brokers and their expertise in “In a business that continues
derivative products gives them an opportunity to exploit
opportunities that were not widely available when the
to experience dramatic growth,
market was exclusively a long-short equity play. we need to work hard to
Brian: The requirements from prime brokers have clearly retain and recruit the most
changed as a result of the explosion in the use of deriva-
tives. Cross-margining solutions, OTC credit intermedia- talented individuals.”
tion products and synthetic equity prime brokerage prod- Henderson: Challenges faced by hedge funds themselves
ucts have increasingly become key differentiators. cause challenges to us as prime broker. Clearly perform-
Henderson: For some, yes but for Deutsche Bank, no. ance, the ability to produce real alpha and the flow of
Synthetic solutions have always been part of Deutsche’s investment into and out of the industry are issues for
prime brokerage offering and we leverage our derivatives everyone.
offering to accommodate clients trading these types of Investment strategies are becoming more crowded and
instruments. funds are trading more esoteric strategies and markets to
capture alpha and arbitrage opportunities. As a prime bro-
How much of a challenge for prime brokers is the trend ker our challenge is to anticipate trends in terms of new
towards hedge funds trading across multiple asset classes? markets and new trading strategies so that we are a ready
Henderson: Deutsche Bank’s resources and appetite make to service them when clients make the demands.
this trend exciting for us. Our balance sheet, understand- ISJ
ing of asset classes and commitment to being a full service Disclaimer: The opinions and recommendations expressed in
provider make it easier for us to accommodate multi asset this article are those of the authors and may not be represen-
class trading and further our relationships with clients and tative of the individual banks and securities firms participat-
their reliance upon us. ing in this virtual panel discussion. The availability of prod-
ucts and services mentioned in this article may be restricted
Aldrich: The advantage of the new entrants to prime bro- by law in certain jurisdictions. Without limitation, this arti-
kerage is that they are not burdened with legacy systems cle does not constitute an offer, an invitation to offer or a rec-
that the more dominant, established players have. ommendation to enter into any transaction or investment
Consequently they are in a better position to cheaply agreement with any of the participants.


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Funds - Cayman & Bermuda

The Cayman Islands and With Cayman home to over 60% of the
world’s offshore hedge funds and
Bermuda are two growing Bermuda growing as the location of
choice for US-based fund managers to
offshore jurisdictions. register investment funds, both have a
blend of regulatory benefit, locational
advantage and securities service expertise
ISJ joins them both for a dip on offer.
“Competitively, we are not a jurisdic-
in the warm waters tion that rests on our laurels and realise
that much of the industry globally is
of the Caribbean. essentially commoditised,” believes Ted
Bravakis, Cayman Islands Government, of
the Cayman Islands. “We believe the way
to differentiate ourselves is through our
quality and expertise.”
Bermuda is also making headway in
promoting itself as a fund domicile and
for those who work on the island it is as
good a domicile as any for foreign
investors to services their funds.
“We believe Bermuda sets a high standard
within the offshore financial industry by
providing the highest degree of integrity
and oversight, which lends further credi-

Island Hopping
bility to fund managers setting up in
Bermuda,” said Paul Kneen, General
Manager, Bermuda Commercial Bank.

The Jurisdictions
Today, the Cayman Islands financial
services industry encompasses banking,
mutual funds, captive insurance, vessel
registration, companies and partnerships,
trusts, structured finance and the
Cayman Islands Stock Exchange. “Our
uniqueness is reflected in our attributes
of excellence, experience and client focus,
coupled with a balanced regulatory
regime and highly entrepreneurial busi-
ness climate,” says Bravakis. “The avail-
ability of experienced professionals dedi-
cated to providing first-class service has
helped the Cayman Islands grow and
diversify its financial services industry for
more than 40 years.”
Recruiting and retaining high calibre
talent is one of the things that the island
prides itself on
“Our uniqueness is reflected in our attributes with increased
globalisation in
of excellence, experience and client focus.” the financial
world and bar-
riers to accessing talent from other juris-
dictions coming down
Bravakis also explains that in the
Cayman Islands, clients can experience a
“one-stop shop” from the fund industry
and expertise of service providers allows
institutional clients from all around the
world to be served. “Clients have come to


U n i q u e l y

Established in 1971
the Bermuda Stock
Exchange (BSX) is today
the world’s fastest growing
offshore securities market.
p o s i t i o n e d

The BSX is internationally

recognised as an attractive
venue for the listing of:
Hedge Funds
Investment Fund Structures
Fixed Income Structures
Derivative Warrants

Advantage Bermuda e-mail:
22 Church Street, Hamilton HM 11, Bermuda
Tel: 1-441-292-7212 • Fax: 1-441-296-1875

The BSX is a full member of the World

Federation of Exchanges.
Bermuda is a British Overseas Dependent
Territory and is part of the UK for the
purpose of OECD membership.
Funds - Cayman & Bermuda

expect unparallel market knowledge, says Bravakis. Islands is about one hour’s flight from
global perspective, responsiveness and International anti-money laundering the United States with the airport han-
quality and this has contributed to the standards have also been adopted by the dling close to 1,000,000 international
jurisdiction’s worldwide recognition as a Cayman Islands and they have been dili- and domestic passengers each year from
domicile for funds,” he says. gent in taking on global standards such the U.S., Canada, Central America and
Bermuda too pride’s itself on the work as Basel. This is recognised in a report the UK.
force that it can attract to the location released in 2005 by the International Most, or all of the administrators in
through its low-tax structure and Monetary Fund (IMF) that assessed Cayman can provide the full range of
favourable work-life environment, and regulation in the Cayman Islands around securities services. A lot of shareholder
attracts talent from the Canadian, UK, its banking, insurance and securities interaction activities such as subscrip-
and Australian markets. industries, that said: “An extensive pro- tions, redemptions, shareholder state-
“We believe Bermuda sets a high stan- gram of legislative, rule and guideline ments and communications with share-
dard within the offshore financial indus- development has introduced an holders are all delivered on the island,
try by providing the highest degree of increasingly effective system of with processing and accounting services
integrity and oversight, which lends fur- regulation, both formalising earlier prac- based in other locations where there are
tices and lower costs and more flexible
introducing immigration policies.
“Location is critical to the success of both enhanced Wojciechowski believes that location is
jurisdictions with short the US, the UK procedures.”
The report
critical to Bermuda’s success, with only
two hours flying time from most of the
and Europe within easy reach.” further
stated: “the
east coast of the US, a short flight to
Canada and daily services to the UK and
ther credibility to fund managers setting supervisory system benefits from a well- Europe. “We are truly at the crossroad
up in Bermuda,” says Kneen. developed banking infrastructure with between Europe and North America and
He believes that the working relation- an internationally experienced and qual- in a complimentary time zone to Asia,”
ship between the Bermuda Government ified workforce as well as experienced he says. “The US is one of our largest
the business community has made lawyers, accountants and auditors.” trading partners and we sit right off its
Bermuda a unique market for financial Bermuda too, has introduced legisla- doorstep in a jurisdiction that provides a
services that offers a deep knowledge of tion in the funds sector that is hoped solid, proven framework of regulatory
its core business areas and clients, an will reduce the time it takes to incorpo- operational infrastructure while sup-
internationally recognized stock rate funds on the island. “Bermudas reg- porting product innovation.”
exchange and a good understand the ulatory environment retains flexibility to The core services that the jurisdiction
markets and products. ensure regulation is both light but effec- offers are similar to those found in other
The Bermuda Stock Exchange has tive yet quick to adapt to the increasing jurisdictions around the world; account-
grown from strength to strength and demands of the developing regulatory ing, portfolio pricing, investor servicing,
lists over 300 funds. “BSX is becoming environment,” explains Kneen. custody and trust servicing.
the location of choice in the offshore All investment schemes must apply to “Clients are looking for service and
world for those wishing a ‘superior’ level be classified under The Bermuda support, they have commercial needs.
of support from their listing,” says Monetary Authority (Collective The challenge for any exchange is to
Kneen. “Almost half of the funds that Investment Schemes Classification) carefully balance its desire and ability to
list on the BSX are domiciled in other Regulations 1998, known as the ‘CIS meet the needs of clients while main-
locations.” Regulations’. These aim to establish stan- taining its commitment to the effective
dards and criteria for the setting up and and prudent regulation of the market,”
The Regulatory Environment running hedge funds in Bermuda whilst says Wojciechowski. “At the BSX we feel
The structure for establishing funds in protecting the interests of the investor. that we have struck the appropriate
the Cayman Islands is governed by the “The ability of our commercial sector balance in that Exchange is entrepre-
Mutual Funds Law of 1993 a 15 year-old to work with our regulators ensures that neurial in its approach to new products
piece of legislation. The Law was enacted key developments in our markets are and innovation but is steadfast in rela-
in 1993 and the age of this piece of legis- understood and analyzed so as to place tion to it’s administration of key global
lation has given regulators the hindsight us in a position to act should the need regulatory principles and client needs.”
of a tried and tested system that can be be or to assist in the support that new Both the Cayman Islands and
applied to funds on the island. regulation for the benefit of the global Bermuda have a lot to offer in the funds
Subsequently, funds have become a key industry overall,” says Greg and servicing space. Embracing
sector in the Cayman Islands with Wojciechowski, President & CEO, The legislation to open up the market whilst
almost 7,000 registered to date. Bermuda Stock Exchange. retaining flexibility for those seeking to
“The Cayman Islands’ approach to the operate funds from the islands seems to
development of the financial services Room to Service be a successful formula. Coupled with
sector recognises that an appropriate Location is critical to the success of their advantageous locations, these two
regulatory and legal environment is both jurisdictions with short the US, the jurisdictions could be set to be the
not an impediment to, but rather a UK and Europe within easy reach. success stories of the future.
key driver for commercial success,” As Bravakis explains, the Cayman Watch this space. ISJ


Pre-Sibos 2006 - Leading Vendor Profiles

sibos Raising ambitions

Sibos 2006 at a glance
In October 2006, Sydney will host Sibos - the world's
leading financial forum. The annual conference and
exhibition draws over 5,500 executives and technology
managers from the banking and securities industry.
The Sibos 2006 theme is “Raising ambitions”. Sibos
2005 in Copenhagen challenged the financial community
to raise aspiration levels and capitalise on the communi-
ty’s assets and potential. We have already proven in the
past that as a community, we are capable of great Bank Austria Creditanstalt (BA-CA) and its affiliates
achievements if we have the collective ambition to do so. through-out Central and Eastern Europe (including
This year’s Sibos theme invites the global financial com- Bank BPH (Poland), International Moscow Bank and
Patrik Neutjens munity to set the agenda for the future. It also calls for HVB brands) is recognised as one of the leaders in
decisions on how to tackle current issues efficiently.
Following "Time for growth" in 2004 and "Transformation" in 2005, it is now time the specialised provision emerging market custody.
for the financial community to agree on new ambitions, to plan and realise them fast The group offers both custody to both domestic and
and efficiently, to optimise results sooner than later. Sibos 2006 will examine how foreign investors or their agents in 14 markets across
the financial community needs to solve current issues, complete existing projects the region.
and jointly tackle ambitions on future opportunities: new markets, infrastructures,
geographies, business models, operational solutions and partnerships. CONTACT DETAILS
The theme is also extremely relevant for the region that will host Sibos 2006. MICHAEL ASCHAUER, HEAD OF CUSTODY, CEE
‘Raising ambitions’ is about growth and about ‘opening up’ to new ways of doing DAVID PENSTONE, CEE REGIONAL SALES AND RELATIONSHIP
things to achieve our collective ambitions. It is about emerging markets, it is about MANAGEMENT
the corporate space, global and regional market infrastructures, integration and
transaction management, partnerships and cooperation with regulatory bodies, as
Sibos is the place to be for networking and critical dialogue in the financial services DORA HORVATH, HUNGARY, LOCAL RELATIONSHIP MANAGER
industry. If historical trends are anything to go by, we can expect Sibos 2006 to MIROSLAV VELIKOV, BULGARIA, LOCAL HEAD OF CUSTODY
attract a record number of attendees and exhibiting companies.
We look forward to seeing you in Sydney.
Patrik Neutjens is the Director of Sibos Stand No: C08

An industry-leading outsourcing vendor for global BNP Paribas Securities Services is a leading provider
transaction processing and investor communication of securities services and investment operations solu-
services to banks, brokerages, fund managers and tions to issuers, financial intermediaries and institu-
issuing companies. ADP provides integrated tional investors worldwide. With award-winning oper-
multi-currency securities processing solutions to sup- ations and a presence in 18 countries across Europe
port securities operations in almost any instrument and Australasia, BNP Paribas Securities Services
and market. Investor communication services include delivers a comprehensive range of services based on
proxy voting services in over 82 markets, company unrivalled local market expertise, innovative solutions
reports, meeting notification and vote tabulation for and excellence in client relationship management
all beneficial shareholders.
THE ISIS BUILDING MANAGEMENT, +33 (0)1 42 98 42 30

Stand No: E10 Stand No: B02


Wherever you settle should feel like

Demands for a single European

capital market have set
harmonisation in motion.

We are convinced of the benefits

of harmonised financial markets
in Europe and are committed to
removing barriers to cross-border
securities settlement.

Pre-Sibos 2006 - Leading Vendor Profiles

Clearstream is the premier international settlement & peterevans is a leading independent provider of front
custody organisation offering a comprehensive serv- to back office solutions for the financial services sec-
ice covering both domestic and internationally traded tor. Clearly focused on the securities and investment
bonds, equities and investment funds. Since July market, the company proudly launches its’ new prod-
2002, Clearstream has been an integrated part of uct line at SIBOS 2006
Deutsche Borse Group. This new suite of applications offers a comprehen-
In Q4 2006, Clearstream will launch the ‘Next sive, configurable, fully integrated, browser based,
Generation of Collateral Management Services’ and front to back solution that can be either deployed as
the Central Facility for Funds is Clearstream’s latest a single application or integrated as components into
initiative to offer a more efficient post trade solution your existing platform.
for investment funds domiciled in Luxembourg.

Stand No: J10 Stand No: E14

With 19 offices and over 1500 staff globally, DSTi As the leading supplier of custody services in the
offers the most comprehensive suite of technology Nordic and Baltic Region, we at SEB recognise our
solutions for the global financial services communi- responsibility towards our customers.
ty. Over 700 clients, ranging from single-site instal- A blend of personal service, advanced communication
lations to large global institutions with operations solutions and IT systems means that we can provide
in every financial centre, rely on DSTi to help them sub-custody services of the highest standards. Our
run their business more effectively. Pan-Nordic Custody system and Internet Solution give
clients fast and consistent reporting and speed up the
Products on Show clearing and settlement processes. In addition, we take
DSTi’s investment management solutions include pride in keeping our client base fully up-to-date with
any changes or events that could have a bearing in any
front, middle and back office functionality that handles of the markets in which we act as sub-custodian.
multi-currency portfolios for both institutional and
retail markets. The suite of products can be used CONTACT DETAILS
either as stand-alone applications or brought together MIKAEL BJORKNERT: MIKAEL.BJORKNERT@SEB.SE
in flexible combinations according to specific needs. GORAN FORS: GORAN.FORS@SEB.SE

Stand No: E04 Stand No: B03


Pre-Sibos 2006 - Technology

The year was 1984, the first IBM PC was to fundamentally change the business,
on the market, computer platforms were and rather than having an ‘unhealthy’
accessible to people and specialist sys- patchwork of domestic markets across
tems could be put onto these platforms at Europe he sees the future as Europe being
a fairly low cost. one domestic market.
Peter Evans had the idea for a turnkey
Nominee Accounting system product and Standards
got Mike Foley, in to help on the technical In its 22 years in existence peterevans
side of things. has seen many changes in the financial
“From my perspective it was a three- world, and none more so that the wide
month contract,” says Foley. “I was going spread adoption of Swift messaging stan-
to do this with Peter and go back to my dards.
day job, but it mushroomed and moved “These are great,” says Foley. “If you go
forward and we got some good deals in.” back a few years it felt like you were con-
peterevans’ first client was a small pri- stantly reinventing the wheel. It’s a very
vate client stockbroker and through that good way for us to facilitate the delivery of
the company entered into the areas of systems otherwise you are starting with
nominee accounting and corporate blank pieces of paper all the time. It has
actions. Recognising this as being part of allowed us to have a very much more
the custodial role Evans and Foley cast componentised approach to the way in
their net a bit wider and got involved with which we build systems.”
custodians themselves. What standards have done for software
Business has blossomed for peterevans, houses like peterevans is allow them to
even through the peaks and troughs of the build products in such a way that they can
financial technology arena. The company ring fence different parts of the functional-
has exploited the outsourcing market by ity and design and then drop that piece
selling products directly to its potential into a particular implementation.
customers but also to third parties who
use them to provide outsourcing services. Future

the tech “With this rise in outsourcing, we are

backing two horses by providing the sys-
tems direct to clients and also providing
One of the challenges for peterevans
moving forward is that a lot of companies
still operate on legacy systems that may

touch systems to outsourcers,” explains Foley.

