The Global Investor Magazine Autumn 2023 by SRP & FOW

Autumn 2023 www.globalinvestorgroup.com

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MATTHEW CHAMBERLAIN LME chief on life after nickel

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EDITORIAL

LME chief Chamberlain eyes life after nickel This decade has been difficult by anyone’s standards but no-one has had two years like Matthew Chamberlain. The London Metal Exchange chief executive announced in January 2022 he was leaving the firm he had been running for five years for the promised land of crypto. The firm announced an interim and started a search and everything was in order … and then Putin lost it and invaded Ukraine. The sudden military intervention and the reaction to it roiled the markets and few were more disrupted than the physicallydelivered metals business at the heart of which sits the LME. The pressure came to a head in the early hours of Tuesday March 8 as the LME nickel price rocketed in the face of massive short positions in the over-the-counter market. As the price blew out so did the margin being called of the LME’s clearing members, to the extent that the LME and its biggest clients were facing on the morning of March 8 margin calls of nearly $20bn, ten times higher than the previous record set just days earlier. Clearing banks and brokers learned a lot about handling margin spikes from the start of the COVID pandemic three years ago but $20bn is crazy. So the LME, Chamberlain and his risk team had an almost impossible decision to make. Go through with the margin calls and face the prospect of having to put some of the LME’s biggest clients into default if they couldn’t raise the cash, or do something else - and the only something else that would cut it was close the market. So Chamberlain closed the market. While that was controversial enough, the LME went further and said that all trades in the run-up to the closure of the market would be ripped up. Of course, some firms (not least the five clearing members facing default) breathed a huge sigh of relief but others, who were long nickel and watching on March 8 the trade of a lifetime, were furious. The spotlight immediately fell on Chamberlain who, to his credit, told Bloomberg TV early on March 9 that

Autumn 2023

suspending nickel was the right decision in the interests of market stability. Immediately there was speculation about law suits from the firms that felt robbed by the decision to rip up trades but legal experts at the time suggested exchange rule books typically allow the firms they regulate to do exceptional things in exceptional circumstances. The LME finally re-opened the nickel market more than a week after it closed and the price predictably collapsed to a realistic level. At this stage, Chamberlain was still jumping ship but the pressure told in April when he announced that he was not leaving the firm as planned, and would stay on to guide the LME through the aftermath of the nickel suspension. As Chamberlain says in this issue’s cover feature, the nickel situation exposed flaws at the LME that need to be ironed out, not least in its oversight of the OTC market. These issues are Chamberlain’s focus as he continues to try to move on from the nickel suspension. Having spoken to many exchange leaders, brokers, traders and lawyers about the LME nickel closure over the past 18 months, the consensus is that Chamberlain effectively had no choice other than to close the market. The decision to rip up trades is more contentious and that is at issue in the legal case brought against the LME by hedge fund Elliot Associates and market-maker Jane Street Global Trading, which, at the time of writing, was still awaiting a ruling. Chamberlian’s legacy will be coloured by that judgement but he deserves credit for not jumping ship and instead staying to help the LME recover from what was an virtually impossible situation. On a sombre note, the team at Global Investor were saddened to hear of Andrew Capon’s passing. The former Global Investor editor was a titan of financial publishing, liked and revered in equal measure. Our thoughts go out to his family and friends at this difficult time.

EDITORIAL

Luke Jeffs, Managing Editor, Global Investor Group

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CONTENTS

REGULAR FEATURES

DERIVATIVES:

Trading Places: Northern Trust promotes Fanning to run FX; HKEX hires Roberts to manage issuer services; Women in Securities Finance adds to its ranks; Cboe moves Tomczyk to replace Tilly as CEO

15 Michael Peters, the chief executive officer of Eurex, and Erik Mueller, the chief executive officer of Eurex Clearing, look back on 25 years at Europe’s largest futures and options exchange

Highlights from GlobalInvestorGroup. com: Firms concerned about best execution in OTC crypto market; DTCC goes live with US T+1 scorecard; BNY picks Eurex to clear its European repo; Eurex signs 18 firms ahead of October Euribor launch

22 Mark Phelps, the head of RJ O’Brien in Europe, the Middle East and Africa, reflects on a turbulent 18 months running the London-based futures commission merchant 25 SGX’s new head of wholesale markets and platforms Lee Beng Hong describes the Asian exchange’s ambitious plans in foreign exchange and currency derivatives

COVER STORY: 10 London Metal Exchange chief executive officer Matthew Chamberlain discusses the reforms the exchange has introduced since closing the nickel market in March 2022

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28 European Energy Exchange chief executive officer Peter Reitz sees more of the European energy market moving to cleared and exchange-traded derivatives

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CONTENTS

30 Qatar’s QNB Group has grown to be one of the largest and most trusted financial services firms in the fast-growing Middle East and Africa region

58 GLMX’s Andrew Turvey offering insights into GLMX’s background and expertise in the field. 60 The OCC’s chief clearing and settlement services officer and executive director in charge of technical certification and documentation services consider the appeal of US clearing

SECURITIES FINANCE: 34 Donia Rouigueb, the head of sales in charge of CACEIS Group’s Securities Finance and Repo businesses, discusses the changing nature of the securities finance market

CUSTODY: 66 Pictet’s Market Head Rob Lowe traces the progress made by the Swiss group in the UK and some of its core markets in Europe

37 The International Securities Finance survey 2023 celebrates the best and brightest agent lenders, prime brokers and technology vendors

68 CIBC Mellon’s executive director and segment lead, asset owners Alistair Almeida explains how the Canadian pensions market is based on engagement

46 Simon Lee, the managing director and head of business development in EMEA and APAC for eSecLending discusses the increasing cost of risk-weighted assets

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71 Global Custody Survey 2023

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TRADING PLACES

Trading Places The industry continued to reshuffle the deck in the third quarter of 2023. ASSET MANAGEMENT: Planixs hires ‘Bankers’ Plumber’ Ransome as liquidity futurologist Planixs has named Olaf Ransome, known widely as ‘The Bankers’ Plumber’, as the new Liquidity Futurologist at the collateral management fintech. With a career of more than 35 years, Ransome is known widely as a financial markets expert who has worked with firms active in traditional and decentralised financial market infrastructures. Neville Roberts, chief executive of Planixs, said: “Olaf is one of the world’s foremost experts in banking capabilities and processes. His breadth and depth of experience across the Financial Services value chain will be of great value to Planixs and I am delighted to welcome him to our company.” Northern Trust promotes Fannin to run FX, securities finance Northern Trust has promoted Dane Fannin to run the US group’s Global

DANE FANNIN

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Foreign Exchange business in addition to his current role as the US group’s head of securities finance. As the new global head of Global Foreign Exchange (GFX) and Securities Finance, Fannin will be responsible for the continued technology innovation and business growth across the suite of GFX and Securities Finance solutions, the firm said. With 15 years of experience at Northern Trust, Fannin began his career with the firm in 2006 in securities lending.

