Issue #5 - State Street, Citi, T+1, CBOE, CME, DTCC, JSCC

📰 Welcome to the Newsletter

Good morning!

Welcome to Global Custody Pro – we're thrilled to have you on board! We’re your guide through the fascinating world of global custody, clearing, payments, and digital assets. We know it's a complex field with a lot to keep track of, so we've made it our job to sift through numerous sources and bring you the most important updates.

🌏 Global Custody News

Citigroup Inc reported third quarter earnings. Their Securities Services business unit revenue rose 24% year-on-year (YoY) to USD1,388mn, largely driven by a 23% increase in net interest income, primarily driven by higher deposit spreads and volumes, and a 24% increase in non-interest revenue. Their assets under custody and administration reached USD26 trillion, up 22% YoY. Average Securities Services related deposits grew to USD135 billion, up 13% YoY. LINK

State Street reported third quarter revenue of USD2,616mn - up 10.8% YoY. Assets under custody and administration grew 17% YoY to USD46.759 trillion. They noted AUC/A wins of USD466bn and yet-to-be-onboarded AUC/A of a further USD2.4 trillion. LINK

The European T+1 Task Force has released its October report. The report recommends that public authorities should set a realistic implementation date for T+1 settlement, update CSDR Article 5 to mandate a one-day maximum between trade and settlement dates, and exempt SFTs from this requirement. To mitigate potential impacts, corporate event standards should be reviewed, FX instruction cut-offs reassessed, and further analysis conducted on lessons learned from the US experience, particularly in areas like securities lending and prime brokerage. LINK

In a recent interview with ISDA IQ, the SEC Chair Gary Gensler highlighted several regulatory developments with significant implications for global custodians. The move to T+1 settlement for equities and bonds in North America, with Europe potentially following suit, marks a major shift in post-trade processes. Gensler also emphasized upcoming Treasury market reforms, including mandatory central clearing, which will require substantial operational changes by 2025-2026. LINK

Cboe Global Markets launched new Options on VIX Futures (UX) on October 14, 2024, offering traders another tool to manage U.S. equity market volatility. The new product complements Cboe's existing VIX Index options and may allow more market participants, including those restricted from securities-based options, to trade VIX options products. Options on VIX Futures will have European-style exercise, P.M. settlement, and physically settle into front-month VIX futures. LINK

The U.S. Treasury market is preparing for a significant structural change as it moves towards expanded central clearing, Federal Reserve Bank of New York official Michelle Neal said on Tuesday. Speaking at an industry forum, Neal highlighted that the transition, mandated by recent SEC rules, could shift over $4 trillion in daily transactions to central clearing by 2026. The move aims to enhance market resilience and risk management, but faces challenges in implementation, including potential changes to clearing models and margin practices. Neal urged market participants to start preparing now for the upcoming deadlines. LINK

CME Group's international average daily trading volume reached a record 8.4 million contracts in Q3 2024, up 29% from the previous year. Europe, Middle East, and Africa (EMEA) saw a 30% increase in average daily volume, reaching 6.2 million contracts. Asia Pacific (APAC) experienced a 28% growth, with average daily volume hitting 1.8 million contracts. The record volumes were driven by growth across all asset classes, with interest rate and equity products accounting for three-quarters of the volume increase. LINK

BCG released its Global Payments Report 2024. The global payments industry is facing a significant slowdown in revenue growth, with CAGR projected to decrease from 9% to 5% by 2028, reaching $2.3 trillion in revenues. To remain competitive, payments companies must modernize their technology infrastructure, leverage AI, adapt to instant payments systems, and actively shape the evolution of digital currencies. BCG argue that banks need to reinvent their payments businesses to avoid losing further market share to fintechs and tech companies. LINK

🎶 People News

State Street announced that Vice Chairman and Chief Financial Officer Eric Abroaf has resigned and is expected to leave State Street in February of 2025. According to their 2024 Proxy Statement, he earned total compensation of USD6.905 million from State Street in FY2023 as the 3rd highest paid named executive officer. LINK

S&P Global Inc announced later on Tuesday that the same Eric Abroaf will become their Chief Financial Officer. We’ll keep an eye out for details of his compensation. LINK

🚀 Digital Asset News

DTCC released the findings from a collateral mangement case study conducted with Japan Securities Clearing Corporation (JSCC). The DTCC Digital Launchpad was used to demostrate the efficiencies possible when using this technology, and is now available as a sandbox for industry participants to work with DTCC on these new solutions. LINK

CSD Prague, the Central Securities Depository owned by the Prague Stock Exchange, is pioneering innovation in the European capital market by introducing DLT-based settlement systems, having received authorization from the Czech National Bank and ESMA to operate under the European DLT Pilot Regulation. From November 18, 2024, the CSD will offer issuers registration of book-entry securities in a new DLT-based registry, enabling various operations including primary subscriptions, issue increases, and transfers with or without cash settlement. LINK

IOSCO have published a report on retail investor education in crypto assets. This report updates previous work done in 2020. It underscores ongoing market volatility, risks, and major frauds, while noting increased regulation and interest, especially among younger investors. The findings emphasize targeted education initiatives addressing crypto-asset hazards, including messaging on instability, social media vigilance, regulatory structures, scam prevalence, and sound investing principles. LINK

📈 Chart Of The Week

Instant payments or faster payment systems are one of the hottest topics in payments. Isn’t it interesting how emerging markets have much more rapid adoption of new technology in this space? It will be interesting to see if account-to-account payments in UK and Europe grow as fast against the dominance of the card networks.