The process works on the insourcing
side too and peterevans was the company
responsible for working with Mellon Trust
be as many as 20 years old.
With all the regulatory and legislative
change happening, it is a tall order to
expect that these changes can be accom-
to insource their UK Custody. “They could modated on systems which are so old.
With a unique blend of see the commercial advantage and cost “Technology is moving all the time and
front to back office benefit of bringing that operation in-
house,” says Foley. “So we provided them
we will always keep our foot on the gas
with regard to our technology footprint
business solutions fit with a system to support their local cus- and by using mechanisms such as ASP we
tody with a direct link to Crest.” are able to smooth the process of moving
for any custodian, clients off their old systems,” says Foley.
peterevans is proving Regulation A lot of companies cite issues to do
with risk and cost as reasons as to why
MiFID is currently driving the agenda
itself in the premier from a European perspective and petere- they still operate on older systems. At
league of UK software vans has been active in going to Central
and Eastern Europe to look at potential
some point however, there is going to be a
rush of companies who want to change
houses. business there. “Central and Eastern their systems as they realise that to be
Europe is definitely going to be a growth regulation compliant and to keep up with
area,” believes Foley. “It may well be that their peers in an intensely competitive
Alan Duerden speaks you get established banks in the west set- world appropriate changes have to be
ting up operations in Eastern Europe and I
to Mike Foley, think there is going to be a lot happening The main challenge for peterevans is
Managing Director, in that area.”
From a software vendors point of view
how they handle this influx in interest and
make sure that a client migration to new
about riding the Foley does not deny that regulation is systems are not only a smooth but cost
good news because clients have to buy efficient process, a task they have risen to
peterevans wave and products to be regulation compliant, but in the past.
why he couldn’t leave. what he sees with MiFID is the potential Will we have another twenty-two years of
peterevans? I think so!


Custody - Nordic Panel

Bente Hoem

Nordic Custody
Panel Debate
Our industry insiders grapple Anne-Lise
with the current issues and Kristiansen
trends in the Nordic region.

Bente Hoem, Head of Global Relations and Support,

DnB NOR. Hoem has 15 years of experience within the
custody business, from Christiania Bank og Kreditkasse,
where she headed up International Securities Services and Christel Leonhard
from SEB where she established and headed up its
Norwegian securities operations.

Anne-Lise Kristiansen, Head of Sub-custody and

Clearing, Nordea. She has worked in finance for 17 years
and joined Nordea's Securities Services in 2003. Preiously,
Kristiansen worked for investment managers and other
major players in the Norwegian securities market.

Christel Leonhard, Head of Sales, Securities Services,

Danske Bank. Leonhard has been head of sales since Neal Meacham
November 2005, but has been with the bank since 1984,
before joining the Securities Services area she held vari-
ous positions in Danske Markets including Sales of
FX/Derivatives and Marketing of Danske e-Markets.

Neal Meacham, Head of Custody, Swedbank. Meacham

has worked in the Swedish securities industry for over 20
years of which the last 8 years have been with Swedbank.
Prior to his current managerial position Neal has primarily
worked with client relations management and client serv- Allan Nedergaard

Allan Nedergaard, Nordic Business Development,

Northern Trust. Nedergaard joined the European Sales
team in 2005 and is responsible for the sales and market-
ing efforts of Northern Trusts’ global custody and related
products to the Nordic countries. Previously, Nedergaard
worked for Danske Bank, responsible for the Nordic insti-
tutional client base as well as Nordic region sub custody.
Ulf Noren
Ulf Noren, Head of sub-custody Client Relations, SEB.
Nored heads up the sub-custody venture in the 4 Nordic
Markets, Germany, the 3 Baltic Markets and Ukraine. He
has been with SEB for two and a half years and has
worked with Sub- and Global Custody for the past 23

Johan Wennerberg, Head of Relationship Management,

Handelsbanken. She is vice president at Handelsbanken
and has been with the company since 1984. Between 1995
and 1999 he worked as head of the Nordic desk with Johan Wennerberg
Handelsbanken in Asia.







Custody - Nordic Panel

Within the Nordic market there ones that make solutions and services Nedergaard: Local custodians will need
has been continued consolidation available that meet the needs of investors! to review their own capabilities to deter-
and alliances how do sub- In order to do that a provider must be mine if they can go it alone in order to
custodians best position to able to adapt the existing setup to future meet the future as well as the current
compete successfully? changes and requirements coming both needs of Nordic investors. These being
from the market and from clients. predominately:
Hoem: The consolidation has been most- Flexibility is the key answer as investors A: Cost reduction versus increased
ly on the trading infrastructure and I have different objectives. efficiency – faster time to market
believe there is still a long way to go until Our strategy as a sub-custodian is to B: Capital expenditure and develop-
we see consolidation between the post- have centralised and highly automated ment of technology to meet intraday
trading infrastructures. In addition, many processing of operational core custody information and performance needs
of the alliances have not really come into functions, supported by individual C: Complete servicing of a wider and
effect as yet. In the long run, consolida- human services. This enables us to more varied asset classes – property,
tion and alliances or not, the best way to provide the right mix of flawless execu- hedge funds, private equity, complex
position yourselves to compete success- tion and settlement combined with tai- derivative instruments, currency as
fully is to have an efficient organisation lor-made solutions based on in-depth an asset class, infrastructure etc.
and flexible system that easily can adapt knowledge of the market and highly
to changes and new products. It is also professional capabilities. If not, they must consider other options
very important to deliver very such as merging or partnering
good service on all levels “The best providers of custody with other providers in order to
survive in an increasingly com-
Kristiansen: In light of the services in the Nordic markets are petitive and busy market place.
upcoming changes in the Nordic the ones that make solutions and One such example is Northern
market infrastructure, we see Trust’s cooperation with Svenska
increased demand for regionali- services available that meet the Handelsbanken. Not only do our
clients benefit from the global
sation of sub-custody services.
On the other hand, it is absolute- needs of investors!” reach and local expertise offered,
ly essential to maintain strong but also the fact that asset servic-
local expertise both regarding infra- Meacham: Our part of the world is ever- ing is the core business activity for both
structure and client services. Also, an changing, even though we sometimes organisations. There are no distractions
integral part of succeeding in this think that some changes takes a little too of other business lines such as mortgages
changing environment is to be actively long, it is none the less constantly chang- or credit cards.
involved in the local and Nordic devel- ing. Flexibility has to be a key factor for Equally, global custodians must come
opments ongoing. Nordea has strong operating in a market such as ours. up with innovative approaches in order
representation in the market institutions Custodians which have flexible to open up opportunities in the Nordic
as well as in the different working systems/platform, reporting mechanisms, region. We believe that local knowledge
groups, which work towards adapting operating models and client servicing and the ability to listen to client needs is
the market participants to the future processes in conjunction with strong paramount in order to provide innova-
changes. So, the ability combine the market influence and a dedication to deal tive solutions for Nordic clients. For
Nordic and local expertise and adapt- with constant change and development example:
ability is, to us, the key to success. are going to be most successful.
Understanding client requirements and Northern Trust took up a significant
Leonhard: The best providers of custody relating them to our market environment challenge when looking to service the
services in the Nordic markets are the will be ever increasing asset as our mar- Swedish mutual fund sector. Since
ketplace moves forward. Swedish mutual fund companies are

Flexibility on a solid ground

To keep the customer in Handelsbanken is one bank
focus. That is one of the throughout the region –
cornerstones at with the same organisation,
Handelsbanken. We do not management and culture,
simply sell products, we and one of the highest
provide you with the rated private banks in
services you need and Europe.
As the first bank to provide
Because of a decentralised local in-house custody in all
structure, we ensure a Nordic markets, we have a
flexible and quick decision- set-up that allows the same
making process, and it high level of service
helps us to create tailor-
made services, as well as
throughout the region.
new market solutions to We offer flexibility on a solid Nordic Custody Services
meet your expectations. ground.
Custody - Nordic Panel

obliged to work with a local custodian, information requirements and how this a massive amount of RfP's, RFI's and
we identified a solution to this problem data will be used. Our information deliv- exclusive discussions with a limited num-
by partnering with a local player, Svenska ery can be customised accordingly ensur- ber of providers. This will continue for
Handelsbanken, allowing one of the ing we are getting to the heart of our reasons described in the below and will
largest insurance and mutual fund com- clients’ requirements. eventually lead to a consolidation also
panies in the Nordic region (Folksam) to among service providers in this region.
consolidate all their assets including Noren: Since last year, the infrastructure
funds with a global custodian. Northern consolidation has been slow. The NCSD Wennerberg: We believe that that there is
Trust worked closely with the Swedish project that shall consolidate the Swedish a need for local market presence but with
regulator who approved our fund model and Finnish CSD's is ongoing but results a set up which is as harmonised as possi-
and the principles of this are now incor- are produced at a slower pace than we ble when it comes to systems and report-
porated into the Swedish Fund Act. We first anticipated. Though, the work is dili- ing. The local presence is essential in
have also rolled out a similar mutual gent and aims towards finding Nordic order to offer best possible corporate
fund solution in Norway. We have since solutions so that other CSD's can work action, tax reclaim and proxy voting serv-
expanded this model to include the other according to the model to be chosen ices. By building on a harmonised set up,
Nordic countries as well making this a when further consolidation comes about. system changes and market adaptations
true Nordic mutual fund solution. There is no doubt that this will happen, can be made more effectively.
the question is when. Another dimension
Secondment of staff to work in our of consolidation is the growing trend How has consolidation affected the
clients’ offices during peak activity is among clients to consolidate to fewer services offered by custody
another means to gain an in-depth providers and benefit from the advan- providers?
understanding of our clients’ businesses tages of using one provider in a multi-
and ensure that they are receiving the tude of markets. This trend has been Hoem: I do not believe that there has
service that is right for them. For exam- growing stronger and stronger the last been so much consolidation in the
ple, we gain an understanding of their three years and also 2006 has started with Nordic countries, as to have any large

Nordic Excellence

Securities Services is the leading provider of custody and clearing services in the Nordic region.
Business is built on long standing partnerships with our clients.
Our commitments are efficiency, reliability and providing the highest service quality.

For further information please contact: Head of Securities Services: Mikael Björknert, Custody Services: Göran Fors, Global Client
Relations: Ulf Norén,
Custody - Nordic Panel

impact on services offered by sub- which can be confusing as well as fragmented with different
custodians. The consolidation on the frustrating for those not familiar with infrastructures and very different laws
Nordic Stock exchanges infrastructure our regional diversification. Custodians and regulations, I do believe that a
may have had an effect on the number have reacted by offering regional Nordic regional provider will have an
of remote member on the exchanges and services. These services will become advantage toward non-Nordic partici-
on their increased market share in each more and more sophisticated and pants, except for the plain vanilla settle-
market. This again has, of course, had an involve a larger array of products as the ment and clearing. However, in the
effect on the sub-custodian and the markets continue to consolidate and future with more harmonisation of mar-
service they provide for the investment client demands increase. kets on all aspects in the Nordics, access
firms. The merger between the Finnish will be easier for all non-Nordic partici-
and the Swedish CSD has so far not had Nedergaard: Consolidation does not yet pants. I believe that it is important to
any impact on the market and I do appear to have affected the service have a strong domestic client base and
believe it will take time before any offered to global custodians. Work on a capacity in order to be able to deliver a
results are evident. Nordic single platform for clearing, set- more advanced product.
tlement and depository functions in
Kristiansen: In our case, as we are a true Finland and Sweden is still in its relative Kristiansen: It will definitely be an
Nordic organisation, so offering a infancy, with full implementation not advantage being a Nordic regional
Nordic service is very natural for us. expected in these two markets for up to provider. Also, the established foothold
During the process of integrating four five years. This seems to be the first step we have in all of the Nordic markets
Nordic banks, which we have gone towards a full Nordic consolidation due to our history is a clear advantage.
through in the past years, we have including the Danish and Norwegian The positive effects brought about by a
actively worked towards a regional prod- CSD’s longer term. Once this implemen- large clientele on the ability to handle
uct mainly by harmonising our products tation has been completed, global custo- volume peaks, such as those experienced
and services while keeping in mind the dians would expect to see benefits in the during the course of this year, are
local market restrictions. Our staff is form of improved operational efficien- undoubtedly great.
used to working in Nordic, cross-border cies and lower costs. The future Nordic market is not
teams and knowledge is actively shared carved in stone. In Sweden today there is
between the countries. We have true Noren: In general the competitive edge some interest from global players to
Nordic experts in our organisation. has sharpened. As most business propo- establish themselves. In general today’s
sitions concerns regional business, the framework is too fragmented and the
Leonhard: Until now, consolidation has competitive development is mainly separate markets are too small for global
been most visible players to establish a
on the exchange
side with the
“Consolidation does not yet appear to have full sub-custody serv-
ice themselves. To
OMX group affected the service offered to global custodians.” develop a true har-
operating the monised Nordic mar-
exchanges in Denmark, Finland, Sweden evident among the two regional players ket is still far ahead. There will in time
and the Baltics. Furthermore, all Nordic and the (those) trying to build a regional be new global market players in the
exchanges are using the SAXESS platform. region and a consolidation of local and
trading system. The effect has been a smaller existing players. Nordea is a
stronger foreign focus on the Nordic Wennerberg: With a pan-Nordic organi- driver for a Nordic harmonisation
market and has resulted in a growing sation, providers can offer single pan-
number of remote exchange members Nordic agreements, structured reporting Leonhard: New entrants to the Nordic
and, as a result, the turnover in both and consolidated fee schedule, which all market are faced with tough competition
volumes and numbers has increased means less documentation for our from the Nordic regional providers, who
significantly. As a result of the growing clients. Handelsbanken can also offer an are characterised by holding a major
activity on the exchanges, broker dealers escalated point of contact for all four market share both with domestic and
have witnessed an increasing demand countries, Handelsbanken offer account international clients in their original
for custody services. managers who take care of the day to home markets and a very strong
Within the CSD community the day transactions locally in each country, foothold in the other markets. Besides
initiatives around NCSD, which today but as an escalation point we also offer a the very competitive situation, the costs
includes Finland and Sweden, are regional client relationship manager for of setting up systems with links to four
progressing. However, for the time all markets. individual CSDs and hiring people with
being, it has not caused any changes to the right skills will be very challenging
the setup of custody services. Will it be an advantage being a for non-Nordic participants.
Nordic regional provider in the However, implementation of a fully inte-
Meacham: Exchange consolidation offers future Nordic market or will there grated Nordic CSD, including one sys-
investors an efficient entrance to multi- be ease of access for non-Nordic tem and a harmonised set of regulations,
ple markets in the region. Unfortunately, participants? would ease the entry barriers to the
the post-trade environment has not Nordic region significantly.
reached the same level of consolidation, Hoem: As long as the markets are very


Custody - Nordic Panel

Meacham: This depends on the products in those areas previously considered as operating environment and also offer
and services the individual participant is ‘safe’ (such as the mutual fund market). extensive customised reporting capability
looking for. Plain vanilla settlement and With continuing growth in international to cope with the new challenges.
clearing can most likely be done efficient- investment, complex investment strate-
ly on a remote basis. The ability to provide
However, if the “The Nordic market is changing, making ‘value added
participant is looking for services’ is also important
more advanced asset serv- it an increasingly difficult environment in as Nordic clients seek to
icing, reporting, market
influence, etc. then they
which to compete, even in those areas increase their revenues
and improve performance
would most likely go the previously considered as ‘safe’ (such as standards. Securities
route of a Nordic regional lending, commission
provider. Regional service the mutual fund market).” recapture, off balance
capabilities is definitely on sheet cash funds as well as
everyone’s lips right now so yes, being a gies, new investment classes such as alter- investment risk and performance ana-
regional provider with strong domestic native investments and cost pressures, lytical services have all moved closer to
capacity in all markets will continue to be Nordic clients have become more sophis- the top of clients’ agendas.
important. This is regardless as to how ticated - increasing their expectations and
and when the post-trade infrastructure demanding more from their custodian. To cope with these demands and to com-
develops. pete successfully in the market, huge
Technology is a key factor for all investment is required in technology and
Nedergaard: The Nordic market is chang- participants. It must be automated, the right level and quality of resources
ing, making it an increasingly difficult scalable in volume and functionality, flex- such as market knowledge, global services
environment in which to compete, even ible enough to adapt to the ever changing including. tax, global reach. Those