CUSTODY: HKEX hires Roberts to run EMEA Issuer Services Hong Kong Exchanges and Clearing (HKEX) has hired Chris Roberts, formerly of J.P. Morgan and Morgan Stanley, as the Asian exchange’s new managing director and head of EMEA Issuer Services. In his new role, Roberts will oversee the marketing activities for Hong Kong’s IPO services across Europe, the Middle East and Africa (EMEA). Based in London, he will also run post-IPO services in EMEA, collaborating with global issuers and the European listing community, the firm said. Northern Trust hires Keane as Asset Servicing head Northern Trust has hired Aisling Keane, formerly of State Street, as the US group’s new head of Asset Servicing in Hong Kong. In her new role, Keane is responsible for leading the firm’s asset servicing arm across Hong Kong, Macau and Taiwan. Additionally, she will oversee the

strategic direction of Northern Trust’s asset servicing business, in addition to supporting clients through providing solutions.

SECURITIES FINANCE: Clear Street hires two in latest technology team expansion Clear Street has hired two senior executives including a chief information officer in the prime broker’s latest expansion of its technology leadership team. New York-based Clear Street has named Jonathan “Jon” Daplyn as the new chief information officer (CIO) and Hari Godbole as managing director and vice president of Engineering. Sachin Kumar, co-founder and chief technology officer of Clear Street, said: “Jon and Hari have the expertise and vision to help guide our organisation as we pioneer a technology-first experience for prime brokerage to compete with the best in the world.” Women in Securities Finance announces two New York Chapter leads Women in Securities Finance has announced Elaine Hannigan of Scotiabank and Barclays’ Megan Fritz as two new additions to its New York Chapter. Elaine Hannigan, director of Prime

NANCY ALLEN

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TRADING PLACES

Services at Scotiabank and Megan Fritz, chief of Staff, Liquid Financing at Barclays will join Nancy Allen, who has led the New York Chapter of WISF since May 2023. Nancy Allen, head of EquiLend Data and Analytics Solutions, said: “I am very excited to build out the NY team with both Elaine and Megan. Both women have extensive securities finance experience and complement the existing leadership team nicely. We have big plans so watch this space for great things to come for WISF in NY!” De Vidts joins London Reporting House as senior adviser London Reporting House has hired repo expert Godfried De Vidts, formerly of ICAP and the International Capital Markets Association, as a senior advisor as the firm forges ahead with plans to launch its European repo trading service. De Vidts will work with LRH as it prepares to launch in November a repo trading service that uses Securities Financing Transactions Regulation data to offer fresh insight into the European and UK markets. Danny Corrigan, chief executive and co-founder of London Reporting House, said: “Godfried’s wealth of knowledge and experience and his connections within the sector will be invaluable to the business as we move forward in launching our services which provide our ‘give-to-get‘ market participants with unparalleled insight and analytics into the EU and UK repo markets. We are delighted to welcome Godfried as a senior adviser and know he will be a great addition to our team.”

DERIVATIVES: SGX chief Loh elected chairman at exchange trade body WFE Chief executive of Singapore Exchange (SGX) Loh Boon Chye has been elected as the new chairman at the World Federation of Exchanges (WFE) at the trade body’s annual conference.

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LOH BOON CHYE

The London-based trade body elected seven new directors to its board in September at the event in Bermuda. “Singapore Exchange has been a longstanding supporter of the WFE,” Loh said. “It is my privilege to serve as chairman of WFE to help promote the association’s mission in fostering a transparent, collaborative, and innovative ecosystem for the global financial markets.” Cboe chief exec, chairman Tilly resigns after investigation Cboe Global Markets has appointed board member Fredric Tomczyk as its new chief executive officer, replacing long-standing chief exec and chairman Ed Tilly who has stepped down from the US exchange group. Tomczyk replaces Tilly who has resigned from the role following an investigation by the board of directors and outside independent counsel which found he had not disclosed “personal relationships with colleagues, which violated Cboe’s policies and stands in stark contrast to the company’s values”. Cboe said in a statement the conduct was not “related to and does not impact the company’s strategy, financial performance, technology and market operations, reporting or internal controls”.

Nasdaq promotes Chai to run European trading as Sibbern leaves Nasdaq has promoted Roland Chai to run European trading after the current holder of that post Bjorn Sibbern said he is leaving the US exchange to join Switzerland’s SIX Group. Nasdaq said Sibbern will remain with the firm through the latter part of this year to ensure a smooth handover to Chai before Sibbern becomes SIX’s global head of exchanges at the start of next year. Sibbern will also sit on the SIX executive board. Sibbern, who has been with the group for 15 years, has been Nasdaq’s president of European markets since mid-2019. Chai joined the US group in 2020 as chief risk officer before being promoted last year to run Nasdaq’s marketplace technology arm. RJ O’Brien hires Citi veteran for insights role RJ O’Brien has hired Citi veteran Tom Fitzpatrick as the world’s oldest and largest independent futures broker looks to develop its research offering. The Chicago-based firm said Fitzpatrick has joined the firm as managing director in charge of global markets insights. He takes on the new role after 39 years at Citi, where he held various research and sales positions.

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EXCLUSIVES FROM GLOBAL INVESTOR GROUP

Breaking stories from Global Investor Group Here are some of the top stories you may have missed at GlobalInvestorGroup.com ASSET MANAGEMENT: HKEX to launch listings platform in November Hong Kong Exchanges and Clearing has said it will launch its new digitalised IPO settlement platform on November 22 2023. Hong Kong Exchanges and Clearing (HKEX) said the new IPO settlement

offering, dubbed FINI, serves as a milestone for the growth of Hong Kong’s capital markets. Nicolas Aguzin, chief executive of HKEX, said: “FINI is a major development for Hong Kong’s capital markets, bringing greater efficiency and convenience to market participants and issuers, helping them to better manage their risks and costs.”

Firms wary of best execution in OTC crypto markets – Acuiti Regulated firms are concerned about demonstrating best execution when trading in the increasingly popular over-the-counter crypto derivatives markets, according to research from Acuiti. The market intelligence specialist published a report that found 98% of respondents saw challenges in complying with best execution requirements when trading over-thecounter (OTC) rather than listed crypto derivatives. “OTC usage among institutional crypto derivatives traders is on the increase,” the report said. “However, there has been concern expressed within the network over how to measure best execution when trading OTC.”

CUSTODY: UniSuper picks BNP Paribas as triparty collateral provider Australian superannuation fund UniSuper has picked BNP Paribas’ custody arm as its triparty collateral management service provider. BNP Paribas Securities Services said this announcement complements an existing collaboration between UniSuper and BNP Paribas that began in 2015 and involves the French bank handling Australian custody for the fund. Natalie Floate, head of Markets & Financing Services APAC at the French custodian, said: “We are very pleased to expand our relationship with UniSuper. Going live with our Collateral Management services in Australia is another step forward in the evolution of our partnership with one of Australia’s leading superannuation funds.” DTCC goes live with T+1 ‘scorecard’ The Depository Trust & Clearing Corporation (DTCC) has launched a T+1 ‘scorecard’ to help clients using the Central Trade Matching platform to

NICOLAS AGUZIN

Autumn 2023

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EXCLUSIVES FROM GLOBAL INVESTOR GROUP

better assess their readiness for the US shift to a shorter settlement time next year. The post-trade firm said the settlement scorecard is available through its Institutional Trade Processing (ITP) Data Analytics offering, which aims to help existing clients assess their operational preparation in light of the T+1 migration in May 2024.