The leading provider of Custody and Clearing Services in Norway

DnB NOR your Nordic Partner

Offering: Commitment, Knowledge, Experience and Excellent Service

For further information please contact:
Head of Securities Services - Jan B. Penne:
Global Relations and Business Development - Bente Hoem:
Securities Finance - Dag Rudiløkken:
e-mail: •
Nordic Custody & Clearing Alliance: Swedbank, Sweden – Amagerbanken, Denmark – OKOBank, Finland
Custody - Nordic Panel

providers unable to meet these challenges costs for running the depository systems increase in market activity. As a result of
on their own have realised the advantages and more costs to manage the four differ- that, and in order to enhance risk man-
of forming alliances or involving them- ent links to the depository systems. agement and administrative procedures,
selves with merger and acquisition activity. In a world with more open market the demand for matching tools and serv-
There is considerable potential for fur- environments, it is inevitable that that ices is growing all the time.
ther consolidation to take place within there will be more access for non-Nordic From a more sub-custody perspective
the Nordic region. participants and in this environment it is the Nordic Scene has got a lot of atten-
There is increased pressure on more important for local providers to find their tion the last years, mostly in relation to
established regional or local providers to roles and to offer services which require the consolidation within the exchanges
reconsider their business strategies if they local market presence. With this comes and CSDs, but also by the fact that both
are to survive in what is now such a com- also a requirement for providers to be broker dealers and custodian banks are
petitive market. Global or larger custodi- innovative and review the packaging of moving towards regional sub-custody
ans may, on the whole, have the advan- their respective custody products in order solutions in order to make the network-
tage with their ability to invest in the to find new and improved services to ing management more efficient.
technology and product development offer to its clients.
required to support both mar- Meacham: The focus on
ket and individual investor client service levels is one
needs. This is good news for
the Nordic investor. Their
“In a world with more open market of the positive aspects of
the competitive situation
large asset bases are attractive environments, it is inevitable that that we have here in the Nordic
to, and therefore hotly con- region. The
tested by, local and foreign there will be more access for domestic/regional
custodians alike. It also
means they can have access to
non-Nordic participants.” providers are very good at
what we do and the global
sophisticated global solutions providers have added a new
to support their growing, global invest- dimension with a somewhat broader
ment needs. The Nordic market was recently service offering.
described as "an exciting place It is an exciting region but to achieve
Noren: We really do not see any access to be and with real enthusiasm even higher levels of efficiency on a
disadvantages for non-Nordic partici- across the board to increase regional basis we will need a truly region-
pants even now. The advantage of being a efficiency and raise client service al CSD. The NCSD initiative is a strong
Nordic regional provider lies more in the levels", is this true? step in the right direction but in its cur-
local presence: rent form it only covers two of the mar-
- Understanding and influencing the Hoem: I have not heard this statement kets. This is somewhat of a barrier for
regulatory framework, before. However, increased efficiencies custodians in attempting to provide
- contribute to the efficiency and high client services had been on the increased regional efficiency, something
re-shaping of the CSD's, agenda for many years in the Nordic mar- that is most likely expected by clients and
- knowing the language, ket. In addition, competition in the on most of the custodians’ wish-lists.
- having personal relationships with Nordic market is very high compared to a
staff in other parts of the value chain lot of other markets, which also have had Nedergaard: Local custodians have tradi-
like issuers and broker dealers to an impact on the efficiency and on cost tionally been the natural choice for many
mitigate and solve risk situations, savings efforts. It is an exciting region and Nordic institutions, in particular for their
- being in dialogue with and I believe it has been a trademark for the domestic assets and mutual funds. These
promoting foreign investors interests Nordic countries to be in the forefront custodian banks are visible in the market
in the local environment when it comes to consolidation and effi- and they provide a broad range of other
..are some of the most evident ciencies efforts. financial services to the Nordic client
contributors to a solid regional service base. However, the Nordics are proving
package. This will be difficult to achieve if Kristiansen: The Nordic markets are his- to be a fruitful market for global custodi-
the prime base is Paris, Amsterdam, torically very efficient and we have found ans. We can now compete successfully,
Milan or London, just to pick a few a common understanding across the even for local assets, as Nordic clients
European locations. board to try and work towards making continue to recognise the level of service
them even better. and added value offered by leading-edge,
Wennerberg: It all depends on the struc- Nordea works actively in local market global custodians. Today, clients are
ture of the future Nordic market, but if it groups to drive local market practice interested in consolidation of assets with
is a harmonised marketplace on a single towards Nordic and European market one custodian, economies of scale, greater
system, it will mean advantages to be a standards. efficiency and technology services as well
regional provider as long as you as a as a wider range of value added services.
provider operate in one Nordic system. Leonhard: Enthusiasm is driven by vari- Global custodians differentiate them-
Today Handelsbanken operates with one ous factors. The main factor is the selves through greater investment in tech-
settlement system linked with four differ- stronger focus on investment opportuni- nology, global market capabilities and
ent depository systems. This means more ties in the Nordic markets and the actual more value added services. Considerable


Custody - Nordic Panel

capital expenditure is required for provi- front of a harmonisation with a Nordic CSDs and exchanges, is centralised in
sion of the advanced technology neces- list of securities and harmonisation of Copenhagen. It means that even if the
sary for back, middle, and front office listing requirements. CSDs are still operating on four different
efficiencies. It also enables flexibility in On a depository level, VPC in Sweden systems, we can supply our clients with
service solutions. An example is Northern and APK in Finland have joined together similar solutions covering all Nordic mar-
Trust’s Trade Services product which under the NCSD name and is now look- kets.
allows investment managers to selectively ing at finding a harmonised solution with However, being a supplier of sub-cus-
outsource components of the post execu- one system for the two markets. The pur- tody also means that in order to match
tion trade process. In addition to offering pose is of course to offer a single new initiatives and improve efficiency
state-of the art proprietary systems, it is Swedish/Finnish market and the cost for and quality, the underlying technology
also important for global custodians to the depository, as well as for the custody has to be continuously expanded. In
be able to interface with proprietary sys- providers, to run one market rather than 2006, functionalities within Corporate
tems such as SimCorp Dimension, Trema two should be much lower which should Actions and reporting have been upgrad-
Finance KIT and Omgeo OASYS Global. mean possibilities to reduce costs even ed and this will continue in 2007 with
The Nordic region is one of Northern further. special focus on STP improvements.
Trust’s main markets. We know that to However in order to optimise, also the
be the custodian of choice, we need to be depositories in Norway (VPS), and in Nedergaard: Substantial and ongoing
innovative in our commitment to devel- Denmark (VP) should take part in the investment in the most sophisticated
op and expand our service capabilities – discussions and we think that there technology to meet the continuing drive
such as our ground-breaking cooperation unfortunately is some way to go before towards STP and the increasingly diverse
with Svenska Handelsbanken in Sweden VP, VPS and NCSD have found a model portfolio requirements of Nordic
to provide custody and trustee services on how to co-operate which can be investors are essential. Automation is an
for mutual funds. Other examples accepted by all parties. expectation and vital to help investors
include improving trade and cash dead- become more operationally efficient.
lines, providing corporate actions in local Will 2006-2007 see a major spend To achieve the above, custodians will
language, working with regulators to clar- on technology or are most systems need to be flexible in their approach. In
ify or change local regulations, for exam- up to speed with the changing this respect, technology is a key factor in
ple offering stock lending services to demands facing the industry? being able to meet client demands –
Norwegian insurance companies. Northern Trust, for example, has been
The investment needed to cope with Hoem: It is hard to speak for the whole consistently investing in excess of USD 1
the increasing challenges and service market but I do believe that most of the billion over a three year period to meet
demands faced by the indus- this demand.
try is a tall order for many
local custodians. For them, “The competition to strive to introduce Noren: Of course,
continued market consolida-
tion through alliances, merg-
best practice and conformity in 7 markets Investment levels will
continue to be high
ers and acquisitions is the is a truly enthralling.” and even if their would
most likely road ahead. be no mandatory
Noren: It is an exciting and enthusiastic players need to make major investment investments (which the regulatory
place to be. The competition to strive to during 2006-7. DnB NOR are in the changes most likely will require) they
introduce best practice and conformity in process of assessing as to whether the would still be high. The reason is of
7 markets is a truly enthralling position. securities services areas should invest in a course that demands for further refine-
Taking this seriously and meeting the completely new custody system or if we ment and customisation will continue to
challenge of making a regional delivery to should continue investing in the existing be on the rise. New or immature prod-
an ever growing client base that either one. I also believe that MIFID will have ucts will surface/develop and that will
have, or would want to, regionalise has an additional impact on this year's invest- require automisation of processes that
delivered general increases in service lev- ments as well as next year's. Future con- today might be manual or only partly
els and a much better financial and solidation will also create a need for automated. Typical such areas will be
administrative proposition. As this will investment and technology. Issuing and Paying Agent services,
continue, we really do not see anyone Liquidity Support Products, client specif-
changing the above description of the Kristiansen: There is continuous develop- ic sweeping to/from Master account solu-
region. ment of systems to live up to market tions and assimilations between
changes regarding ISO standards and Securities and Cash products. The key
Wennerberg: I agree that we are experi- client demands. Even though the systems requirement for a supplier is to have a
encing exciting times in the Nordic are up to speed today, new demands will platform that allows as little as possible
region. All of the Nordic exchanges are follow. duplication of such investments in order
part of the Norex alliance and have to cover multi-markets.
adapted a common trading system. OMX Leonhard: In 2005, Danske Bank
has taken a strong position with owner- launched a new custody setup based on Wennerberg: In Sweden and Finland, we
ship of most of the Nordic exchanges the concept that all operational process- follow closely the decisions of NCSD
except Oslo Børs and is now in the fore- ing, including direct links to the Nordic regarding what system the depository will


Custody - Nordic Panel

use in the two markets. When a decision Nedergaard: As an innovator and key
has been made, we will start the adapta- influence in the development of global
tion of our system to the new system, and securities services Northern Trust serves
in connection with this we will also build on many global asset servicing and tech-
functions that will allow maximum bene- nology advisory boards and working
fit of any new opportunities that the new groups such as CLS, SWIFT, ISITC to
NCSD system may offer. name a few. We are thus well positioned
We also follow with interest the develop- to ensure our clients’ business interests
ment of VP's new electronic voting prod- will be actively promoted within the
uct in Denmark. industry, both in the Nordic region and
around the world.
What do you see as the major chal-
lenges facing the industry in the Below are a few of the challenges we see
near future? facing the industry in the near future:

Hoem: The major challenges facing the - the continuing trend towards alliances
industry in the near future will be to in the region increases the opportunity
adopt to new regulations such as MIDIF, for clients to access a greater range of
Basel 2 in addition to local changes in services and improve on operational
legislations, laws and infrastructure. efficiency
Increased competition in the Nordic - the gradual relaxation in cross border
countries and over capacity will also be a complexities reduces investment
big challenge for the market players. The challenges.
industry needs a higher level of standard- More diverse investment strategies, with
increased use of alternative asset classes
“The major challenges facing the industry in and derivatives
- improved interest in securities
the near future will be to adopt to new lending programmes as Nordic clients
increasingly realise the potential
regulations such as MIDIF and Basel 2.” revenue that can be generated from their
portfolios, and the individual Nordic
isation in order to reduce the risk level in countries clarify regulation on this issue
many markets. - regulatory reporting, complexity of
Kristiansen: In developing the NCSD the individual tax structures and supporting
major challenge is to develop a common new vehicles that help efficiency around
framework and develop a true efficient this such as pooling. Northern Trust has
market for the whole Nordic region. The implemented tax-transparent cross-bor-
challenge is to involve all Nordic markets der pooling solutions for our clients –
and not just adding another layer and both for distributive and
additional costs in the securities process. non-distributive clients
- increasing performance by having the
Leonhard: The prime objective is to information to make decisions sooner,
deliver high-quality cost-efficient services, reducing cost and focusing on what
but as mentioned above, more regula- really matters.
tions and advanced risk management sys-
tems mean that data capture, reporting Noren: Keeping up with regulatory
and control functions are areas which will changes and managing to run consolida-
require more attention in future. tion cases under such regulatory pressure.
Finding an attractive business
Meacham: Keeping cost at an acceptable proposition in times of fee pressure and
level and at the same time retaining a increased investment/development needs
high level of service. Regulatory issues are and finally the managing of reciprocal
and will continue to be challenging as expectations.
well as the ever increasing focus on AML
and anti-terrorist activities. Another Wennerberg: The key for a continued
major challenge is the inefficiencies relat- market harmonisation in Europe and the
ed to the settlement and clearing of Nordic region is harmonisation of laws
funds. I feel the fund industry needs a and tax regulation, and we believe this
much higher degree of standardization will be a major challenge.
and that the risk level in this arena is far
from acceptable today. ISJ: Thank you


business decisions and their impact on
Quality of Life

You pick the right You pick the wrong You pick the right
financial partner financial partner Tai Chi Master

The people you work with can either be a source of comfort, or frustration. Which is why so many choose to work
with Northern Trust. We’re known for exceptional client service. We also have some of the most sophisticated
technology in the business, and an array of innovative products. All delivered in a way that’s convenient for you.
Because it’s our job to provide solutions that decrease your anxiety. Not add to it. If you’d like to know how we can help
you, call Allan Nedergaard at +44 (0) 207-982-2236 or e-mail

Asset Management | Asset Servicing | Wealth Management
Analyse this... Securities Lending Systems
ISJ invites technology providers and fund managers to comment
on the latest developments in Securities Lending Systems.

Rob Sammons Malcolm Clark


Rob Sammons, Director, Anetics Malcolm Clark, Anvil Software

Recently, while visiting with a broker/dealer client in New In the last few years technological requirements of financial
York who manages securities lending along with a suite of institutions have progressed. The multitude of disparate sys-
other products for a major European bank, the inevitable tems that ‘do the job’ for different desks is no longer good
question came up, “So Rob, who’s got the best overall sys- enough. Financial institutions now need a global, multi-
tem for my business?” He explained that his business had asset, multi-function solution. Communication and sharing
expanded from just Securities Finance to facilitate settle- of information between business areas and regions is key.
ment and raise capital, to include a conduit book and other In many firms, Repo and Securities Lending, traditionally
products like Fixed-Income Repo, Contracts-for-Difference, separate areas of the business, are now coming together
and certain other derivatives. and a single technology solution makes sense.
As a director at a consultancy that does system integration This business strategy is driving technological changes.
across multiple vendor products it is a question that comes Our recent projects with clients in Europe and North
up regularly. The answer, as you might expect, was, “It America reflect a strong trend for firms to implement a sin-
depends.” gle system for both securities finance and repo. There is
As it stands, there are many fine systems available for our much overlap between both businesses on an operational
industry, each represented by a sales force capable of and technology basis. Combining the securities-lending and
demonstrating how their system does things no other sys- repo business lines onto a single platform reduces system
tem can do. support costs and generates operational efficiencies from
The point is that consideration of a move to a new system consolidated collateral management. Even if the desks them-
can appear the solution to a problem in the same way that selves aren’t integrated, the benefits of running them on the
the grass across the fence looks finer than your own grass same platform can still be achieved.
close at hand. You don’t see the bare spots until you’re liv- Other organisations realise benefits from combining their
ing with them. Every lawn has at least a few. The result is, two businesses explicitly onto a single trading desk. Apart
you may not need to move house to place your own shop in from the logistical benefits of a single platform in terms of
verdant splendor - though you will need to do some cultivat- economies of scale, reduced support costs and having a sin-
ing. gle vendor relationship to manage, there are a number of
In the course of this client meeting I discovered issues to real business benefits as well – most significantly having the
include, a) a need to better track the marketplace (available ability to price portfolios efficiently, and combined collateral
supply and demand, offers and needs, counterparty bal- management across the two different product lines.
ances, P/L), b) problems with income and expense alloca- A recent global client rejected the option of an in-house
tion across the trading desks supported, c) ever more time rebuild and came down heavily in favour of a vendor solu-
devoted to regulatory reporting, and d) problems adapting tion. They found that in-house development can be lengthy,
to Agency Lending Disclosure with US Domestic lenders. expensive due to no economy of scale, and is not able to
Then, to top it off, my client indicated that his personnel had evolve with the end users' needs and market requirements
been grousing about not having access to basic tools avail- the way that a specialist supplier's solution can.
able to peers at other firms. Other Anvil clients have recouped the costs of a new system
So, how did the meeting end? We reviewed the issues in under a year on operational savings alone.
(some of which are not adequately addressed by any vendor This trend is leading to a progression of the role of vendor
system), and weighed the pro and con of solutions that my as partners. Securities finance and repo can often be differ-
firm might provide versus developing solutions in-house. ent areas politically within the banks. Getting them to work
In conclusion, the best system for Securities Lending is together is essential to creating a system that meets the
likely the system you are currently using. Anticipate gaps in need of both, not just today but in the future. Increasingly
functionality and fill them in with the specific tools and utili- there is a direct relationship between the vendor and traders,
ties you need. Outside vendors are ready to help. which helps cement buy-in and ongoing feedback as to
changing requirements.


Analyse this... Securities Lending Systems

Darren Crowther Alan Matson

Darren Crowther, Director, 4sight Financial Software Ltd.
Alan Matson, Managing Director, Chief Technology Officer,
Whilst a Securities Lending system provides significant busi- eSecLending
ness benefits in its own rights, it is only when it is integrated
into an organisation’s infrastructure that key benefits such as Recently there has been a strong trend among beneficial owners
STP, trade automation and data consolidation can be realised. to apply investment management techniques to securities lend-
Every integration project will impact many business and techni- ing programs. This has led to more multi-lender programs as
cal processes so it is therefore important, from the outset, to beneficial owners split their lending assets among several
have a knowledge of what you have today and what you would lenders and/or hire specialist lending agents for specific asset
like to do going forward. classes. With these multi-manager programs, though, have
An initial analysis of static data and transactional data feeds come new challenges in reporting. Beneficial owners often need
will take place which will map out the key data flows and sys- to consolidate their various performance, risk and compliance
tem requirements. To minimise the time spent during the cre- reports into a format that spans their entire program. While
ation of these interfaces any suitable feeds which already exist most securities lending providers have deep and flexible report-
should be reused and streamlined wherever possible to avoid ing systems for their own programs, it has been left to the
duplication of effort. System replacement should not entail a beneficial owner to handle this consolidated reporting.
complete change to interfacing processes but should involve a Whether developing consolidated reporting in-house or
more gradual evolution, incorporating the latest technology through outsourcing, the first step for any beneficial owner is to
and the new functionality available to the user. standardize the data from the various providers. The ideal way to
The speed of this re-integration process needs to be consid- do this is to specify standard data formats and electronic deliv-
ered carefully, and must not only determine how the migration ery methods to the lenders. Once all the required data fields
of the existing current feeds and processes will occur but how have been covered in the specification, it should be straightfor-
new interfaces can be quickly and easily plugged in as future ward to consolidate these standard feeds into usable reports.
integration requirements are identified. The Securities Lending Lenders often have pre-developed electronic data feeds that
system should come with the toolkits to help you do this as don’t match the specification provided by the beneficial owners.
quickly and easily as possible. However, it can be a straightforward exercise to map the various
A wide variety of data suppliers can be used to provide different data feeds to a standard format as long as the required
inbound market data feeds relating to pricing and securities data fields are present.
data (for example). The receiving system needs to be suffi- Hidden in the discussion above of standardizing the data is
ciently flexible to cater for different formats and delivery mech- the deceptively complicated phrase, “required data fields.”
anisms while ensuring data integrity is maintained. Outbound Beneficial owners should be careful when specifying what data
data feeds enable connectivity with a large number of external they need so as to make sure that they can do all of the required
systems including Accounting, Custody & Settlement, and Risk reporting.
Management solutions amongst others. Unless the business is For the three general types of reporting, there are also some
a start up, the requirements for these feeds will normally be considerations that should be given to consolidating the infor-
already set. The new system will be required to, at a minimum, mation.
provide you with your current output options whilst providing Performance reporting – It is important to consider how
options to enhance and change the feeds as the receiving sys- income is broken down and how providers measure metrics
tem requires. such as fees and utilization.
Finally, standardisation is another important aspect of the Risk reporting – Risk management reporting should incorpo-
integration process, particularly in a message orientated envi- rate program-wide data for both sides of the transaction, lending
ronment, and communication with external systems should and collateral. Counterparty exposure should be aggregated so
utilize a standard approach to ensure custom processes are that balances with repo counterparties are combined with the
not required and data is in a widely accepted format. The intro- balances of the same counterparties as borrowers.
duction of XML Messaging and the continued use of the Compliance reporting – Compliance also needs to be
SWIFT standards will help to improve this process and make it monitored at the program level for most beneficial owners.
easier when replacing other systems. Additionally, where mes- In summation, the two keys to improving consolidated
sage formats do not change the need to perform detailed inte- reporting across a multiple provider program are obtaining
gration testing will be reduced. consistent and well-specified data.


Analyse this... Securities Lending Systems

Rupert Perry Pauline Parker

Pauline Parker, Sungard
Rupert Perry, Director, Pirum Systems Ltd
It is no news to say that lenders recognise that they are
The most obvious benefit of automating existing monthly or under pressure. Their clients are increasingly sophisticated
bi-weekly manual reconciliations is the reduction in manual requiring greater transparency leading to the services offered
effort required to produce a reconciliation. Less well recog- having to spell out the risks and rewards of their program,
nised is the need to change existing operational procedures this means that provision of more flexibility is a given.
to actually review and investigate breaks every day, if the Added to this is increased pressure of competition, reduced
maximum possible reduction in operational risk is to be margins and increased regulation. The good news is that the
achieved. explosion in the hedge fund market has increased borrowing
demand and funds are able to increase performance through
Whilst putting automated reconciliation in place has prob- lending.
ably been the key operational issue for most market partici-
pants over the last 5 years, a new concern is gaining promi- The dichotomy is that to gain the real benefits from
nence for those with automation: Reconciliations are not agency lending there is investment required in order to
being reviewed as part of a daily routine and as a result, achieve the requisite efficiencies and the resultant extraction
breaks are not being investigated and resolved on a timely of performance in the programs offered. There are clear
basis. interdependencies of business activity growth and trading
volume driving revenue; however this requires technology to
When reconciliations are reviewed every day, differences achieve it which in turn requires investment. All three (rev-
can be resolved more quickly, as the details of the trade are enue, business growth, technology) are interdependent; the
still fresh. This ensures books and records will be more trick is to invest where the case is clearly going to give bene-
accurate and enables all of the other downstream processes fit to the client. According to one lender, the main issue still
(e.g. mark to market, dividend claims, P&L reporting and seems to be that there is a lack of efficiency in the lending
monthly billing) to work more efficiently. market due to lack of funding in technology infrastructure
and the necessary understanding in that technology.
Larger market participants have been working on the
“usage issue” for some time, both by speaking directly with Beneficial owners are becoming more aware of the lending
their counterparties and also through the industry’s repre- market and are looking to incorporate it as part of their
sentative bodies. The International Securities Lending asset management practice; however they will be asking
Association will shortly be issuing a new “Best Practice” questions and want flexible and personalised reporting,
guideline which recommends all contracts (settled & pend- delivered by e-mail or over the web, potentially on demand.
ing, trades & collateral) are compared daily and covers Trading of general collateral is now increasing expected to be
usage by stating: carried over automated systems; the large brokers are
increasingly reluctant to trade this type of security other than
“Lenders and borrowers will work to resolve contract com- automatically as the trades carry very little value. One broker
pare breaks the same day that they are identified such that confided that this type of transaction is often offered for free
no breaks are outstanding more than one day.” to their client.

With increasing volumes and shrinking margins, counter- The technology suppliers are working hard to ensure that
parties who are unable / unwilling to use automation effec- the controls required to manage risks are provided. They are
tively are starting to be seen as being too risky and expen- also well aware of the need for easy interfacing to down-
sive to deal with. The higher volume / lower margin busi- stream and 3rd party systems. The provision of automated
ness will therefore be directed away from such clients. tools to aid efficiencies in operations has also been
increased markedly over recent times.
The lending market is growing up, the market and the tech-
nology to support it is moving, what is needed is the agent
lender to engage in utilisation of this technology to make a
real difference to their bottom line.


Analyse this... Securities Lending Systems

SIA & BMA Boards Approve Merger to the Securities
Brain Lamb Industry and Financial Markets Association

Washington - The boards of directors of the Securities

Industry Association and the Bond Market Association
today voted to merge the two organizations, creating
AS ELECTRONIC TRADING SYSTEMS BECOME MORE PRO- the Securities Industry and Financial Markets
The new organization will encompass almost the
Brian Lamb, CEO, Equilend entire diversity of firms in the financial markets and
create a single, powerful voice on legislative, regulatory
Often discussions around advancements in technology are and market practice issues.
positioned as “man vs. machine”. In some ways, this is a false “Combining these organizations into one broader, yet
dichotomy. To properly asses the effect of technology on the unified, association positions us to better represent our
role of the trader it is important to recognise that technology
and jobs are not mutually exclusive. member firms and accomplish our mission of helping
them, the securities industry and the financial markets
Over the years I have seen the proliferation of technology in grow and prosper, while also continuing to enhance
the securities finance space from several perspectives: as a public trust and confidence,” said James Gorman,
user of technology, as a trader in the securities finance and Chairman of the SIA and President and Chief Operating
fixed income business and now, as a provider of technology. Officer of the Global Wealth Management Group at
Given my experiences on both sides of the fence, I am confi-
dent that there will always be a role for traders in the securities Morgan Stanley.
finance industry. “SIFMA will aggressively promote efficient global
capital markets, foster the development of new prod-
That is not to say that there isn’t a Darwinian evolution at ucts and services and advance responsible market
play. In future, in spite of, or perhaps with the aid of, advanced practices which benefit all financial market partici-
technology, the best traders will continue to rise to the top. In pants,” added Edward Forst, Chairman of TBMA and
my experience, having helped to design many trading systems,
I have seen technology create opportunities for traders to man- Chief Administrative Officer of Goldman Sachs.
age greater volume and focus on their core competences - The new organization will also enhance its member
without increasing headcount costs - rather than technology services and provide access to a larger network of
prove itself to be a reason for displacements. members. The Association will benefit from a stronger
member and staff organization and will have an
Trading in general is a highly specialised and complicated increased capacity to achieve results. Further, the
function, which is one of the reasons why, to date, technology
has been able to add so much value. In many ways securities Association will have a strengthened research capacity
finance is even more complex and certainly more data inten- and more opportunity for member firm professional
sive, with a comparatively large amount of information, all development, training and advancement.
requiring processing, attached to each transaction. Due to this At the same time, the merger is also expected to gen-
complexity, trading technology has been slower to take hold in erate efficiencies both in terms of cost savings and the
this space, but, particularly in its ability to automate labor amount of volunteer time members contribute. The
intensive tasks and deliver more information in real-time, it is
certainly poised to add some real value in the coming few Association should benefit from economies of scale
years. In the end though, what will be the real impact of and the elimination of duplications and redundancies,
advanced technology on traders in securities finance in the such as real estate. Duplicate member committees will
near term? Well, those who can grab and use the newest and also be combined, which will allow members to more
most efficient technology will prevail. efficiently manage the amount of time they spend on
association activities.

Tools and Utilities

for Securities Lending

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Legal & Compliance - Class Actions

Stand and Deliver... USD6.3 million – a 19 per cent increase.

Even excluding WorldCom’s over USD6.1
billion settlement and Enron’s USD7.1
billion (and counting) settlement, the
The total value of securities class total value of cases settled during 2005
grew to an all time high of USD3.5 bil-
actions settlements is on the lion, surpassing 2004’s over USD2.9 bil-
increase. Rekha Menon speaks lion tally by more than 17 percent states
the report.
to key figures in the litigation It would appear that a growing fre-
quency of cases involving accounting-
business about why class actions related allegations, as well as institutional
are becoming more successful. investors serving as lead plaintiffs has
contributed to this increase in settlement
amounts. More than 35 per cent of all
2005 settlements were associated with an
institutional investor lead plaintiff, com-
pared to only 20 per cent for the prior
year. Moreover, median settlements in all
cases with an institution as lead plaintiff

in a Class of
are USD10.7 million compared to only
USD5.0 million for cases without an
institutional lead plaintiff.
“The association between institutional
investor lead plaintiffs and higher settle-

their Own ments may partially be attributable to

institutions choosing to participate in
stronger cases rather than a causal effect
on settlement amounts, though in at least
one case this year an institutional lead
plaintiff had a significant influence on the
settlement outcome,” noted Dr. Laura
Simmons, a principal in Cornerstone
With several high profile cases and Research’s Washington, DC office and an
unprecedented settlement amounts, the author of the study, which is an annual
securities litigation market in the US has effort, comparing settlements in 2005
been in the spotlight in recent years, against earlier settlements of cases filed
more notably the class actions arena since the passage of the Private Securities
where lawsuits are brought on behalf of a Litigation Reform Act (PSLRA) in
group of investors who have suffered an December 1995.
economic loss in a particular stock or Tony Gelderman, senior partner at
security as a result of fraudulent stock plaintiffs' law firm Bernstein Litowitz
manipulation or other violations. Berger & Grossmann LLP (BLB&G) agrees
According to a recent report released by with Simmons. BLB&G, which has helped
Cornerstone Research, a provider of win the largest securities litigation settle-
ments in
the past
“More than 35 per cent of all 2005 settlements were twelve
associated with an institutional investor lead plaintiff.” including
the his-
financial and economic analysis in civil toric USD6.2 billion WorldCom class
litigation and regulatory proceedings, action recovery, says Gelderman, focuses
2005 was a remarkable year for securities primarily on institutional clients. In the
class action settlements. Nine cases WorldCom case, he points out, outside
including WorldCom and Enron experi- directors contributed funds from their
enced ‘mega’ settlements of over USD100 personal assets to the settlement fund, at
million and half of all settlements exceed- the demand of the lead plaintiff, the New
ed USD7.5 million in 2005, whereas his- York State Common Retirement Fund.
torically, between 1995 and 2004, the The Private Securities Litigation
median settlement amount has been only Reform Act (PSLRA) of 1995 is widely


Legal & Compliance - Class Actions

regarded as the turning point in the US support its claims. Moreover, the high helped improve the outcome of cases and
securities class actions space. PSLRA was costs of litigation were a powerful explains the increase in settlement val-
designed to curtail class action lawsuits weapon with which to coerce companies ues,” remarks Gelderman. However, he
by the plaintiffs’ bar. In particular, the to settle claims. notes that while the settlement amounts
high technology have been increas-
industry, “While class actions remains a predominantly ing, the number of
accountants, and cases have actually
investment American phenomenon, activity in other parts of been going down,
bankers felt that
they had been
the world appears to be picking up.” an observation that
is corroborated by
unjustly victimized by class action law- “PSLRA helped remove the race to the a report recently issued by the Stanford
suits based on little more than declines in courthouse and has ensured that only the Law School Securities Class Action
a company’s stock price. Prior to 1995, more meritorious claims are being Clearinghouse in cooperation with
the plaintiffs’ bar had free rein to use the brought forward by highly qualified Cornerstone Research.
discovery process to troll for evidence to plaintiffs with good counsel. This has The report found decreases in 2005 in


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Legal & Compliance - Class Actions

both the number of case filings, as well as “There have been a few class action instances of class action lawsuits that are
the amount of investor losses associated cases, but it needs a very strong case to taking place in countries like Japan,
with case filings. The number of securi- give an impetus to form a group. Not Netherlands, Finland and Sweden.
ties class action suits filed in 2005 repre- only are the laws in relation to creating a However, he contends that the next big
sented a 17 per cent decrease from the class very different between the two market to watch out for is China. “The
213 cases filed in 2004 and a 10 percent countries, substantive law to bring a cor- next explosion of securities class actions
decrease from the 1996–2004 average of porate to be sued are very different as will take place in China because many-
195. Gelderman suggests that, the well,” Lomas points out. But he says that companies file misleading accounts,”
improvements in corporate governance the new UK Companies Law which is says Monks.
following high publicity cases such as likely to go into statute books in the As the phenomenon of securities class
Enron and WorldCom and the Sarbanes autumn will help improve the situation actions slowly migrates to countries out-
Oxley (SOX) Act of 2002, have influenced by increasing shareholder rights. side the US, the main challenge in front
the number of filings. This reduced level Many other countries are considered of lawmakers and advisers should be
of litigation activity, can also be attrib- ahead of the UK in this respect such as strike the right balance between access to
uted to the fact that the dramatic boom Canada, Australia, Netherlands and justice and prevent US style lawsuits,
and bust of U.S. equities in the late Spain. S. Korea introduced the Korean cautions Lomas. There are several
1990s–early 2000s is now sufficiently Securities-Related Class Action Act based negative aspects of the US system that
past, notes the Stanford-Cornerstone on US federal legislation at the beginning lawmakers in other jurisdictions need to
report, so that the large beware of, he says. “In the
majority of lawsuits “The next explosion of securities class current climate in the US, it
relating to fraud during that is very easy to start a class
period have been concluded. actions will take place in China action on very frivolous
To date, while class actions
remains a predominantly
because many companies grounds. Many corporates
regard the system as being
American phenomenon, activ- file misleading accounts.” misused,” explains Lomas.
ity in other parts of the world “While there are several posi-
appears to be picking up, albeit at an of 2005. In Norway and Sweden too legis- tives of the US securities class actions sys-
extremely slow pace. The main barrier lation facilitating class actions already tem, there are many negative aspects to it
say experts, is legal in nature, with several exist and in November last year, as well. It is a bonanza for plaintiff bars
countries not yet allowing for groups of Germany, introduced the KapMuG law who have made a lot of money over the
individuals with a common complaint to which introduces a mechanism for group years through these lawsuits. Companies
join together in a single action. actions in the context of securities litiga- have often had to pay out large sums of
Commenting on the UK, Paul Lomas, tion. In France, on the other hand, dis- money for minor accounting errors. In
Partner at the UK office of international cussions are on to introduce a class action fact, the balance of power is skewed
law firm, Freshfields Bruckhaus Deringer mechanism. towards these law firms rather than
says, “The reality is that we do not have Despite these ongoing legislative efforts, shareholders,” adds Lomas pointing
the same securities litigation market like US style lawsuits are extremely rare. In towards the case of Milberg Weiss
in the US because of differences in law.” Australia, for instance, class-action law- Bershad Hynes & Lerach LLP, the most
For instance, Lomas says, the UK has an suits have been permitted since 1992, but prominent class-action securities law
‘opt in’ rather than an ‘opt out’ class a review by SCAS (Securities Class firm, which has won more than $45
actions structure like the US. In the US, Actions Services) Alert, a newsletter by billion in its suits against corporations.
the court decides upon the class of enti- ISS, a US based provider of proxy voting Recently, the firm was indicted by a
ties that are affected by a corporate and corporate governance services, federal grand jury on fraud, conspiracy
wrong doing and an entity can easily opt found just one significant securities class and other charges related to an alleged
out of the law suit if it so desires. In the settlement, an A$ 97 million settlement kickback scheme. A Los Angeles grand
UK on the other hand, entities have to obtained by more than 22,000 investors jury handed up a 20-count indictment
opt in to a class if they want to partici- of GIO Australia Holdings in 2003. against the firm and partners David
pate in the lawsuit which is much more Investors claimed that GIO executives Bershad and Steven Schulman.
difficult. “Inertia being what it is, it is made misleading and negligent state- Prosecutors accused them of illegally
very easy to create opt-out class actions ments in 1998 while defending against a paying part of nearly $250 million in fees
but very difficult to create an opt-in class hostile takeover bid by AMP Ltd. The set- over a 20-year period to clients who
actions because of risk related concerns,” tlement, the largest in Australian history, agreed to act as plaintiffs.
states Lomas. Further, once a team has was approved by an Australian federal Indeed, in the US, the current system
been created, unlike in the US where the court in August 2003 and shareholders distorts market behaviour, while in coun-
court administers the class, in the UK, recovered an estimated 60 percent of tries like the UK, there is room for more
entities establishing the class have to set their losses. channelled activism. For a successful,
rules regarding lawyer fees and liability The market for non-US securities class positive securities litigation environment,
among others. Moreover, in the UK, the actions will grow, but slowly, states the key is for regulators to find the right
law dictates that shareholders cannot sue David Monks, managing director of balance so that both shareholders inter-
the company, since shareholders are Magenta One, the class action recovery ests and corporate interests are preserved.
themselves regarded as the company. specialist, pointing out to sporadic ISJ


Essay Award 2006


TOMORROW’S PEOPLE Giulio di Cerbo, Managing Director,

EMEA, Citigroup Global Transaction
ESSAY AWARD 2006 Services. He is well-known within the
financial industry, and is an active
participant in forums, roundtable dis-
Sponsored by cussions, conferences and seminars.