SECURITIES FINANCE: BNY picks Eurex as first repo clearing house outside US BNY Mellon has selected Eurex to clear its European repo transactions, making the German venue the first non-US clearing house to be selected by the US financial group. Björn Storim, chief executive of BNY Mellon’s European bank, said the demand for EU repo is “continuously increasing and this important milestone supports us in expanding our business and risk management capabilities in Europe”. BNY Mellon has become the latest trading and clearing member at the Deutsche Boerse-backed trading firm, with the first transactions already having taken place. Pirum enhances connectivity to support US T+1 migration Pirum has enhanced its connectivity and interoperability with the main FIS securities lending platform to help clients prepare for the US regulatory shift to T+1 next year. The firm said the enhancement allows FIS Securities Lending Processing Platform clients to connect to their counterparts using Pirum’s post-trade services or FIS’ Loanet platform. EquiLend starts pilot testing DLT securities finance system EquiLend has started testing with clients a distributed ledger-based system that aims to establish an industry-wide single source of data for securities finance transactions.

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New York-based EquiLend said several agent lenders and brokerdealers are participating in the pilot of the distributed ledger technology (DLT) system known as EquiLend 1Source.

DERIVATIVES: US court rejects bid for SPIKES hearing A US appeals court has rejected a bid from the Minneapolis Grain Exchange for a panel to reconsider its ability to list its equity volatility index contract. The move ends an extended dispute with Cboe Global Markets over the Securities and Exchange Commission (SEC) exemption order that allowed the Minneapolis SPIKES contracts to be listed and traded. Cboe, which originated the market for trading volatility index (VIX) futures on the S&P 500, issued a position paper, clarifying that the suit was aimed at the narrow issue of the exemption order but not to stamp out competition. “Cboe brought this case against the SEC because it failed to comply with applicable law when it granted an exemption to a single exchange for a single product listed on that exchange,” the statement said. “Any suggestion that Cboe used litigation to eliminate competition is false. Rather, Cboe sued to ensure fair competition and that all exchanges are able to introduce products and compete on equal footing.” Eurex eyes DAX same-day options before year-end Eurex may launch same day options that reference the main German blue chip index before the end of this year after seeing strong adoption of its first daily options since their launch in August. Speaking on a panel at the FOW Trading Singapore event, the firm’s head of equity and index derivatives sales for the Asia Pacific said take-up of the single day options referencing the EuroSTOXX index launched in August has been encouraging.

ICE to launch airline-focused carbon futures on October 9 Intercontinental Exchange (ICE) plans to launch in October the US group’s first carbon credit futures aimed at the emerging carbon offsetting regime for airlines. ICE said it will make available on October 9 a series of contracts that reference Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) eligible credits. The contracts will be aimed at airline operators covered by the roll-out of the voluntary phases of CORSIA’s global carbon credit scheme, starting from next year to the final compliance period at the end of January 2028. Marex non-execs Lord Fink, Carla Stent to leave board Marex has said long-standing non-executive director Lord Stanley Fink and non-executive chair Carla Stent are leaving the broker’s board in line with regulatory guidelines for directors’ tenure. The London-based broker said current senior independent director Robert Pickering will replace in September Stent as non-exec chair, a position she has held since 2019 after joining the board in 2014. Marex said non-executive director Sarah Ing will replace Pickering as senior independent director. Eurex signs up 18 firms for new STIR incentive scheme Eurex has signed up 18 firms, including some of the world’s top investment banks, to support the October launch of its new Euribor contract and a partnership programme to encourage trading across the German exchange’s shortterm interest rate (STIR) derivatives. The Deutsche Boerse-owned exchange said the STIR partnership programme will “go live in the last week of October” to coincide with the relaunch of the Eurex Euribor contract, and separate programmes aimed at liquidity providers in Euribor and Euro Short Term Rate (€STR) derivatives will take effect in early November.

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DERIVATIVES CUSTODY

COVER FEATURE: MATTHEW CHAMBERLAIN, LME

Autumn 2023

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LME chief Chamberlain considers life after nickel London Metal Exchange chief executive officer Matthew Chamberlain talks to Radi Khasawneh about the reforms the exchange has introduced since closing the nickel market in March 2022. Matthew Chamberlian has achieved a lot since taking over as chief executive officer of the London Metal Exchange in early 2017. In his nearly seven years in charge, Chamberlain has overhauled the LME warehousing system, changed the exchange’s price methodology and launched various sustainability initiatives. But his leadership will be remembered for one thing: the sudden closure of the LME nickel market in March 2022. Speaking in September 2023, Chamberlain describes his time running the London market as comprising two distinct chapters either side of the start of the COVID pandemic. “If you look at my tenure it has been divided into periods that have been marked by external events. Between 2017 and 2020 we were in a process of resetting the business and putting in place the strategic pathway, then obviously we went into the pandemic and I very much enjoyed being able to work so closely with the members to put in place electronic pricing.” Chamberlain surprised some by announcing in January 2022 he was leaving the LME after a decade with the firm, five as chief executive, to become chief executive of a digital asset custodian backed by Nomura. He says: “That was an unprecedented period, and I was looking at taking the opportunity after five years to widen my own horizons and take up a new challenge.” Then the Russian invasion of Ukraine

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in February 2022 shocked the global commodity markets. Early on March 8, the LME nickel price blew out in the Asian trading session, inflating margin calls, and forcing the LME to suspend its nickel market and cancel some trades. LME and Chamberlain became front page news overnight and his imminent departure was thrown into doubt. Six weeks after the suspension, in late April, the exchange said Chamberlain was not leaving after all. “When the nickel situation happened, difficult though it was, it created an array of new things to do, and the more I thought about it the more I wanted to get my teeth into that process,” he says. “That is something that I think was felt by the whole team, so it has really created this third period of driving forward this Action Plan and thinking

about how we build the right market structure while being true to the roots of our success for 145 years as an exchange. It’s a fascinating challenge to take it forward, and I feel a renewed sense of mission and purpose from a personal perspective.” The LME’s recovery from the nickel suspension was complicated in June 2022 by the news that hedge fund Elliot Associates and market-maker Jane Street Global Trading were suing the LME for closing the nickel market, a legal action that has yet to be resolved. Chamberlain is now focused on rebuilding confidence and credibility in the LME nickel market, which has showed signs of recovery this year after volumes collapsed due to the suspension. “At the LME we saw volumes dip in

Chamberlain: “If you look at my tenure it has been divided into periods that have been marked by external events”

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DERIVATIVES

COVER FEATURE: MATTHEW CHAMBERLAIN, LME

DERIVATIVES CUSTODY

COVER FEATURE: MATTHEW CHAMBERLAIN, LME

Chamberlain: “We are very conscious of the difficulty that March 2022 caused right across the industry, and all you can do in that situation is to really commit to make enhancements and trying to minimise the likelihood of those challenges happening again.”