As sponsors of Investor Services Journal’s 2006 essay competi- Nigel Taylorson, Head of Relationship
tion, Citigroup’s Giulio di Cerbo and ABN AMRO Mellon GSS – in Management, ABN AMRO Mellon. He
the shape of Nigel Taylorson, thier guests, and members of their is a seasoned commentator on industry
teams – were on hand to present the award and a cheque fof trends, issues and developments.
USD2,000 from ISJ to winning entrant Nathalie Aubry at a dinner
held at London,s Dorchester hotel. Topics covered in the submit-
ted essays spanned many different aspects of the securities
industry, including legal, risk, compliance and securities industry
infrastructure. All the essays were of an extremely high standard,
and – in keeping with the growing globalisation of the business –
their authors were drawn from all corners of the world.
Aubry, a PhD student and UACES scholar at Robert Green Paul Stillabower, Head of Business
University in Aberdeen, focused on regulation of post-trade Development, HSBC. He is responsi-
securities services within Europe, an extremely topical issue at this ble for sales, relationship management,
time. As Aubry highlighted, post-trade processing may generally marketing and market strategy in
be viewed as a somewhat obscure activity, but it is nonetheless Europe, the Middle East and Africa.
central to the healthy functioning of global capital markets.
Photos: 1 - Giulio di Cerbo & Nathalie Aubry; 2- Justin Lawson, Elizabeth
Coleman & Harvey Colborne; 3 - Guilio, Nathalie, Nigel Taylorson, Mark Latham.


Due to its limited length this paper will only focus on European reg- endorsed at the Lisbon European Council of March 2000.
ulation regarding ‘post-trade’ securities services – the process that In the midst of this regulatory euphoria, a possible clearing and
results in securities transactions becoming final and irrevocable and settlement framework directive is on the discussion table.
that also enables the safekeeping of securities. Though invisible to Interestingly this is an addition to the origical FSAP. As the need for
the final investor, these operations are nonetheless at the core of a a directive is being discussed, the paper can only show what is
proper and secure functioning of financial markets. They are also expected to be happening and what needs to happen. Therefore it
concomitant to key issues such as investor protection, financial mar- focuses on ‘impact’. The question stands: What would be the impact
ket stability, the distribution of financial risk, and the competitive- of a clearing & settlement directive on securities services?
ness of the European single market. This paper does not attempt to take sides as far as the need for a
The European Parliament’s Resolution of 2003 underlined that directive is concerned, but hopes to contribute to the debate. It is
existing clearing and settlement barriers do not enable cross-boder only concerned with the potential impact regulation in this area
transactions to be processed efficiently. Accordingly it is impossible could have. In such a highly technical area has really politics and reg-
to exploit to the full an internal market in financial services. ulation its place?
Financial services have recently been scrutinised, and a battery of
European directives and other pieces of legislation were designed to Where are we today and what is clearing & settlement anyway?
support the realisation of a ‘truly integrated financial market’ – as All stakeholders readily admit that, on the one hand, national mar-
envisaged in the Financial Services Action Plan (hereafter ‘FSAP’), kets are secure and highly efficient, but, on the other, the European
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Winner - Essay Award 2006

market deeply fragmented due to the diver- or not. Pan-European clearing and settle- increased considerably. Clearing and settle-
sity in market practices, legal frameworks ment practices would simplify current ment service providers are seeking to
and tax regimes. Indeed Securities Clearing operations. enhance performance, reduce costs and
and Settlement Systems in the EU have Clearing and settlement is a condition for establish a pan-European presence, in their
historically developed on a purely domestic the smooth operation of securities markets own or through mergers and alliances,
basis, as cross-border trading activity has which is still far from being met. The basic which is beginning to lead to significant
been, in the past, very limited. Given the problem here seems to be the existence of restructuring. At the same time, regulators,
large economies of scale and scope that too many clearing enterprises, some of supervisors and overseers are taking steps in
characterise Securities Settlement Systems them working only on a national scale, and order to increase the clarity and homogene-
and Central Counterparties (CCPs), the consequent absence of the economies of ity of standards applicable to securities
domestic systems have experienced a scale which are usually obtained in the clearing and settlement systems, to update
process of consolidation leading to the United States in the clearing and settlement their supervisory methods in order to meet
creation of domestic monopolies or quasi- of securities trade . Consolidation is com- the challenges posed by market develop-
monopolies operating under uniform plicated by conflicts of interest since each ments, and to enhance safety.
technical, regulatory and legal frameworks. part of the clearing and settlement system
National Central Securities Depositories wants to secure its own survival. The need for a directive…
(CSDs) were developed to comply with the
national central bank, stock exchange and “The inefficiences of The Risk argument
banks demands . Yet one element remains
identical: the existence, on the one hand, of
cross-border arrangements Regulatory binding measures in the form
of a Directive should be introduced to con-
a risk free central infrastructure, and on the in the EU are due to strain any undue risk imposed upon market
other, the presence of financial intermedi- participants, financial stability or investors
aries – operating in a highly competitive a lack of global and issuers. The current legal differences
market – that provide operational and technical standards.” between the Member States are such that it
financing services. would be impossible to address certain
The performance of clearing and settle- What is needed? objectives (as set by the second Giovanni
ment functions has been entrusted mainly There are areas that could benefit from report, i.e. cost-efficiency, fair competition
to institutions such as CSDs and CCPs. The Commission action – even according to the and avoidance of systemic risk) with non-
former mainly perform functions relating challengers of an EU directive: the removal regulatory means while ensuring a consis-
to settlement and custody, while the latter of obstacles to the introduction of a har- tent overall framework for the Single
typically perform functions relating to monised law of securities transfer and hold- Market. The effectiveness of transfers and
clearing. CSDs and CCPs do not usually ing; the promotion of harmonisation of the the finality of transfers as a result of book-
deal with retail investors. Access to these reporting of tax file information; the appli- entry debits and credits made within sys-
institutions is offered by other entities – cation of competition policy. The ineffi- tems are crucial to reduce uncertainty and
namely, Custodians and Clearing Members ciences of cross-border arrangements in the systemic risk. It is fundamental to the func-
– which act as Intermediaries for clearing EU are due to a lack of global technical tioning and creation of a safe, efficient and
and settlement activities. However, certain standards, the existing of differing business integrated EU clearing and settlement
Intermediaries may not wish to access practices and inconsistent fiscal, legal and infrastructure to have clear rules regarding
directly these institutions; they use other regulatory underpinnings. As a result, cross transfer of ownership in the context of
Intermediairies instead. Therefore, a multi- border clearing and settlement in the EU is securities clearing and settlement systems,
tier intermediary structure is possible. much more costly and complex that at applicable to financial instruments held
Cross border transactions can be settled purely domestic level and, potentially, less with CSDs.
through the following channels: 1/ direct safe. This fragmented market structure is It is worth paying special attention to
remote access to the foreign Securities no longer acceptable at a time when invest- containing systemic risk in the one hand
Settlement System; 2/ use of custodian hav- ing strategies are increasingly based on pan- and assuring a level playing field for all par-
ing direct or indirect access – typically European, sector-based considerations and ticipants in the clearing and settlement
through a local participant – to the foreign a single EU financial market is being creat- market on the other. On systemic risk, cor-
Securities Settlement Systems; 3/ use, as an ed. Without clearing and settlement porate consolidation will inevitably concen-
Intermediary, of a CDSs or International arrangements, the ability and willingness of trate risks, which are today diffused among
CSD that has direct or indirect access to participants to trade in EU securities will be many settlement systems. Nevertheless, it
the foreign Securities Settlement System. sub-optimal; the liquidity of financial mar- could prove reductive to rely solely on
Today risk free CSDs process 90% of EU kets will be affected and the cost of capital enhancing the risk management instru-
securities transactions and 70% of the will be higher than it need be. ments of clearing and settlement
monetary value of transactions settled in Against this background market forces are Infrastructures, especially if we consider the
the EU: over 250 million transactions worth driving the demand for far greater pan- profit-seeking nature of the settlement sys-
EUR 300 trillion per year. Yet the current European efficiency. The introduction of tem operators. The need to maximise share-
heterogeneuous nature of the European the single currency, the emergence of an holders dividend could conflict with the
clearing and settlement arena gives rise to equity culture on continental Europe, and need to run the companies, in keeping not
increased direct and indirect operating the improvements in information technolo- only with the obvious supervisory requisites
costs as they grapple with the complexities gy have contributed to the increase in num- but also in keeping with sound and prudent
of cross-border clearing and settlement. ber of relatively important cross-border management.
Although these costs and complexities have transactions. As a result, the strains on and It is unavoidably a contentious issue.
only a marginal impact on the decision to the expectations from cross-border clearing Chief among the bones of contention is the
invest in a particular cross-border security and settlement arrangements have proper position of central securities deposi-


A passion for results

In our business – as well as in yours –

results are everything.
We are delighted to announce that the 2006 Global
Investor Global Custody Survey has ranked us the
top performing global custodian among our peer
group, while recognising us as the best provider
ahead of our peers in 15 of the survey’s 25 service
Combined with the 2006 R&M Consultants’
Global Custody Survey, which has now rated us the
number one global custodian in Continental Europe
for two years in a row, we believe results like these Call us to find out how we can help
best demonstrate our commitment to clients and you achieve the results you want
in 2006 and beyond.
the industry - and confirm that when you appoint us,
you are choosing expertise which is second-to-none. For further information,
please contact:
Brian Leddy
Head of Sales
+44 (0)20 7163 5907
Winner - Essay Award 2006

tories, particularly the ICSDs Euroclear, terms of the right to provide services on the conduct of business rules and client money
Clearstream and SIS Sega Intersettle. A one hand and capital adequacy require- rules requiring segregation of client money
group of agent banks have argued that ments on the other. Very few securities are and assets.
CSDs should not be allowed to offer bank- placed in multiple CSDs, making CSDs nat-
ing services and other value added services, ural monopolies. Should they, as monopo- Market forces
because of the systemic risk implications lies, be allowed to compete with institutions The removal of the remaining Giovanni
and the problems of cross-subsidisation that don't have that monopoly? On the barriers should naturally lead to further
between monopoly functions and competi- other hand, the CSDs ask why they should European integration, and cross-border set-
tive banking functions. be prevented from competing. The compe- tlement costs will in turn be reduced even
tition issue is important here. in an environment where multiple settle-
Improved regulatory co-ordination ment infrastructures prevail. However, in a
A directive for securities would be consis- “The current legal harmonised Europe, market forces should
tent with the approach adopted by the be able to further progress consolidation of
Commission to achieve a genuine Single differences between clearing and settlement, and there should
Market for Financial services, based on the the Member States are be no need for regulatory intervention
definition of a common regulatory and towards the creation of a single, pan-
supervisory framework and the application such that it would be European clearing and settlement market
of mutual recognition principle. Together
with the directive relating to the taking up
impossible to address infrastructure.

and pursuit of the business of credit insitu- certain objectives.” Conclusion

tions (Consolidated Credit Institutions Clearing & Settlement proved to be a
Directive) and the Markets in Financial much-debated question at the European
Instruments Directive (MiFID), it would … but is it really needed? level. It is an issue at core of the integration
form a global set of consistent legislative of the European financial market – politi-
rules governing all stages of the securities A risky and costly venture cally sensitive and highly technical. Would
transaction processes and market partici- The benefits of a directive would be out- the Commission leave it up to market
pants and institutions involved. weighed by the risks and costs. In a debate forces or put in place a framework? Despite
where there is a risk that there will be many European and American differences, are the
Rights of access and choice voices calling for additional regulation, it is models converging?
The achievement of an integrated important to recall that additional regual- The cheapest and easiest version of clear-
Securities Clearing and Settlement System tion comes at a price. Additional prudential ing and settlement would be to have one
will largely depend upon Clearing and regulation of participants in the prost trade global CSD. But is that a realistic goal? Is
Settlement service providers’ enjoying effec- processing chain can also developed using there one model of clearing and settlement
tive freedom of access to, and choice of, the tools of convergent supervisory practice that is going to emerge as a consensus view?
their preferred clearing and settlement loca- rather than new high level measures. It is doubtful. The laws and local practices
tion on non-discriminatory terms. Clearly A period of regulatory uncertainty during are different in each country. It is some-
certain access and choice restrictions still which the developmeent of the industry is times said that these differences could be
remain today. A directive should clearly held back could arise. This is particularly removed, but I think you have to ask
define different functions. Infrastructures important at a time when the consequences whether it would be in the interests of all
and Intermediaries do not have the same of market-fuelled change are being digested the economies to put these capital markets
vocation . In many cases, these stem from and infrastructure providers are engaged in together. A CSD is a crucial part of a
national law provisions or their interpreta- significant investment programmes based domestic capital market, and that domestic
tion. The most efficient way to remove on a broad consensus about appropriate capital market in turn is very important to
these or similar direct or indirect restric- technologies. the domestic economy. I think there will
tion, incorporated in a multitude of nation- Plus the risk linked to compromising always be regions in Europe. Even within
al legal instruments, is likely to be the adop- inappropriatedly in a highly technical area. countries there are already regions, and
tion of a framework Directive, introducing The costs of compliance are to be high, they will want to retain their own capital
comperehensive rights if acces and choice especially in the case of inappropriate regu- markets. If there are regional service
and the conditions for their exercise. The lation. An example of this risk is the current requirements, then someone will provide to
central tenet of the Commission's approach debate on the ESCB-CESR standards, where meet those requirements, even if it is at a
to clearing and settlement regulation is that the industry had to work hard to explain slightly higher price.
"Securities Settlement Systems should have why it should not be mandatory to collater- With a directive or without one the
right of access to Securities Settlement alise credit exposure. European Commission, because it has
Systems in other member states." The engaged a public debate about clearing &
alternative, namely to rely on voluntary Too much regulation already settlement, has generated regulation – this
action by the national legislators or regula- It is important to recall that all partici- could be self regulation or legal regulation.
tors, would be much less certain and might pants in the securities processing chain, Yet, the issue of definitions between the dif-
not guarantee EU-wide liberalisation for a with the exception of some individual ferent functions performed by market par-
long period of time . investors, are subject to a degree of regula- ticipants is crucial to future developments.
The lack of a European regulatory and tion. Companies are subject to an obliga- Should they be separated? In a market driv-
supervisory framework for clearing and set- tion to keep proper accounts; banks are en by profit making organisations at all
tlement, which raises problems of equal subject to solvency standards and (in some value chain levels it remains to be seen
treatment for all parties offering clearing cases) conduct of business rules; investment there will be winners and losers.
and guarantee services, is problematic in firms are subject to capital adequacy rules, Nathalie Aubry



The Premier Gathering Of Beneficial Owners In Europe


12-13 September 2006
Grand Marina Hotel
Barcelona, Spain

Over 80 Investors Including Most Italian SGR FOFs Attended In 2005


14-15 September 2006
Hotel Principe di Savoia
Milan, Italy

Te l : + 1 - 2 1 2 - 7 6 8 - 2 8 0 0 E x t . 1 • F a x : + 1 - 2 1 2 - 7 6 8 - 2 4 8 4 • E m a i l : m a i l @ i m n . o r g
Diary & Snapshots

Dating Snapshots...
Global Securities
Services events
24 July 2006, 3 days 23 October 2006, 3 days Derivatives & Securities World
Alternative Investment Summit Hybrid Securities Europe 2006
2006 Australia London
Rydges Jamison Hotel, Sydney, terrapin
Australia Tel: +44 (0)20 7827 4161
Tel: +44 (0)20 7827 4171 rope/
Web: 6 November 2006, 4 days
Energy Investment Trading Asia
12 September 2006, 3 days 2006
Hedge Funds World Asia Singapore
Hong Kong Convention Centre, Tel: +65 6322 2705
Hong Kong
Terrapinn g/
Tel: +44 (0)20 7827 4171
Web: 7 November 2006, 2 days
Asset Allocation Asia 2006 Kevin Green, Mizuho & Rob Lowry, Exchange Systems
19 September 2006, 3 days The Conrad Hotel - Hong Kong
Private Equity World Middle East terrapin
2006 Tel: +65 63222 721
The Jumeirah Beach Hotel, Dubai,
UAE - United Arab Emirates
Tel + 44 (0)20 7827 5989 8 November 2006, 3 days Ethanol & Biofuels Asia 2006
me Singapore
26 September 2006, 2 days Tel: +65 6322 2726
The 15th ALFI & NICSA
Investment Funds Forum
Luxembourg 14 November 2006, 4 days
Tel: (+352) 22 30 26-1 Hedge Funds World Africa 2006
Web: / Cape Town International
Convention Centre - Cape Town,
26 September 2006, 3 days South Africa
Portable Alpha 2006 Tel: +27 (0) 11 516 4054 Clive Lambert, FuturesTechs & Alec Baughen, Triscar
TBC, London, United Kingdom
Tel: +44 20 7539 4325 fwza/
Web: Cognito Pub Quiz 19 November 2006, 3 days
ha/ Trade Finance MENA 2006
Al Bustan Rotana Hotel - Dubai
9 October 2006, 5 days Tel: +44 (0)20 7092 1267
Sibos 2006
Sydney, Australia
SWIFT 28 November 2006, 3 days
Tel: +32 2 655 31 11 Hedge Funds World Zurich 2006
Web: Swissotel, Zurich Tel: +44 (0)20 7827 5995
16 October 2006, 3 days
Hedge Funds World LatAm 2006 28 November 2006, 3 days
Four Seasons Hotel - Miami Real Estate Investment World
Terrapinn Japan The losing team proving that its the taking part that counts!!
Tel: +44 (0)20 7242 2324 Four Seasons Hotel, Chinzan-so, Tokyo
atam/ Tel: +65 6322 2309
17 October, 2 days
Hedge 2006 5 December 2006, 3 days
Victoria Park Plaza - London Hybrid Securities World Australia
Terrapin Rydges Jamison Hotel, Sydney
Tel: +44 (0) 20 7539 4320 Tel: +61 2 9005 0724

Let’s go that way... Joy MacKnight and Dan Barnes

Meet the Future

All In
daily task was to liaise with 28 If you were named Cantor employee
broker/dealers, most of which were of the year how and where would you
located in New York. When talking celebrate?
about her role she comments “I enjoyed

A Days
working at Northern, but I started to I would probably opt to celebrate with a
wonder what it would be like to cross huge happy hour after work at a local bar,
over to the sell-side of the business and followed by dinner at an awesome restau-
work on Wall St. I decided that if I was rant in the city.
ever going to make a move to New

York, that there was no better time in
my life to do it…while I was still young Where do you see yourself in five years
and able to relocate with relative ease”. time?

In a spontaneous move, Biddle hopped I am working towards the opportunity to

on a plane to New York to meet with the gain international experience in the
broker/dealers she had built relation- industry. I would love to be in London or
ships with during her time in Securities Hong Kong in five years.
Lending. Having a series of interviews,
she noted “I was most impressed with Outside of work, what are your vices?
the entrepreneurial nature and growth
of Cantor’s newly-formed Debt Capital Sushi and chocolate – But not together!
Markets division”.
What are your goals for the future?
Since being hired in June 2006, Biddle
has been working hard to build her own Travelling to as many places possible,
book of business as a salesperson on buying a home, taking care of my existing
the Repo Desk. Her networking at con- family, starting a family of my own, and
ferences was certainly noticed by us always keeping in touch with the people
here at ISJ! in my life who are most important to me.
– So many!
What do you like most about your cur-
rent position at Cantor Fitzgerald?
I like that I am part of a group that was
only created a few years ago because it
ElizabethBiddle provides me with an enormous oppor- CD or MP3?: MP3
tunity to grow with the division. I also Music or films: music, especially 80’s!
ISJ speaks to Elizabeth consider the people in Debt Capital Beer or wine: both....depends on my mood
Markets a huge resource. All of the
Biddle of Cantor Fitzgerald, individuals who joined this division hail Beach or ski: 100% beach
continuing the series of from various shops on Wall St; and they Car or bicycle: neither....I like to walk
provide our team with a diverse base of Sport or Shopping: shopping
“Meet the future” profiles. knowledge and idea generation.
Watcching or playing?: playing
Who are your Mentors/Role models? Shoes or bags: do I have to pick?!
Having graduated from the
University of Texas in Finance, Biddle Night in or night out: a night in BEFORE a
knew banking was where her heart lay. I consider Rony Saba, my previous part- night out
ner at Northern Trust, a role model. I
In 2002 she joined Northern Trust as truly admire his ability to keep a con-
part of the C&IS DIAMOND Program, a stant (and grounded) perspective on Elizabeth C. Biddle, 26
12-24 month rotational training pro- what matters most in life. It’s too easy Title: Associate, Repo Sales, Debt Capital
gram geared towards management to get hung up on insignificant details Markets
development. This is a hard fought in life that you shouldn’t waste your Education: BBA Finance (University of Texas
course to get onto and after completing time worrying about.
at Austin )
six rotations through various divisions Employment: 1998 – 2000 UBS Warburg,
she accepted a permanent position in We at ISJ work hard, however, we did
hear you work long hours too? French M&A, 2002-2005, The Northern Trust
the Securities Lending Group. Working Company, C&IS DIAMOND Program then
on the Fixed Income Lending desk, with
Not as long as some people in this Fixed Income Securities Lending, 2005 to
primary responsibilities covering the
Government Securities Lending book. industry. My hours are typically 7:00 present, Cantor Fitzgerald, Repo Sales, Debt
While working in Securities Lending, her am – 5:00 pm. Capital Markets



Month Winner Client Location Assignment Mandate Size

July AA Mellon North Yorkshire UK Custody & Accounting GBP 1 bn

June JPMorgan WSS Royal Mail UK Custody GBP 2.2bn
June AA Mellon Merchant Navy UK Custody & Accounting GBP 3.2bn
June BNP Paribas Istituto Nazionale Italy Depot bank EUR 0.6bn
May HSBC RLAM UK Securities Servcies USD 40bn
May AA Mellon Railpen UK Custody GBP 17bn
May Northern Trust SFP Netherlands Asset Servicing EUR 330m
April Northern Trust Prince Street USA Global Custody USD 160m
April HSBC Karstadt H. Germany Depot bank & Custody EUR 400m
April BNP Paribas Avance Madrid Outsourcing EURO
April AXA Rosenberg AP7 Sweden Equities EURO 320m
April AA Mellon DEPFA Bank Netherlands Custody & Securities EUR0 115bn
March State Street AXA IM UK Outsourcing mandate EURO 20bn
March State Street Stagecoach UK Custody USD 900m
March Northern Trust SBB Netherlands Custody EUR 7.5bn
March SG SS ESCA Austria Custody EUR 600m

And Relax.......
The holiday season is upon us. But those of us who haven’t enjoyed the
scorching sun yet have been doing some work!
After some stirling performances and crushing of French dreams, the Italians returned home with football’s most desired
accolade, the World Cup. It is fitting then, that this month’s mandates review kicks-off with more of that inspired Italian tal-
ent..........only this time, no French hearts will be broken along the way!

Istituto Nazionale di Previdenza dei Giornalisti Italiani (INPGI), the national pension fund for Italian journalists, has appoint-
ed BNP Paribas Securities Services (BNP Paribas) as Depositary Bank for its securities assets, with a value of EUR 0.6bn. The
range of services offered as part of this deal includes global custody, investment compliance and investment accounting.
Commenting on the mandate win, Stefano Catanzaro, Head of Sales and Relationship Management for Institutional
Investors in Italy said: “Following our recent successful mandate win from ENASARCO, BNP Paribas continues to strengthen
its market position and visibility in the Italian pension fund market. The quality and breadth of our service and product
proposition entirely met with INGPI’s requirements and we look forward to working closely with them going forward.”

JPMorgan Worldwide Securities Services (WSS) has announced that Nordea Bank S.A. in Luxembourg, has consolidated
global custody for $28 billion of the group’s international fund and private client assets with JPMorgan WSS. Conrad Kozak,
Securities Company Executive at JPMorgan WSS, said: “This extension of the services we already provide for Nordea
Luxembourg is a testament to the business we have built in Luxembourg, which was the first to reach $250 billion of assets
under custody.”

ABN AMRO Mellon Global Securities Services B.V. has been selected by The North Yorkshire Pension Fund to provide cus-
tody, investment accounting (SORP) and performance measurement services for assets totalling £1 bn (EUR 1.45 bn). The
decision was taken following a six-month selection process conducted by Thomas Murray. Nadine Chakar, CEO of ABN
AMRO Mellon, said: “We are delighted that another major UK local authority has selected us as their custodian. The combi-
nation of our dedicated, high quality staff with our leading edge technology has been central to ABN AMRO Mellon’s suc-
cess since our inception, and this appointment confirms those strengths once again.”


Disaster Recovery

played during normal business hours and In addition to this note our ever grate-
we know that you will want to be kept up- ful management were here to welcome
to-date on how your team is performing in us, with some interesting “research” that
‘real time’. they had been fed by the directors, it con-
At Megabank we want our employees to cerned the significance of certain sport-
be able to participate and enjoy the tour- ing events, specifically World Cup foot-
nament so have asked front-line leaders to ball games and what else might be con-
help enable you to watch or listen to flicting with that in our world of finance.
games where this does not cause any dis- Apparently there is a US based compa-
ruption to client service. We do, however, ny that plots such minor details as US
ask you not to download live video or base lending rate announcements against
commentary from the Internet as this important global events such as the
could cause network performance issues. England squads first round game.
So talk to your business leader in the Honestly, I don’t really think here in the
Fever Pitch first instance to understand what arrange-
ments have been made locally. If neces-
UK we need a calendar that identifies to
find out who is swinging the lead. We just
sary, offer to help out by setting up viewing need to look around the office!
facilities for your team or site. What can realistically be done to try
and mitigate against the problems that
The World Cup spread “What a fine state may present themselves to office manage-
like wild fire, of affairs, the content
ment during such a large sporting event?
Well perhaps the first thing we can do is
consuming our hearts provider offering identify just who is and who is not really
interested. In our office there are a num-
and minds. advice to customers ber of staff who have no interest on foot-
ball at all. We don’t want to be too sexist
on how to not receive here but it seems that a good number of
Our (now not so the service.” the young ladies here in the office could-
n’t care less out football, thats you and
anonymous) Karen, Hannah! this together with sensi-
disaster recovery Don’t make me laugh! There is no-one
in our office. This week after four o’clock
ble and firm holiday planning let’s us put
together a core team of staff who we can
expert, Keith Ford just in the afternoon I have only managed to
spot Roger our paranoid manager from
rely to be in the office throughout the
series, this ensure continuity of service
wants to watch a the facilities company and he has only for our customers.
been running around posting up photo- We also make as much use of flexitime
match. copies of our brand new TV License. Oh, at these times as possible, many of our
and a couple of techies from hosting serv- staff can easily come in early and start
ices that have been in to read the BBC early, this gesture tends to encourage staff
Well a big hello from continuity towers! web site to attempt to block all the live to work with us to cover the incidents
What a massive treat for us! No sooner feeds into the local area network. What a If you have the luxury of not needing to
are we finished supporting the Global fine state of affairs, the content provider provide a constant service then the most
Disaster Recovery Industry Conference offering advice to customers on how to sensible solution is to provide a screening
Season than we are back into a pan not receive the service. We can only room in the office, rent a large screen and
European macho football and lagerfest assume that they were doing this master put on a few soft drink. This means that
holiday. Thank you to Kirsten for getting class of sales prevention to possible miti- staff can work right up to the beginning
us all back on time from the US on a gate against an unpredictable rise in the of a game and then be back minutes after
direct flight. hits they may receive? the match.
Of course we now have the world cup We hope you all spotted the an almost So instead of you having members of
to contend with, talk about disaster plan- classic denial of service delivered up the staff taking a whole day off “sick” to
ning! A simple note we received read; FIFA. Allegedly there was a rather dubi- watch a match that lasts for just an hour
ous call by a referee in their game against and a half you will have them taking an
The World Cup Switzerland. Some wag in Korea decided hour and a half out. You may find staff
It happens every four years and is set to that it might be fun to start a viral cam- being more productive when they go
rule many hearts again for the coming paign whereby he suggested that if FIFA back to there desks because they’re happy
weeks The FIFA World Cup tournament were to receive a petition with over a mil- to have seen the game and pleased that
kicks off on June 9. For many of us the lion names then they would replay the you have managed to take care of the.
event will be an interesting and emotional match. A fairly obvious hoax but believed And me, I am just waiting for all the
time as we follow the progress of our by millions of Koreans, luckily FIFA were games to finish and will be off on holiday
national teams. Some games will be able to simply switch off the feed from ~ with Hannah and Karen!
Korea and keep service as usual. ISJ


Moving & Shaking

Lars Gustavsson has also been appoint- ing and administrative services for our
Moving ed as Global Head of Services and Senior
Executive Vice President, effective 01 July
clients,” said Hans Hufschmid, GFS
chairman and chief executive officer.
& 2006 and responsible for leading the
Services organisation delivering the com- Catalyst has announced the appoint-

Shaking mitments to improve service quality,

reduce cost and manage risks while
increasing the agility of the Services
ment of Paul Collins to its Board of
Directors to provide support and guid-
ance to Catalyst’s corporate strategy
organisation world-wide. Currently and marketing processes. Speaking on
Gustavsson is Chief Information Officer his appointment, Paul commented: “I
(CIO) for the Group. am delighted to have the opportunity to
support Catalyst’s growth plans.
A selection of the In addition, Tim Steele has been Catalyst is one of the few firms in the
appointments appointed as Head of PR & Media consulting market which really under-
updated daily at Relations, to succeed Robert White, with stands how to effect change and, more
immediate effect. A journalist with importantly, make it stick. Catalyst’s
WWW.ISJFORUM.COM almost 20 years experience, Steele has skills in the financial services market are
covered the global asset servicing busi- in great demand and these skills will
ness for the past decade, launching continue to strengthen as the sector
International Custody & Fund undergoes rapid structural, regulatory
Administration (ICFA) magazine before and technological changes. I look for-
moving on to edit Global Investment ward to exciting developments over the
Services. Based in London, Steele coming years.”
reports to ABN AMRO Mellon’s Silvia
Maulini, Head of Marketing & RBC Dexia Investor Services has
Communications, with a focus to fur- announced the appointment of Brent
ther ABN AMRO Mellon’s strategic Wilkins to the role of Head, Sales and
goals across its markets. Relationship Management, Americas.
Previously, Wilkins served as Regional
Butterfield Bank has announced that Ian Head, Central
Fair has joined the Group and takes on Canada, Sales &
the newly created role of Vice Chairman Relationship
of Butterfield Bank (Bahamas) Limited. Management for
Reporting to Graham Brooks, Executive RBC Dexia
Vice President, International, Fair will Investor Services,
help the Group continue to expand its where he oversaw
international Private Banking and the development
Wealth Management business. “We are and implementa-
very pleased to welcome a person of tion of the compa-
Ian’s eminence to the Butterfield Bank ny’s sales strategy
Group,” said Brooks. “Ian brings with in central Canada.
ABN AMRO has announced that the
Supervisory Board of the bank has
him an unparalleled depth of knowl- Brent Wilkins He will succeed
edge, particularly on the international Robert Baillie, who
decided to appoint Andre Olijslager as
aspects of wealth management and is departing the organization to accept a
its vice-chairman. Olijslager has been a
planning. His proven abilities and skills leadership role with another organiza-
member of the Supervisory Board since
are a very positive addition to the tion. “On behalf of RBC Dexia Investor
April 2004. In his new role he succeeds
Butterfield Bank Group, and to our sen- Services, I congratulate Brent Wilkins
Arthur Martinez, who was appointed
ior management team.” on his much-deserved appointment to
chairman of the Supervisory Board at
this key strategic role within our organi-
the Annual General Shareholders
GlobeOp Financial Services has zation,” said José Placido, Chief
Meetings on 27 April 2006. The
announced the appointment of Andrea Executive Officer of RBC Dexia Investor
Supervisory Board of ABN AMRO con-
Dulberg as general counsel. Dulberg Services. “I am confident that Brent’s
sists of the following 12 members;
succeeds Alison Gregory, who will track record of professionalism, success
Arthur Martinez (chairman), André
assume a new role within GlobeOp and strong leadership will serve our
Olijslager (vice-chairman), Louise
leading Enterprise Risk Management. organization extremely well as he
Groenman, Baron David de Rothschild,
Additionally, Dulberg has been named expands on RBC Dexia Investor
Trude Maas-De Brouwer, Marcus
to GlobeOp’s management committee. Services’ accomplishments in the
Vinicius Pratini de Moraes, Paolo
“Andrea’s extensive background with Americas.”
Scaroni, Lord Sharman of Redlynch,
the securities industry will be extremely
Rob van den Bergh, Anthony Ruys, Gert-
valuable as we continue to grow the HSBC has announced the appointment
Jan Kramer and Gerhard Randa.
breadth of GlobeOp’s financial, report- of Rhydian Cox as Head of Corporate,