the second quarter in line with that, but what we have seen through the back end of last year and particularly coming into this year is the market being more interesting to trade. People are seeing more opportunities.” LME nickel volumes in the first seven months of this year were down a third on last year to 5.4 million contracts, according to FIA data (see chart 1). But there have been bright spots more recently, with May seeing over 3,000 lots traded a day on average in its threemonth nickel contract on its electronic LMEselect platform. That was the highest level since the market closed in March and was double the tally for May 2022. The latest August figures from the exchange show a 44% year-on-year increase in nickel volume, to 52,516 contracts in average daily volume. Chamberlain says: “We are very conscious of the difficulty that March 2022 caused right across the industry, and all you can do in that situation is to really commit to make enhancements and trying to minimise the likelihood of those challenges happening again,” “We do take this very seriously and we are absolutely committed to the nickel contract. It’s how we can send a

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message to our market that we want to be there for the global metals industry and will do whatever it takes to justify that trust.” One thing that can be forgotten is the market was already on a downward trend before the disruption (see chart) due to a fundamental change in risk management activity following a spike in demand from “class 2” industry users who produce lower grade metal not deliverable under the current contracts. “With nickel it’s really important to remember that there was an incredible growth in nickel volumes across exchanges through the back end of the last decade,” Chamberlain says. “My view of what was driving that was the emergence of the class 2 nickel industry. Back in 2015, the nickel market was primarily driven by class 1 users. “As we saw the demand for electrification and nickel bearing batteries, we saw a class 2 market emerge that was Asia focussed and priced things like nickel sulphates off the LME or Shanghai Futures Exchange contract and those class 2 metals are obviously not deliverable under those contracts. As we now know, that class 2 factor to some extent contributed to the March situation.”

According to an Oliver Wyman report into the nickel situation, the historic price rises in nickel were partly attributable to traders scrambling to cover large short positions as the price surged for $27,080 (£22,200) per tonne to $101,365/t over a three-day period. “To some extent what we have seen is a reset in the contract to its class 1 fundamentals,” Chamberlain added. “Clearly market confidence has been a factor in some decline in volumes but there has also been this element that the recovery has been driven by those traditional participants and the class 2 players have evolved their pricing as a result of what happened. “At a high level, the first priority for us to achieve through this process is to make sure that we once again have a credible and defensible class 1 offering because that is what we have always set out to provide. The principal aim for a physically-settled future is to discover the price effectively of what you are delivering, so a liquid and resilient market for the class 1 metal has to be the absolute priority.” The upwards price pressure was exacerbated by hedging activity related to over-the-counter (OTC) positions that were at the time invisible to the exchange. On the morning of March 8, the LME’s clearing arm estimated an extra $19.75bn of margin was needed, jeopardising at least five clearing members, according to court arguments. “At the time, we were not happy to reopen the nickel market until the underlying cause of the market disorder had been addressed and we had taken steps to reassure the market in light of the unprecedented volatility that the market had experienced by putting two things in place – the first was OTC disclosure and the second was a daily price limit,” Chamberlain says. “The core point was we were not going to reopen that market until there were additional market resilience measures in place. “To a large extent, I think they continue to provide the main elements of confidence even today. That is why

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Autumn 2023

With nickel it’s really important to remember that there was an incredible growth in nickel volumes across exchanges through the back end of the last decade. multiple legs there was a consensus for a cautious approach so we have opted for a phased approach to give time to adjust and build algorithmic solutions and so on.” That cautious approach extends to another proposal to integrate trade-atsettle (TAS) functionality in the closing price process. Beyond these reforms, the exchange has also continued to focus on innovation. Its ferrous complex is up 55% year-on-year in the first eight months of the year, with an average daily volume of 3,291 lots. Its largest Steel Scrap CFR Turkey (Platts) contract is up 75% by the same measure. On September 6 the contract hit 5 million tonnes traded, the highest annual figure since the contract launched in 2015. The LME also has an eye on extending its reach in “financial” or cash-settled markets. “We have always says that we do well when our members are doing

well,” Chamberlain says. “What we have seen in the first half of 2023 is that they have seen a combination of client activity and interest rate increases combine to provide a more supportive environment. We are certainly seeing inbound interest to do more with us or to take new memberships. At the client level, the global commodities merchants and physical hedgers have been more active. So there is a positive usage story overall. “Obviously, the big untapped area for us is the financial side of the market. We do have financial participants but we feel that there is more liquidity that we could bring from that type of player, so that is where we have the most to do in terms of product development.” That growth opportunity is tied in with China and the importance of Chinese venues in the commodity market. There, the exchange has ambitious plans to develop its sales and technology footprint. Chamberlain,

Metals Focus: Nickel Chart 1: Nickel Futures Volume and Open Interest – in metric tonnes Source: FIA

Nickel Futures Volume and Open Interest – in Metric Tons

120M

2.5M

100M

2.0M

80M

Volume

1.5M 60M 1.0M

Adjusted Quarterly

Adjusted Quarter-E

40M

500K

20M

0 1

2015

Open Interest

we have now extended them to all other metals, and we have also in the case of price limits enriched the methodology as we have gone through that process.” Within the Action Plan, the LME has also accelerated its approval of new nickel brands, to ease any potential supply issues. “With the fast tracking of new nickel brands, a big part of that is increasing that Class 1 nickel supply to the market to make it easier for participants to deliver against the contract,” Chamberlain says. “The more liquidity you create, the less chance you have of a delivery squeeze. “Obviously we are still committed to having confidence in that delivery so our parallel consultation on including nickel powder as a deliverable shape is a good example of that. We have decided to pause that process after discussions with the nickel Committee, because, while it is a good idea, there were elements within that which presented difficulties for the physical market participants in actually delivering and using that. “So the Action Plan actually has to be dynamic, and the indications we have had is that market users really appreciated the time and effort it took to get to that point.” Another key component is the rollout of LME’s volume weighted average price (VWAP) methodology for pricing its most liquid contracts. The exchange will extend it to the five prompt dates beyond the three-month contract for aluminium, copper, zinc, lead and nickel in a phased process starting next year, the LME said in September. “The closing price has used a VWAP methodology for our most liquid threemonth contracts since 2020 [when the Ring closed due to the pandemic]. What we are now proposing to do is extend it to other liquid monthly (third Wednesday) dates, they are very important as they are where most of our open interest sits,” Chamberlain says. “After consultation with our users and exchanging views, we felt that when it comes to things like spreads and

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COVER FEATURE: MATTHEW CHAMBERLAIN, LME

2016

2017

2018

2019

2020

2021

2022

2023

Volume and Open Interest calculated by multiplying the number of contracts by the size of the underlying contracts in metric Adjusted quarterly volume - SHFE

Adjusted quarterly volume - LME

Adjusted Quarter-end open interest - SHFE

Adjusted Quarter-end open interest - LME

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COVER FEATURE: MATTHEW CHAMBERLAIN, LME

Chamberlain: “Obviously, the big untapped area for us is the financial side of the market. We do have financial participants but we feel that there is more liquidity that we could bring from that type of player, so that is where we have the most to do in terms of product development.”

who was already a member of the management committee at HKEX Group and its group head of commodities, took in early 2023 oversight of the Qianhai Mercantile Exchange and development of the Hong Kong group’s global commodity products. “Within HKEX, our vision of a global commodities model is a key part of what we are trying to do,” he added. “As part of that we have absolutely stepped up our presence in China. Obviously that was more difficult during the pandemic but we are now in a position where that has been taking place and it has allowed us to reactivate the opportunity given our natural advantages in the region. Our existing footprint in Hong Kong, Shanghai and Beijing gives us the opportunity to leverage that competitive advantage.”