Moving & Shaking

Investment Banking and Markets service activity. Commenting on Paul’s takes over from Ian Stephenson, current
(CIBM), Asia- Pacific, effective July 17th. appointment Miller said: “I am delight- Head of Fund Administration and
Cox has been Head of CIBM, HSBC ed that Paul has joined the UK DB Trustee Services, Institutional Fund
Mexico for the past three years, where Business Development team. Paul’s Services, Europe.
he played a key role in the successful experience and knowledge will be She joins HSS
build out and growth of CIBM's busi- important in helping us further develop from ABN AMRO
nesses in Mexico. Cox joined the HSBC our relationships with prospective where she has
Group as a management trainee in 1984 clients and their consultants over the spent the last
and during his career has worked on next few years.” three years manag-
three different occasions in Hong Kong ing regional and
and has spent time in Malaysia, South Citigroup has announced that Darren product business-
Korea, France and the United Kingdom. Ansell has been appointed as Regional es for transaction
Sales, Director for Securities Finance banking, including
Also, Anna Shill has been appointed as (GTS) responsible for the sales efforts Central and
deputy head of IFS Tax Services, in UK, Ireland, Channel Islands, Eastern Eastern Europe,
Europe, reporting to John Everett, head Europe (Balkans), Rosemary Leahy the Middle East
of tax. In this role, Everett said: “Anna Middle East and and Africa. Prior to
will lead the Tax Product team to help Africa. In this role joining ABN AMRO, Leahy spent 10
maintain the ability to satisfy the Ansell’s focus will years with Citigroup in the transaction
demands and enquiries of our expand- be to introduce banking business in both Europe and
ing client base. She has joined us as the new clients into North America.
scope of the business increases and as the Securities
the tax environment becomes ever more Finance Lending The Bank of New York has appointed
complex.” Shill previously spent nine Program. These Chong Jin Leow as managing director
years at JP Morgan, most recently serv- clients may cur- and head of investor services in Asia.
ing as vice president for global tax cus- rently hold their Leow, who will be based in Singapore,
tody for bank’s Europe, Middle East and Fixed Income / will be responsible for managing the
Africa regions. Her responsibilities Darren Ansell Equity assets in Bank’s investor services business in the
included tax technical work, client liai- custody with Asia-Pacific region. He joins The Bank
son and training and internal tax train- Citigroup or on a Third Party Basis. of New York from State Street Bank &
ing to all levels. Ansell has spent his entire career spe- Trust, Singapore, where he was respon-
cializing in International Securities sible for the combined State Street and
BNP Paribas has announced the Finance, acting as a Direct Lender, Deutsche Bank investor services busi-
appointment of Jason Nabi as Head of Borrower and currently an Agent Lender ness in all Asian countries excluding
Financial Intermediaries UK. Based in and has over 20 years experience in the Japan and Australia.
London, Nabi will be a member of the Securities Finance Industry.
UK Management Team, reporting to Gresham Computing plc has appointed
Tony Solway, Head of BNP Paribas Fortis has announced that Johannah Dave Deller as Managing Director of its
Securities Services in the UK with addi- Ladd has been appointed as Account EMEA (Europe, Middle East and Africa)
tional reporting to Steve Chew, Global Manager Energy Products as part of a operations. Deller assumes
Head of Financial Intermediaries strategic expansion of its Third Party responsibility for the company's
Coverage. Commenting on the appoint- Clearing and Custodian services in European business and will promote
ment, Solway said: “The growth of both Energy Products. Based in Amsterdam, the global uptake of Gresham's suite of
local and international business derived Ladd joins Fortis from the carbon mar- real time information solutions,
from UK broker dealers is gathering ket's European Climate Exchange. including Real Time Nostro (RTN).
pace. Jason’s appointment underscores Before that, she reported on the Deller has extensive knowledge of the
our commitment to the market and our European energy markets as a journalist issues that banks face today, and has
determination to build a world class for Dow Jones Newswires. “We are very witnessed first hand the benefits of real-
service for our clients.” pleased that Johannah joins our team,” time information in the payments arena.
said Jan Bart de Boer, Global Director of Prior to taking the role at Gresham,
Fidelity International has announced the sales and account management for Deller held senior sales and manage-
appointment of Paul Williams as Fortis Clearing. “Her professional expe- ment roles at Fundtech, Compaq,
Business Development Director within rience will help expand our services in Tandem and ICL. “We are delighted to
its UK DB business. Reporting to Mark Energy Products, which is part of welcome Dave to Gresham,” said
Miller, Head of UK DB Business Fortis’s global strategy of reaching 10% Andrew Walton-Green, Chief Executive
Development, Williams joins Fidelity market share for third-party clearing.” Officer at Gresham Computing plc. “His
after 12 years at F&C Management, extensive experience and proven track
most recently holding the position of Rosemary Leahy has been appointed record in global financial services makes
Director of International Business Head of Securities Services, Ireland, for him an excellent strategic addition to
where he was responsible for HSBC Securities Services (HSS), with our high-calibre executive team.”
International new business and client effect from 1 September 2006. Leahy ISJ


ISJ Directory of Services

C: Professor Michael Mainelli,
Z/Yen helps organisations make better choices. Our name combines Zen and Yen -
Executive Chairman
“a philosophical desire to succeed” - in a ratio, recognising that all decisions are
trade-offs. Z/Yen’s mission is to be the foremost risk/reward management firm.
In the financial markets Z/Yen conducts numerous research projects on a variety of C: (Disaster Recovery and Project
wholesale and retail issues, as well as providing technical strategy, support and Management): Keith Ford,
prediction systems. Z/Yen’s renowned annual studies include: Senior Consultant
i. Global cost per trade benchmarks on equities, money markets and foreign E:
T: +44 207-562-9562
ii. Operational performance of broker ratings;
F: +44 207-628-6786
iii. Operational performance of client (buy-side) ratings.

Custody, Clearing & Settlement

Australia and New Zealand Banking Group Limited (ANZ) is one of the leading finan-
cial institutions in the Australian and New Zealand markets. We provide an extensive
range of Retail, Corporate, Institutional and Private Banking services in addition to a T: +61 03 92733563
range of specialised functions including Custody Services through ANZ Custodian F: +61 03 92732650
Services. ANZ Custodian Services is committed to our home markets and continu- C: Philip Dowman
ously seeks to provide our clients with highly competitive service through our cus- E:
tomer-focused and experienced teams, extended business hours and ongoing invest- A: Level 25, 530 Collins Street
ment in technology. Our capabilities incorporate core Custody and Clearing of securi- Melbourne Victoria VIC 3000
ties, Investment Administration Services, Cash, Foreign Exchange and Securities Australia
Lending. W:
Assets under Custody: AUD$90 billion

BHF-BANK is one of the leading German commercial banks which operates as an C: Cornelia Keth
advisory, service and commercial bank on the areas of Asset Management &
T: +49 69 718 3738
Financial Services, Financial Markets & Corporates and Private Banking. Financial
F: +49 69 718 6050
Services comprises the bank’s custody services, investment company (depotbank)
services and its securities and derivatives clearing business. E:
Through the combination of its local market know-how with an in-depth product C: Moritz Ostwald
expertise it aims to serve its clients in an individual and flexible way. The bank’s T: +49 69 718 6838
longstanding experience in the German securities services market goes hand E:
in hand with a corporate culture that values prompt acknowledgements and short A: Strahlenbergerstraße 45,
decision-making channels. 63067 Offenbach a.Main
Assets under Custody: EUR 180 bn Germany
No of funds: 244 W:

The CACEIS Group is a partnership between the Investor Services business lines
of Crédit Agricole S.A. and Groupe Caisse d'Epargne. We rank among the top 10 T: +33 1 43 23 89 75
custodians worldwide, with EUR1,681 billion in assets under custody C: (France)
(31/3/2006). CACEIS provides a full range of services to institutional clients in Patrick Lemuet
France, Luxembourg, Spain and Ireland. These services include, global and local E:
custody (safekeeping of listed and OTC assets) depositary/trustee services, STP T: +352 4767 2567
transactions (SWIFT), corporate actions and income collection, proxy voting, tax C: (International)
services, compliance and performance monitoring, flexible online reporting, secu- José-Benamin Longrée
rities lending, matching, processing and settlement. We also have links to 200+ E:
UCITS registrars. Our network of sub-custodians provides a secure environment W:
for your assets in over 70 markets worldwide.

DBS offers a full range of custodial services including securities safekeeping, settlement of
trades, corporate actions and market information updates. These services are available in T: 65 6878-1830
Singapore, Hong Kong and other selected markets. DBS offers short-term, highly liquid F: 65 6878-4166
overnight facilities for its clients’ accounts to earn daily interest on any excess funds. DBS also C: Ms Low Swee Fun
provides the value added service of tax reclamation without holding tax reductions (where local
regulations permit) on income arising from securities safekept with it. Proxy voting services for
A: DBS Bank Ltd
clients’ holdings at Annual General Meetings and Extraordinary General Meetings are also
Global Transaction Services
available on request.
Securities services is an integral part of Global Transaction Services within DBS bank. With Securities Services, 6 Shenton
more than 20 years of experience in the custody business, DBS’ strengths lie in its ability to Way, 36-02, DBS Building Tower
provide quality services, in depth knowledge and expertise of the Asian markets. Its clientele 1, Singapore 068809
compromise the major global custodians, investment banks, private banks, insurance compa- W:
nies and investment manages etc.


Custody, Clearing & Settlement ISJ Directory of Services

DnB NOR is the largest and leading provider of Custody, Clearing and
T: +47 22 94 92 95
Remote Member Service in Norway In addition, DnB NOR provides a wide
F: +47 22 48 28 46
range of value added services to both Foreign and Domestic clients.
Contact: Bente I. Hoem
Through an Alliance solution with banks in Sweden, Finland and Denmark,
DnB NOR can offer seamless regional products, which can be customized to
W: our client's needs.

T: +46 8 701 2988 Handelsbanken was the first Nordic bank to provide complete custody services in the
F: +46 8 701 2990 entire Nordic region. We conduct in-house processing in each Nordic country, with
Contact: Johan Wennerberg well-experienced staff with in-depth market knowledge and access to market infor-
E: custodyservices@handels- mation. Each client is allocated an account manager fully responsible for the day-to- day activities, as well as a regional relationship manager. Handelsbanken provides
Address: Blasieholmstorg 12, specialised and tailor-made custody services including complete corporate action
SE-106 70 Stockholm, Sweden services, securities borrowing and lending for all Nordic countries, as well as settle- ment and clearing services to clients that are remote members of the Nordic stock
_custody_services exchanges.

New York: Christopher Lynch

T: +1 718-242-7555
JPMorgan Worldwide Securities Services provides custody and securities servicing
E: solutions to the world's leading institutional investors, including fund managers,
London: Dick Feehan insurance companies, pension funds and banks.
T: +44 (20) 7742-0102 As one of the world's leading global custodians, we have $11.7 trillion in assets
E: under custody.
Sydney: Laurence Bailey JPMorgan meets institutional investors' needs by providing extensive experience,
T: (61-2) 9250-4833 comprehensive products and advanced technology designed to optimize efficiency, enhance revenues and mitigate risks associated with global investing.

Anne-Lise Kristiansen
T: +47 2248 6238 Nordea is the leading financial services group in the Nordic and Baltic Sea region
E: and operates through three business areas: Retail Banking, Corporate and
Päivi Salonen Institutional Banking and Asset Management & Life.
T. +358 9 165 51108 - The leading financial services group
E: - A world-leading Internet banking and e-commerce operation
Steen Holmfred, Head of Global - The largest customer base of any financial services group in the region
Custody T. +47 2248 6238 - A leading asset manager in the Nordic financial market
E: - The most comprehensive distribution network in the region
Bo Thulin, Head of Client Nordea is the leading custody services provider in the region. Nordea provides high
Relations, Global Custody quality, tailor-made custody services for local and foreign investors dealing with
T. +46 8 614 7721 Nordic, Baltic or global securities.

RBC Dexia Investor Services offers a complete range of investor services to institu-
T: +44 (0) 20 7653 4096
F: +44 (0) 20 7248 3946
tions worldwide. Established in January 2006, we are equally owned by Royal Bank
Contact: Tony Johnson of Canada (RBC) and Dexia. We rank among the world's top 10 global custodians,
Head, Sales & Relationship with approximately USD 2.0 trillion in client assets under custody, including in-
Management house assets of RBC and Dexia. Our innovative products and services help clients
E: maximise operational efficiency, minimise risk and enhance portfolio returns. And
Address: 71 Queen Victoria Street,
our 3,800 professionals in 15 markets offer proven expertise to enhance clients’
London, EC4V 4DE, UK
business performance.

As a leading supplier of custody services in the Nordic region, SEB Securities

Services expertise in dealing with securities, complex information flows, transactions
T: +46 8 763 5770
and payments efficiently and accurately is crucial to your own business methods -
F: +46 8 763 6930
and to your ability to make wise investment decisions.
Contact: Goran Fors
A blend of personal service, advanced communication solutions and IT systems
means that SEB can provide you with the assistance you need in order to deal with
W: your securities in the most logical manner.
Assets under Custody: US$ 200 bn


Financial Asset Services is the custody and investments-servicing division of
Standard Bank, providing a unique suite of services to sophisticated investors in A:Standard Bank
South Africa and eight sub-Saharan markets. Financial Asset Services
3rd Floor
Standard Bank views custody, investment administration and securities lending as a 25 Sauer Street
core business crucial to many other services the bank offers. The bank has invested Johannesburg 2107
significant capital in developing Financial Asset Services and is continuing to invest T: +2711 636 6615
to maintain and extend its leading position in its chosen markets. E: adam.bateman@standard-
Standard Bank has assets under custody to the value of ZAR1.5 trillion and an W:
overall market share of approximately 40%.

Swedbank provides client-focused custody services to domestic and international

securities lending (including auto-borrow facilities), derivative clearing services,
proxy voting, full corporate actions and income service. Flexibility is an important
aspect of Swedbanks products and services. Our dedicated Client Relations T: +46 8 5859 1800
Managers and Account Managers are focused on personalized processing and F: +46 8 7237 147
reporting solutions. C: Neal Meacham, Head of
Other Features: ISO9001:2000 quality certification. Swedbank Markets Online
(SMO) internet information and reporting toolfor Custody and Securities Lending. E:
Nordic Custody alliance with DnB NOR (Norway), OKO Bank (Finland) and A: Stockholm SE 105 34
Amagerbanken (Denmark) to offer regional custody product. Sweden
Institutional Assets under Custody: USD 70 billion
No. of Institutional Clients: 110

Data Services
Capco Reference Data Services (CRDS) provides a suite of reference data
management solutions that help financial services providers to achieve C: Donna Faup Bailey
superior data integrity, solve data integration issues and transform
operational performance while lowering data management costs. These Director Business Strategy &
services include a comprehensive managed services offering - a proven Marketing, Capco
alternative to in-house management of reference data as well as index T: +212 284 8749
and ETF data solutions. CRDS also provides consulting services E:
including advisory, assessment, migration, implementation, integration,
project management, development and training. For more information, W:
please visit

Through its subsidiaries, DTCC provides clearance, settlement and information services for
equities, corporate and municipal bonds, government and mortgage-backed securities and London: Richard Bustard
over-the-counter derivatives. DTCC's depository also provides custody and asset servicing for T: +44 (0)20 7444-0403
more than 2.5 million securities issues from the United States and more than 100 other coun- E:
tries and territories. In addition, DTCC is a leading processor of mutual funds and insurance
transactions, linking funds and carriers with their distribution networks. DTCC has operating New York: Susan Spivey
facilities in multiple locations in the United States and overseas. For more information on T: + 1 212 855-4144
DTCC, visit E:
DTCC’s GCA Validation Service gathers and distributes validated global corporate actions General information
announcement information on more than 1.4 million securities from more than 150 countries T: +1 212 855-1000
in more than 16 languages, more than any other provider.

Interactive Data Corporation (NYSE: IDC) is a leading global provider of Interactive Data (Europe) Ltd
financial market data, analytics and related services to financial institutions, active A: European Headquarters
traders and individual investors. The company’s businesses comprise: FT Interactive Fitzroy House, 13-17 Epworth
Data, ComStock, CMS BondEdge and eSignal. Street, London EC2A 4DL
T: +44 (0)20 7825 7800
FT Interactive Data provides global securities pricing, evaluations, dividend, corporate
action and reference data designed to support financial institutions’ and investment F: +44 (0)20 7608 3514
funds' pricing activities, securities operations, research and portfolio management. FT E:
Interactive Data collects, edits, maintains and delivers data on more than 3.5 million W:
securities, including daily evaluations for approximately 2.5 million fixed income and C: Brendan Beith – European

Fund Administration
Andrew Collins Managing Director
Butterfield Fund Services (BFS) provides valuation, accounting, corporate secretarial, T: 441-299-3954
compliance, directorial and shareholder services to hedge funds, fund-of-funds, and
mutual funds. BFS also services international pension & insurance trusts. Clients E:
such as financial institutions, insurance companies, and institutional investors use Tania Kowalski Marketing
Butterfield Fund Services to set up and launch investment funds. BFS operates in Manager
Bermuda, Bahamas, the Cayman Islands and Guernsey. T: 441-278-6300
Whether a fund is just starting out or is well established, Butterfield Fund Services A: Rosebank Centre 11
can provide complete solutions to help clients better service their investors. With
over $50 billion in assets under administration, many alternative funds have turned Bermudiana Road, Pembroke,
to Butterfield Fund Services for timely and accurate administration services. Bermuda HM 08 / P.O. Box HM
195 Hamilton, Bermuda HM AX


The CACEIS Group is a partnership between the Investor Services business lines of
T: +33 1 43 23 89 75 Crédit Agricole S.A. and Groupe Caisse d'Epargne. With a total of EUR823 billion in
C: Patrick Lemuet (France) assets under administration (31/3/2006), we are Europe’s premier third party fund
E: administrator. CACEIS provides a full range of services in France, Luxembourg,
Ireland, Belgium and The Netherlands. These services include portfolio valuation
T: +352 4767 2567 with multiple and automated pricing sources, NAV calculation, product structuring,
C: José-Benamin Longrée tax relevant data calculation, fees and commissions calculation, on-line client report-
(International) ing, legal and statutory investment guideline monitoring, performance measurement
and globalisation techniques such as Cloning. Our transfer agency services include
E: retail and institutional account management, Europe-wide transaction processing,
W: distribution network management, third party distribution and shareholder services.
The Fastnet Network, operated by CACEIS, undertakes some of the above services
and is a partnership venture with the Fortis Group.

Derivatives Portfolio Management provides onshore and offshore alternative asset fund
T: +1 732-667-1155 administration, back and middle office outsourcing, portfolio valuation, daily NAVs, risk
C: Skander Aissa administration and portfolio transparency solutions for fund managers, asset allocators,
E: institutional investors and proprietary traders. DPM Mellon’s services are designed to
A: 400 Atrium Drive, Somerset, solve complex administrative needs and improve operational efficiency. DPM Mellon has
New Jersey, the systems, infrastructure and experience to handle your toughest administrative
NJ08873, USA challenges. DPM Mellonhas a world-wide staff of 200 employees. DPM’s HQ is in
W: Somerset, New Jersey with offices in London, the Bahamas, and the Cayman Islands.

A Mellon Financial Company.

New York: Christopher Lynch JPMorgan Fund Administration provides a full suite of products for all aspects of
T: +1 718-242-7555 fund administration, enabling asset managers to focus on their core business of
E: investment management. Fully integrated with JPMorgan's custody and fund
London: Dick Feehan accounting system, it also accepts automated data feeds from clients' in-house or
T: +44 (20) 7742-0102 third party accounting platforms. By automating these activities, we leverage
technology to build flexible business systems that increase efficiencies and deliver
Sydney: Laurence Bailey customer focused solutions.
T: (61-2) 9250-4833 A world-class team of experienced industry professionals provides the expertise you
W: need in fund administration services.

Phoenix Administration Services is a leading third party administration group of

companies targeted at the investment industry. Within the Phoenix group of companies,
T: +44 (0) 127720 1222
there are two separate organisations:
F: +44 (0) 127720 0975
A: 77a High Street, Brentwood, Phoenix Administration Services Limited
Essex, CM14 4RR, UK Phoenix Financial Services Limited
C: Adam Hodgkins The Phoenix offering is comprehensive. If you are looking to:
Outsource your back and middle office administration
Purchase or lease a systems solution
Get advice and guidance on fund administration

C: Fred W. Jacobs, III PFPC is a premier provider of processing, technology and business solutions to the
A: PFPC, 301 Bellevue Pkwy global investment industry. Our core offering includes accounting, administration,
Wilmington, DE 19809 USA investor services, middle-office services and regulatory administration services. Whether
T: 302-791-2000 your products are U.S. or non-U.S. domiciled funds, trust vehicles, limited partnerships
F: 302-791-1570 or commingled investment products, PFPC’s multi-jurisdictional, multi-fund capability
E: allows us to process your complex fund structures - from hedge funds, fund of funds
C: Fergus McKeon and private equity funds to master/feeder and multi-managed funds.
A: PFPC Riverside Two
Sir John Rogerson’s Quay PFPC offers personalized alternative investment solutions tailored to your unique
Dublin 2, Ireland needs. With more than 30 years in the fund servicing industry, our seasoned and
T: +353-1-790-3500 responsive professionals bring you the know-how, focus and dedication to deliver the
E: services you need, when and where you need them, any way you want them.

T: +44 (0) 1481 744000 Our clients have access to a broad range of value added services and tailored solu-
F: +44 (0) 1481 744529 tions including global custody and fund administration services for funds domiciled
C: Jose Santamaria in the Caribbean and Channel Islands.
A: PO Box 48 Canada Court Our services include Trustee, banking and credit facilities, treasury and foreign
St Peter Port Guernsey exchange, trade execution, financial accounting, corporate services, derivative sup-
GY1 3BQ United Kingdom port services and online access, leveraging a custody network that covers 80 plus
W: www.rbcprivatebanking. markets worldwide. Our service combines leading edge technology with professional
com/ci.html expertise and a truly integrated service delivering creative, customised solutions.


For over 25 years, professional advisors, financial institutions, corporations and high net Atlanta: Peter Cohen
worth families worldwide have relied on Trident Trust for integrity, reliability and commit- T: 001-404-233-5275
ment to client service. BVI: Barry Goodman
T: 284-494-2434
Main Services: A full range of back office administration services tailored for hedge, pri-
vate equity and closed-ended funds. We offer flexibility in structuring administration Cayman Islands: Rick Gorter
T: 345-949-0880
which allows us to work closely with accounting firms and other service providers.
Guernsey: Mark Le Tissier
Services include full fund accounting, NAV calculations, registrar and transfer agent,
T: 01481-740-930
corporate secretarial including company formation, due diligence compliance and inter-
UK: Robin Harris
net reporting. T: 44-(0)207-935-1503
Assets Under Administration: $13 billion * No. of Funds Administration: 185 W:

Cayman Islands: Sean Flynn,

UBS Fund Services is a leading fund administration business for traditional and tel. +1-345-914 1006
alternative funds and other collective investment vehicles. With a comprehensive Ireland: Guy Martell,
offering - from product design, through to registration, accounting, net asset value tel. +44-20-7901 5770
Canada: Pearse Griffith,
calculation and reporting – we offer a tailored, cost effective service making best use of
tel. +1-416-971 4702
the latest technology. Luxembourg: Jean-Paul Gennari,
tel. +352-44-1010 1
With administration centres located in the Cayman Islands, Ireland, Canada, Switzerland: Markus Steiner,
Luxembourg, Switzerland and the UK, at 31 March 2006, UBS Fund Services tel. +41-61-288 4910
administered assets of almost 340 billion Euro. UK: Mike Marsh,
tel. +44-20-7901 5000

Prime Brokerage
Fimat’s Alternative Investment Solutions team (AIS) is a dedicated global Prime
Brokerage team serving the alternative investment community including hedge funds C: Philippe Teilhard
and CTAs. A: Fimat International Banque SA
The AIS team offers a global range of brokerage activities on a wide range of asset (UK Branch) - part of the Societe
classes including equities, bonds, currencies, commodities, and their related listed & Generale Group
OTC derivative products. The team also provides a dedicated account management SG House, 41 Tower Hill
team, cross-margining tools between securities & derivative instruments, hedge fund London EC3N 4SG, UK
start-up services, hedge fund industry quantitative information and capital T: + 44 207 676 85 36
introductions services. F + 44 207 628 44 47
The AIS team is part of Fimat, which employs over 1,600 people in 26 markets, and E:
is a member of 46 derivatives exchanges, and 17 stock exchanges worldwide.

Securities Lending
EquiLend Holdings LLC was formed by a group of leading financial institutions to T: +1 212 901 2200
develop a global platform for the automation of securities finance transactions. C: Carrie R. Schwartz
The EquiLend platform is designed to increase efficiency by standardizing, cen- E: carrie.schwartz@equi
tralizing and automating front and back office processes, while delivering global
access to liquidity, reduced risk and scalability. The EquiLend platform is A: 17 State Street, 9th Floor
New York NY 10004
designed to process equity and fixed income securities finance transactions on a
T: +44 20 7743 9510
global basis. Investors include: Barclays Global Investors; Bear, Stearns & Co.
A: 54 Lombard Street
Inc.; Credit Suisse; The Goldman Sachs Group, Inc.; J.P. Morgan Chase & Co.;
London EC3V 9EX
Lehman Brothers; Merrill Lynch; Morgan Stanley; Northern Trust Corporation; W:
State Street Corporation; and UBS.

eSecLending is a global securities lending manager servicing large institutional T: US- +1 617 204 4500
lenders, including pension funds, mutual funds, insurance companies and T: UK- +44 (0)207 002 7600
investment managers. eSecLending's model is based on the premise that C: Dan Ahern
exclusive principal relationships generally offer greater value and significantly E:
higher returns to a lender than traditional custodial or third-party agency lending W:
programs. The firm, which has auctioned over $750 billion since inception, A: 175 Federal Street, 11th FL,
awards principal business through an auction process to ensure greater Boston, MA 02110, US
competition and price transparency. eSecLending is majority-owned by Old A: Old Mutual Place, 2 Lambeth
Mutual plc and maintains offices in Boston, London and Burlington, Vermont. Hill, London EC4V 4GG, UK

IFBS offers the financial industry a wide range of consulting services as well as T: +41 (0)44 218 14 14
individual and standard software solutions. The firm supports clients along the entire F: +41 (0)44 218 14 18
security value chain - from business modelling to change management processes.
A: IFBS AG, Buckhauserstrasse
IFBS’s IT solutions range from FINACE®, a Securities Finance and Collateral 11, CH-8048 Zurich, Switzerland
Management Platform, to the development of tailor-made IT applications. W:


New York: Christopher Lynch
JPMorgan Securities Lending offers institutional investors the opportunity to earn
T: +1 718-242-7555
E: extra income on investment and pension portfolios with minimal risk and
involvement by lending their securities to qualified borrowers. With more than 300
London: Dick Feehan
lending relationships and lendable assets in excess of $1.2 trillion, JPMorgan is
T: +44 (20) 7742-0102
E: clearly committed to the market and to the value that our clients place in it. Our
resources enable you to develop programs that comply with your business
Sydney: Laurence Bailey
T: (61-2) 9250-4833 requirements and achieve your business objectives. When you select JPMorgan as your securities lending agent, you have chosen a premier provider of securities
lending services worldwide.

Nomura Group is a global investment bank dedicated to providing a broad range of

T: +44 (0) 20 7521 5672 financial services for individual, institutional, corporate and government clients.
F: +44 (0) 20 7521 2683 The Group’s business activities include investment consultation and brokerage
C: Jonathan Cossey, Head of services for retail investors in Japan, and, on a global basis, brokerage services,
Equity Finance
securities underwriting, investment banking advisory services, merchant banking,
A: Nomura House,
1 St Martin's-le Grand, London, and asset management.
EC1A 4NP United Kingdom Nomura’s Global Equity Finance team has professionals located in Japan, Hong
W: Kong, the United Kingdom and the USA who are dedicated to providing a value
added approach to all Equity Finance needs.

ADP Brokerage Services Group is an industry leading outsourcing vendor for global
transaction processing systems, desktop productivity applications and investor
T: +44 (0) 207 551 3000 communication services to banks and brokerages worldwide.
E: -Proxy Edge – comprehensive solution for institutional global proxy voting management.
Address: The ISIS Building,
-Gloss – leading international STP system which automates the trade processing
193 Marsh Wall, London,
E14 9SG, UK lifecycle from trade capture through confirmation, clearing agency
W: reporting and settlement.
-Tarot - a UK retail and private client stockbroking, custody and fund management solution.
-Securities Data Management – outsourced data services for securities operations.

Advent Software EMEA, established in 1998, provides trusted solutions for the front
through to back office operations, based on a true real-time fund/portfolio
T: +44 (0)20 7631 9240 accounting platform, to the investment management community throughout Europe,
F: +44 (0)20 7631 9256 Middle East and Africa. Advent has an established network of offices across the
region serving a growing client base of asset managers, hedge fund managers, prime
brokers, fund administrators, wealth managers, private banks and family offices who
Address: One Bedford Avenue, continue to improve their businesses using Advent’s suite of integrated investment
London WC1B 3AU, UK management solutions. Advent Software EMEA is part of Advent Software Inc.
W: (Nasdaq: ADVS), a global organisation that has been providing solutions to the
world's leading financial professionals since 1983. Firms in more than 50 countries
using Advent technology manage investments totaling more than US $8 trillion.

A: EMEA - Progress Apama Progress Apama provides the next-generation Algorithmic Trading
68 Lombard Street Platform for both the buy and sell-side financial institutions - giving
London EC3v 9LJ traders full control over composing, deploying and managing algorithmic
T: +44 (0) 870 3517212 trading strategies, such as VWAP, spread trading and index arbitrage.
Apama has customers using the Algorithmic Trading Platform in equities,
A: USA - Progress Apama
10th Floor, 230 Park Avenue futures & options, foreign exchange and bonds and often trading multiple
New York NY assets classes within the same strategy.
T: +1 203 606 5006
E: Apama's platform plugs straight into any market data feeds, order
management systems and databases.

Data Solutions You Can Bank On

T: +44 (0)20 7464 8407 / +1 Asset Control's Total Data Management offers seamlessly compatible in-house
212 445 1076 software and out-sourced services. Asset Control solutions manage prices, reference
F: +44 (0)20 7464 8746 / +1
data, risk factors, credit risk data, corporate actions and research data. The solutions
212 265 6402
Contacts: Pascal Guignabaudet support market risk, Basel II, portfolio management, trading and enterprise-wide
(EU), Belinda Hamer (US) operational coherency.
Address: 60 Lombard Street, Asset Control is the only firm in its class offering turnkey solutions with guaranteed
London, EC3V 9EA, UK
delivery dates. These ready-to-work solutions eliminate development time and risk.
E: As a future-proof technology investment, Asset Control has been certified by a
W: unique track record of long-standing customer implementations in leading financial
firms around the world.


CMA's mission is to help its clients from the financial services industry increase their
P: +46 8 566 30 800
competitiveness through the supply and integration of value-creating IT-solutions and
F: +46 8 34 15 44
infrastructure. Each solution and implementation is individually tailored to a
customer's specific requirement in order to ensure maximum system effectiveness
A: CMA Small Systems AB
for financial institutions such as national banks, depositories, clearing and
P.O. Box 6463, Gävlegatan 22
settlement centers, retail banks, stock exchanges and brokerage houses.
S-113 82 Stockholm, Sweden
CMA Small Systems is represented with offices in Sweden, Russia and France.
Market activities focus on Europe (Nordic, Baltic, Central/Eastern Europe and
CIS countries), Middle East and Africa.

T: +1 212 922 6590

Eagle Investment Systems LLC, a Mellon Financial CompanySM, is a global provider F: +1 212 922 7677
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GOAL is the widely-acknowledged industry leader in providing creative products,

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Manifest offers global voting services to institutional investors encompassing 75,000 Development Manager, Europe
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Redi2 Technologies is an investment management software products and services

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Training and Education

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In the first of a new series ISJ Rabbani Wahhab, Senior Fixed
invites a reader to look back at Income Portfolio Manager at
what they did and look forward London & Capital, reflects...
to what they want to do.

How have investment management strategies evolved Are hedge funds still alternative?
over the past five years, with the benefit of hindsight? It is undeniable that there has been a massive explo-
London & Capital has evolved its approach to invest- sion in the number of hedge funds in recent years. In
ment in two ways. Lessons learnt in recent years have 1990, there were just over 600 hedge funds; the num-
facilitated the development of, firstly, our absolute ber now exceeds 8,000, calling into question the con-
return strategies, which aim to participate in rising allo- tinued status of hedge funds as an ‘alternative’ asset
cated markets, but have an emphasis on extensive hedg- class. Hedge funds are an important part of London &
ing programs to protect the downside during difficult Capital’s overall strategy. Beyond using hedge fund
periods. In the bond markets, for example, there is a strategies directly (especially for our bond portfolios),
wide selection of products that may be used to hedge a we have also gone down the fund of funds route. We
portfolio’s capital value and we actively use risk control- cherry pick a few dozen external funds each year from
ling mechanisms to protect the downside. Secondly, the thousands of funds that are out there, allowing us
with the proliferation of available data for analysis and to selectively extract optimal returns from the wide set
the drive towards lower trading costs, quant driven of strategies pursued by the hedge fund community.
products have become increasingly popular. This has provided a stable return stream that has fitted
in well with our absolute return packages.
How have lessons learnt impacted on the development
of new and innovative strategies? Over the next few years where will the largest returns
Analysis of past events has led to our investment in the come from?
second type of strategy mentioned above – the quant- As the trend towards quantitative analysis contin-
driven approach. Many quant models have been made ues to gain momentum, quant driven funds will
available over the past few years – driven by exploding become increasingly important. As trading volumes
data volumes and the proliferation of trading venues – continue to increase and trading venues continue to
particularly in the equity markets. However, we identified expand, asset managers must evolve their trading
a quant product which focuses on what we believe are the strategies to continue to capitalise on market oppor-
correct dynamics when valuing a portfolio of US equities. tunities. We see quant-driven analysis as a growth
Our enhanced index, MarketGrader, is totally unemotion- area here – we hope to build on MarketGrader’s suc-
al, computer driven and based on algorithms, and looks cess by encompassing a wider universe of products
at what we believe are the important features of more attached to different equity markets.
than 5700 US equities. MarketGrader selects stocks based
on the variables of cash flow, growth, value and profitabili- What's the biggest risk you face?
ty – as opposed to just market capitalisation – by assess- There is a chance that long-only mandates may again
ing the financial results of companies submitted each gather favour amongst the investment community,
quarter. This is a level of ongoing analysis impossible for however our premise is that we’re going to see an
a human analyst to achieve. increasing trend towards absolute return strategies.
This could be seen as a risk; however our ongoing
With the benefit of hindsight on market conditions and focus on absolute returns is based upon lessons
volatility, what would you do differently? learned from market developments over the past five
London & Capital actually pre-empted the equity years. On the quant side, there is a chance there could
volatility seen in the earlier part of this decade, and be a surge in similar types of quant driven products –
evolved investment strategies to protect portfolios. This enhanced indices have gained favour in the US, but
was achieved by diversification across asset classes MarketGrader is one of the first of its type in the UK.
(including real estate, bonds and hedge funds). On the However, rather than a risk, we see this as eventually
bond side, the strategy is complemented by the active inevitable.
use of risk reduction/hedging tools such as bond ISJ
futures contracts and credit default swaps.


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