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Alongside that push, the LME is in the process of upgrading its trading platform, with new versions of its electronic LMEselect and LMEsource market data platforms set to go live in the second quarter next year, and a new graphical user interface called LMEtrader in testing. “We will have a robust matching engine that is customised for our market, native TAS functionality and a route to mass quoting/mass cancel,” Chamberlain says. “The latter is absolutely crucial for our options market – right now that is predominantly a voice-based market, there is very little electronic options activity. We think we could really unleash a lot of new business if we had an electronic options market and we know the options market makers are interested if we can

give them the right technology setup. “As well as the platform upgrade, we also have an event streaming platform that will reduce the reliance on pointto-point connections that can create vulnerable points in terms of resilience. The way messages get moved around should be much more robust. So the new platform works on that basis and over the coming months and years we will put all of our systems on that, and we believe that will be the biggest driver of further enhancing operational resilience. That is sometimes less visible but a critical part of our technology strategy.” Having pioneered responsible sourcing and pushed to make that data discoverable electronically, an industry shift to sustainability has helped the LME galvanise adoption. “With sustainability it’s not a moral choice that we are making, it’s something that we absolutely have to do if we are going to remain relevant,” he says. “Our experience with responsible sourcing made it very clear to us that we had to be part of this process, and we are now in a position where by the end of this year every brand listed on the LME will have had to submit their first compliance submissions to demonstrate their compliance with the phased set of requirements we have been implementing over the last five years.” Two years ago, the LME launched LMEpassport, its digital certificates of analysis and sustainability credentials register. It now has 219 brands signed up. “The physical metals industry has always been a very manual industry, and now people are recognising the value of digital solutions to make their lives easier,” Chamberlain says. “The strides we have made with LMEpassport make a host of information visible and trackable on that individual metal basis, so that will be very useful as you track key metrics like emissions use. I’m really passionate about this providing the right solutions for those needs as they develop.”

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Disruptive pioneer to global powerhouse – 25 years of Eurex Michael Peters, the chief executive officer of Eurex, and Erik Mueller, the chief executive officer of Eurex Clearing, talk to Luke Jeffs about the European exchange group’s evolution over 25 years. Eurex is the largest exchange in Europe by some distance and the only European venue to make the top ten of global exchanges by volume of trading. The exchange has attained that status largely through success in two key product areas – equities and interest rates, (see table 1). The Deutsche Boerse venue has the world’s largest range of MSCI index futures and options products covering every international market or region worth a mention. The Frankfurt market also has various Euro Stoxx and Stoxx Europe sector indices, including the well-liked Euro Stoxx 50 index, and it is home to the DAX. On the rates side, Eurex has the EuroBobl, which has maturities of seven years or more, the Euro-Bund (five years) and the Euro-Schatz (two year maturity), all of which are heavily-traded and have enjoyed a stellar two years as firms have hedged their German government debt amid inflationary pressure (see chart 1).

In rates, the exchange plans towards the end of this year to relaunch its three month Euribor contract backed by a new incentive scheme that seeks to replicate the success Eurex Clearing has had building swaps clearing volume through its partnership programme. The Euribor gambit re-ignites Eurex’s decades-long rivalry with ICE Futures Europe (formerly Liffe), the home of Euribor trading. Eurex’s Euribor play seeks to copy its now-legendary repatriation of the Bund in the late 1990s when Deutsche Boerse managed to take Liffe’s entire Bund book, a success hard-coded into Eurex’s DNA. Speaking to FOW before Eurex celebrated its 25th anniversary on September 28, the exchange’s chief executive officer Michael Peters said the Eurex’s focus has shifted since 1998 but he fondly remembers the early days. Peters said: “When you look at the story of Eurex, for me it’s the evolution

Table 1: Eurex Revenue Breakdown by Asset Class (€) Asset Class

2022

2021

Change

Financial Derivatives

1234.4

995.8

24%

Equities

509

439.4

16%

Interest Rates

367.9

282.8

30%

Margin Fees

117.6

73%

Other

239.9

205.6

17%

Source: Deutsche Boerse Annual Report 2022

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from a disruptive pioneer to a global powerhouse. What does it mean “disruptive pioneer”? We were and are a market operator that designs, builds, and operates our market infrastructure. That started with our trading infrastructure and continues with clearing and risk management, which is becoming more important. “We consider ourselves as an organisation that has led the development and set standards with regards to the infrastructure, performance, and throughput figures for trading. But the focus is shifting from trading technology to risk management technology and methodology as capital efficiencies and cross-margining are becoming crucially important.” Capital savings from portfolio margining of correlated products are one of the key selling points of the Euribor strategy but there are also regulatory tailwinds, as there were in the late 90s when Eurex took the Bund. Peters said: “If we look back to the start, when DTB and Soffex merged, we were the only two exchanges globally that were fully electronic with an integrated clearing house.” Eurex was formed in 1998 by the merger of Germany’s Deutsche TerminBoerse (DTB) and Soffex (the Swiss Options and Financial Futures Exchange) which worked together for a decade before coming together to create Eurex.

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Peters said: “We were able to offer direct access electronically to anywhere in the world but we also needed the alignment of the regulatory framework. That came in Europe in 1996 with the implementation of the Investment Services Directive and it was at that time that Eurex under Deutsche Boerse decided to open its first foreign office, in Cannon Street.” Peters and a colleague were the first staff in the London office, located just a stone’s throw from the prodigious Liffe floor, while Heike Eckert, the current Executive Board Member of Deutsche Boerse, set up the group’s first US office, in Chicago. A key catalyst for Eurex’s success taking the Bund was the introduction in 1996 of the Investment Services Directive which allowed European financial firms to offer their services to clients in other European countries for the first time. “That was a gamechanger,” said Peters. “We received a lot of interest in memberships for Eurex because we could admit members remotely from everywhere in Europe including London which was the most important European financial centre.” Peters added: “And, in 1998, the entire Bund business shifted to Eurex because of the disruptive element of technology but also remote access, additional efficiency and longer trading hours. Also importantly, we changed the market because the order book became fully transparent which was not the case if you were trading in the pit. With our pioneer spirit, we changed the world of derivatives trading.” Eurex’s success with the Bund then was due to a combination of factors – regulatory, technological and structural – a formula the exchange plans to emulate with Euribor. Peters continued: “And that was part of our DNA that continued over time. If you look at the next major event where technology and a big political decision came together was the start of the European Monetary Union.”

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We received a lot of interest in memberships for Eurex because we could admit members remotely from everywhere in Europe including London which was the most important European financial centre. Michael Peters

The EMU, introduced in stages through the 1990s, paved the way for a European equity market and the European equity derivatives market that Eurex dominates today. Peters said: “We started in the index derivatives space, like every exchange did, with a local equity index offering

but then, in 1999, investors started looking for exposure to Europe and that was the start when we listed the first European indices, with the STOXX family, and we went on to establish STOXX as the global European benchmark.” And then, in 2008, Lehman Brothers

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futures that reference Eurex’s key indices could be portfolio-margined against Eurex’s index futures (see chart 2). “The dividend derivatives and the other index derivatives for the Dax, EURO STOXX and MSCI have high correlations, so this created crossmargin and capital efficiencies that you simply don’t have in the swaps markets, so clearing and portfolio risk margining became and is a key success factor.” Peters added: “We have continued with total return futures, starting with EURO STOXX before extending that to the dividend index and the bank index, and in 2021 to FTSE. Today, approximately 90% of the inter-dealer market that was swap-traded is now cleared in our clearing house.” Eurex launched in March 2021 a FTSE 100 future, option and total return future under an agreement with FTSE Russell, part of the LSE Group. ICE, the home of FTSE 100 futures and options trading, did not launch its FTSE 100 TRF until November the following year. Eurex has also established in the past decade a diversified MSCI index derivatives business. Peters said: “With MSCI, where we started in 2013 and 2014, we are now the exchange with the largest offering of MSCI derivatives. That was the next natural step from a strategy point of

We have continued with total return futures, starting with EURO STOXX before extending that to the dividend index and the bank index, and in 2021 to FTSE. Today, approximately 90% of the inter-dealer market that was swap-traded is now cleared in our clearing house. Michael Peters

collapsed and the function of exchanges and clearing houses changed forever. Peters said: “Another key event was the Lehman default and the Pittsburgh G20 meeting of 2009 where the politicians decided the over-thecounter (OTC) market should be made fundamentally safer through a robust risk management methodology and a proper collateralisation methodology with central counterparties and exchanges playing an important role.” The reforms introduced to shore up the OTC markets, such as the requirement that vanilla products were reported to a regulated entity and cleared through a clearing house, effectively opened this vast market up to exchange groups like Eurex for the first time. New capital charges on OTC products like dividend and total return

swaps paved the way for exchanges like Eurex to offer capital-efficient listed futures, a trend known as futurisation. Peters said: “A key early initiative was the creation of a regulated and centrally cleared dividend futures and options market which had been the dividend swap market based on individual agreements between two counterparties. Jointly with the market, we standardised dividend swaps into dividend futures and later options, first for indices and later single names.” “This was a huge success and the banks told us the standardisation provided much more growth opportunity than they had previously seen in the OTC space.” As well as the capital efficiency of trading futures rather than swaps, Eurex offered through its clearing house further savings as the dividend

Chart 1: All fixed income futures contracts (ADV) and open interest in millions

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Source: Eurex

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EUREX

view. We started with the domestic indices, extended to the European indices and then moved to offer global and regional indices. We have the broadest offering with more than 160 MSCI futures and 20 MSCI options. Almost 60% of the MSCI open interest globally is consolidated within Eurex Clearing, whereas contract wise, we trade about 27%.” Eurex competes with ICE Futures Europe and Hong Kong Exchanges and Clearing in MSCI derivatives. For Erik Mueller, the chief executive officer of Eurex Clearing, Lehman Brothers triggered a fundamental change in the trading industry that is still playing out today. He said: “I saw Lehman as a treasurer for Deutsche Boerse Group as well as for the central counterparty and our Clearstream business. What we know is the futures markets worked very well, but what became obvious is that the OTC derivatives market was even larger than the listed derivatives market at that time and there were bilateral exposures between the major players that prompted regulators to install a neutral, independent, thirdparty to risk manage the relationships between clients in a standardised, transparent, and predictable way. “In other words, it greatly enhanced the role of central counterparties (CCPs) but through indirect regulation related for example to the capital requirements for banks, this has led to a change in behaviour, and we are still in that process.” Mueller, who has been the head of Eurex Clearing since 2016, said the reforms ushered in after Lehman have changed the focus of trading firms. “It has prompted us to think the future is not so much about the latency race that was so predominant on the trading side, instead the future will be much more around excellence in risk management and the capabilities to portfolio margin and real-time risk manage.” Eurex’s capital optimisation strategy relies on Prisma, a platform that calculates the risks across all

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Capital efficiency is well-established in the exchange-traded equity derivatives space but in the fixed income market, particularly as it pertains to the Euro, there is a highly fragmented landscape today. Erik Mueller

derivatives markets cleared by Eurex. The technology, which Mueller said has been described by bank clients as “the gold standard for risk management in our industry”, is also marking an anniversary this year, its tenth. Mueller said: “Prisma gave us the capability not only to portfolio

margin but also around real-time risk management which for the daily expiry options is of crucial importance.” Eurex launched on August 28 its first daily options contract, based on EURO STOXX blue chip index, and said in September it had traded about 10,000 lots a day over the first three weeks

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since launch (see chart 3). Prisma is also integral to Eurex’s Euribor relaunch, which is, in turn, a key part of its broader Euro interest rates strategy. Mueller said: “Capital efficiency is well-established in the exchangetraded equity derivatives space but in the fixed income market, particularly as it pertains to the Euro, there is a highly fragmented landscape today. “A client focused on European rates will likely have bunds with Eurex Clearing, interest rate swaps with LCH in London, the Euribor contracts with ICE in the UK, and that client will likely finance these transactions in a bilateral repo market. “In a way, this represents the maximum inefficiency in a single currency so one of the key areas of investment for Eurex Clearing has been furthering the capabilities around an integrated value proposition for the Euro, which we have called the home of the Euro yield curve,” said Mueller. Ahead of the relaunch of the Eurex Euribor contract slated for the last week of October, the exchange is signing up clients to its expanded partnership programme, an incentive scheme that was first used on the clearing of interest rate swaps (IRS). Eurex said on September 12 it had

18 firms pledged to the programme including most of the world’s top investment banks. Mueller said: “We have seen over the past year that the partnership programme in swaps is delivering success, so we are now at €32tn (£28tn) in notional outstanding, up from zero five years before.” Eurex already has many of the components of a European interest rate ecosystem, which could make the inclusion of Euribor an attractive prospect for clients seeking margin savings. He said: “We have the Bund, Bobl, Schatz as well as the OATs and BTPs, and the OTC IRS. Given the ongoing dissatisfaction among EU regulators that systemic risk resides in a third country, a situation which is not sustainable, they asked us to extend the partnership programme that we have successfully employed for interest rate swaps to the short-term interest rate (STIR) complex including ESTR and Euribor.” European policymakers have made in recent years no secret of the fact they are unhappy that Euro swaps are mostly cleared at LCH in London and Euribor futures are mostly traded and cleared at ICE also in London, outside of European regulatory control since Brexit.

Chart 2: EURO STOXX® Index Dividend Futures

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Mueller continued: “It wasn’t a priority a year ago but it has become more urgent for market participants to be able to look at this from a more holistic perspective around the Euro risk.” While LCH generates margin savings by clearing swaps of different currencies, Eurex is taking a different approach, aiming to clear as many Euro products as possible under one roof. “The competing value proposition is to look at a single product across multiple currencies which offers benefits to some but not all. The European buy-side for example is mostly focused on the Euro but for the dealers the multi-currency proposition is attractive.” Mueller continued: “We think the future is in delivering efficiencies across these different products within a single liquidation group. One thing that is under-estimated is that repo is the grease in the financial system and not only as a source of liquidity for banks but also as a backstop for those buy-side firms that have become part of the risk management processes of CCPs by putting up initial margin (IM) for future market moves and variation margin (VM) in cash to settle the daily mark-to-market.” Eurex, like LCH, has reported a spike

Source: Eurex

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EUREX

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EUREX

in demand for cleared repo as firms such as buy-side clients have reacted to bank liquidity concerns in the first quarter by using more cleared products to mitigate counterparty risk. “Of course, the non-banks don’t have the same access to liquidity that the banks have so they are reliant on well-functioning repo markets and they are discovering that because of the balance sheet cost of the banking regulation, there are gaps at month and year ends where banks are seeking to optimise their G-SIP scores. It can become prohibitively expensive for them to extend financing to non-bank clients.” Mueller added: “Against that background, we are observing a strong movement into the cleared repo space. Europe, unlike the US, is not yet considering a clearing obligation but the recent FSB report on leverage in the non-bank financial system suggests the answer is in a portfolio margined universe of STIRs, long-term interest rates, IRS and repo, and there is a strong point to be made that this would be the natural home of the Euro currency.” “That is what we are working on and STIRs fit in as one piece of the puzzle that delivers greater efficiencies to market participants if you feel that capital efficiency is the big driver going forwards,” he added. And Eurex sees parallels between

With Brexit now a reality, it has become more urgent for European regulators to want a certain proportion of the EU systemic risk to be housed within the perimeter of their direct supervisory powers. I think that is an important change.

Chart 3: Zero day to expiry options

Source: Eurex

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Erik Mueller

what it is trying to do with Euribor and its success 25 years ago with the Bund. Mueller said: “In a way, they [Bund and Euribor] are comparable in that you had two major prerequisites. With the Bund, there was a regulatory break with the Investment Services Directive so there was no need to physically present in a pit anymore and then there was the technology.” He continued: “If you look at this situation, it is both again. The regulatory rules are changing. The ECB has said consistently and prior to Brexit that there is a need to be responsible for systemically relevant exposures in the Euro currency.” Mueller said the European Central Bank signalled as early as 2011 its intention to repatriate Eurodenominated products into the Eurozone. “With Brexit now a reality, it has become more urgent for European

regulators to want a certain proportion of the EU systemic risk to be housed within the perimeter of their direct supervisory powers. I think that is an important change. He added: “There are many points of evidence that the passport that was crucial to allow London to manage the finances of EU has effectively fallen away. That cannot be the status quo going forward so the question is how can we help transition into a new world?” And the last component is the technological advantage. “The technology part is not this time a trading system, but it is around risk management. If you look at the four global CCPs, we are the only one that has a full bank licence because we think that access to liquidity matters also for CCPs, not for business as usual but when you go to the end of the waterfall, these banks can become decisive which is why voluntarily we are not only an

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EMIR (European Market Infrastructure Regulation) registered CCP but also offer full access to the ECB.” Mueller added: “So there is both a regulatory break and a technology break here that could be the basis for success.” Looking ahead, there is further to go on the expanded scope of clearing houses as new issues come to light, argues Mueller.

“Look at Archegos, it took a car accident for the industry to realise that maybe we are not as standardised from a risk management perspective as we should be whereas clearing offers exactly that as the banks can’t be played off against each other. If you drill down in futurisation, you come to clearability.” As well as repo, which is part of Eurex’s broader rates strategy, Mueller

said there is also potential for increased adoption of clearing in the still largely over-the-counter foreign exchange market. “If you look at the capital rules, FX was out of the equation for years but now Uncleared Margin Rules (UMR) and other rules are now shifting what was previously a prime broker business to a cleared proposition,” Mueller concluded.

Eurex’s technology pledge paves way for options innovation Eurex is by-far the largest European options market but the European options market is still a fraction of the size of the vast US options industry. There are reasons why, according to Eurex chief executive officer Michael Peters. “During COVID times we could observe an increased focus on micro futures and options trading on particular names like Amazon, Tesla, Google etc in the US. Europe does not have these publicly listed IT companies, they are rather listed in the US. We have in Europe interesting names like BMW, Porsche, LVMH etc but they tend to belong to different sectors. So, when we look at the US and Europe, there is a fundamental difference in terms of the offering and, particularly, the single names.” “Secondly, when you look at the market structure in the US, the pension schemes and the financial literacy of the retail investors are very different compared to Europe. We’ve also recently seen announcements from European regulators that ban certain trading activities from retail investors. In addition, European market structure is largely driven by structured products offered to retail investors rather than trading futures and options on regulated marketplaces.” The Eurex chief executive officer continued: “That said,

Autumn 2023

adding daily options is an important addition to the respective ecosystem and it will improve our position but the first two elements are crucial.” Eurex launched Europe’s first daily options in late August, linked to the EURO STOXX index, and they are proving popular, so much so the exchange is already talking about versions linked to other indices. Peters said the single day to expiry options were made possible by Eurex’s commitment “to be constantly at the forefront of technological development”. “I would like to mention two examples: First is Next Gen, which is the basic infrastructure that provides more agility in product listings which has enabled us to deliver daily expiries for options, which we started trading in late August and since then have traded more than 300,000 contracts.” He added: “We are just beginning but we have already observed a very healthy client interest of more than 40 market participants including banks,

market-makers and brokers with agency and proprietary trading flow in this new product. We are confident this will continue, and we therefore intend to expand this product to the DAX options as well.” Peters also cited the partnership between Eurex parent Deutsche Boerse and Google Cloud which was extended in February this year to include some 70% of the German group’s technology. “In the second example, we see again the perfect combination between product innovation and infrastructure in our collaboration announced almost a year ago with GoogleCloud.” Peters added: “In this context we assess what kind of infrastructure qualifies for a potential transfer into the Cloud, whether that is data, risk management, clearing or trading infrastructure. We don’t believe that trading infrastructure qualifies at this stage though. . . At the same time, we identify additional new business opportunities that can use the Cloud technology as a business enabler.”

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RJ O’BRIEN

Phelps reflects on 18 months running RJ O’Brien in Europe and Middle East RJ O’Brien’s head of Europe, the Middle East and Africa Mark Phelps talks to Luke Jeffs about his time running the Londonbased arm of the US brokerage firm. September 1 represented 18 months since Mark Phelps became head of Europe, Middle East and Africa at RJ O’Brien, the world’s oldest and largest independent futures broker. In that time, Phelps has helped RJO navigate a period of extreme volatility in many of the firm’s key markets such as commodities, interest rates, equities and foreign exchange while higher interest rates have boosted the bottom line. He has also worked with the firm’s senior management in Chicago to continue RJO’s growth, both geographically into new markets such as Dubai and by diversifying the products offered by the group, partly into markets beyond listed derivatives. Reflecting on that time, Phelps said: “As soon as I joined, I knew it was a great decision though I can’t say I was able to enjoy the first few weeks as it coincided with the start of the Ukraine/ Russia war. You always want to see some market volatility when you’re in my seat but not like that. It was a bit of a rude awakening for me.” His first weeks also included the closure of the London Metal

Autumn 2023

When you get rising interest rates, you also get volatility, so it’s not just treasury revenue that’s increasing; you get transactional revenue improving significantly too, and this has led to strong revenues for RJO this year. Mark Phelps

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Exchange’s nickel market on March 8 which threw up an unprecedented set of challenges for LME member firms such as RJ O’Brien. When Phelps joined RJO in March 2022, he teamed up in London with Adam Solomons, deputy managing director of RJ O’Brien Limited, who has been with the firm since it acquired Kyte Group in 2015. Solomons said: “Mark’s first six months were seat-of-the-pants because of the Ukraine conflict, but what it showed was that there is robustness in the risk management of RJO globally so whilst these things were going on around us, we were able to manage it. It gave Mark an immediate insight into how the firm works.” Looking beyond those initial weeks however, Phelps said he is enjoying working on the group’s expansion strategy: “What has really excited me about the last 18 months is the growth that RJO is undertaking geographically and from a product perspective.” Phelps runs three offices – the regional headquarters in London, the Paris office opened in 2019 and the Dubai hub which began trading in 2018. He said: “We’re also expanding into other regions; most recently we have set up an office in Singapore and I’m playing a small part in getting that up and running too.” As well as regional expansion, RJO has in the past years been increasing the universe of instruments covered by its execution and clearing desks. Phelps said: “We have an established listed derivatives fixed income business here, and over the last 18 months we have started doing US cash treasuries in the region and are getting into the European swaps space in the first half of next year, which will allow us over time to branch out into other currencies, so we’re actively building out our wider fixed income offering.” RJ O’Brien promoted in January last year Amber Wright to become the firm’s London-based global head of fixed income.

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What has really excited me about the last 18 months is the growth that RJO is undertaking geographically and from a product perspective Mark Phelps

Phelps added: “We also have a growing LME desk, having hired a very experienced team a year ago, and this has significantly raised our metals profile and we will continue to expand in that space. On the back of that we have had enquiries from other firms who are keen to access our membership now that we are a better known Category Two member of LME.” RJ O’Brien hired in September last year a five-strong team from BGC Partners, including that firm’s former heads of base and non-ferrous metals Bradley Marchant and Steven Bingley, to focus on metals traded on the LME and CME Group. Phelps continued: “We have also invested in a US equities execution team as we continue to widen the asset class offering at RJO. There is a lot going on in London; it’s an exciting time to be at the firm.” Solomons added: “We are looking to diversify across asset classes to make sure we are not caught out if rates head back towards zero or if commodity hedging requirements reduce. Broadening of our execution offering, alongside the core business of attracting clearing clients, is the most important thing and that is where Dubai comes into play for us.” RJO acquired in August 2020 Dubaibased inter-dealer broker Lombard Forte Securities. Futures Commission Merchants

(FCMs) like RJ O’Brien benefit from higher interest rates because they can generate better returns in the shortterm lending markets so now is a good time to be running an FCM. Phelps said: “However good you think you are at your job, it’s nice if you’ve got the wind in your sails. I joined RJO at an interesting time for all FCMs with the start of the global rate hiking cycle, and it has been a superb 18 months here from a financial perspective because interest rates have been going up and our segregated funds reached an all-time high watermark during 2023.” He added: “When you get rising interest rates, you also get volatility, so it’s not just treasury revenue that’s increasing; you get transactional revenue improving significantly too, and this has led to strong revenues for RJO this year.” And that extra revenue could pave the way for further acquisitions though Phelps said the plan is to focus principally on organic growth. “RJO will always be interested in looking at attractive opportunities to make acquisitions, and that’s not something that is new since I joined the firm. If we saw an interesting opportunity in the market, we would certainly be keen to have a discussion there. “That said, our strategy is to do more of the same, so that is find more exchange-traded derivatives clearing clients and more executing brokers in fixed income, energy and LME for example, but we also want to branch out to get more of the new asset classes on board and that is something that I have seen accelerate over the last year.” The higher revenue from interest rates has made futures broking more lucrative, and, for the first time in decades, there is talk of new entrants. US prime broker Clear Street hired in August the founder and former head of ED&F Man Capital Markets Chris Smith to develop and run a new futures clearing broker, as first reported by FOW.

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RJ O’BRIEN

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RJ O’BRIEN

Phelps said: “We all know that we’ve got a new competitor on its way. RJO’s stance on that is we welcome competition in the market. We’ve been around for 109 years, and in that time we’ve seen FCMs come and go while we are the longest standing independent FCM in the market place and I expect us to grow and thrive irrespective of new entrants.” He added: “I think it’s a healthy sign for the industry that we are getting new FCMs coming to set-up. I think it’s a good thing.” Solomons said the barriers to entry and success in the futures clearing business should not be underestimated. “RJO is historically very strong in the US and when it started looking at expanding in London, it took the decision in 2015 to acquire Kyte Group. This immediately allowed RJO to combine its salesforce with a fully functioning FCM and substantially grow the business in the UK and Europe by leveraging off a solid and established infrastructure and client base.” Solomons added: “In relation to new entrants, it’s very hard to gain traction as a new participant and to attract clients away from their incumbent broker, so whilst we encourage competition, it doesn’t mean it is easy to compete.” Phelps continued that theme: “We’ve got loyal staff, loyal clients and an amazing reputation and brand. We are not going to be losing too much sleep about new competition in the market; our focus is executing on our own global growth strategy.” The European managing director added: “I feel like we have assembled some of the best talent in the FCM space at RJO. I inherited some superb staff when I arrived, but we have also managed to bring in some of the most knowledgeable and experienced staff in the industry, for instance by getting Gemma Lloyd and Tracy Hetherington to join RJO over the last 18 months.” Phelps, who was chief executive of GH Financials before joining RJO, hired in early 2023 Gemma Lloyd as its chief commercial officer from GHF where she

Autumn 2023

In relation to new entrants, it’s very hard to gain traction as a new participant and to attract clients away from their incumbent broker, so whilst we encourage competition, it doesn’t mean it is easy to compete. Adam Solomons

was head of business development. Phelps said: “I came to RJO in large part because of the culture and the people. RJO has an unrivalled reputation for service and prudent risk management but also for the integrity of the staff. I thought before I joined that my personality would fit with these traits.” Risk management has long been a core function for FCMs but the nature of the risk they face is changing, as demonstrated in January this year when ION Markets, one of the main technology suppliers to FCMs, was the subject of a cyber-attack.

Phelps said: “We were not heavily impacted by the ION event because we do not use ION as our back office provider. But, as a general comment, I don’t think any firm can afford to be too comfortable when it comes to this topic because there is always the potential for other vendors in the space to face a similar problem in the future.” US futures regulator the Commodity Futures Trading Commission has made the industry’s cyber-securities a key focus since the ION attack and has pledged to propose legislation on this key topic. Phelps added: “From an operational resilience perspective, I won’t be surprised if some new firms come to market with a more cost-effective, less functionally rich version of a back office system that can be the fail-over in case a primary vendor goes down for that exact issue. I think that would be good for the industry. If we can find a more cost-effective way of providing operational resilience, then I think we and every other FCM out there would look at it.” The head of derivatives trade body FIA sought in June to reassure banks and brokers that they will not be required to install complete but redundant post-trade systems to improve their operational resilience and guard against the problems that arose after the ION Markets cyber attack. But, as he marks his first year-anda-half running RJO EMEA, Phelps’ main focus is the execution of the group’s strategy: diversifying into new geographies and asset classes to complement the group’s long-standing market-leadership in listed derivatives. Phelps concluded: “We have expanded into UK, European and US equity broking, and we’re still looking to build that part of our business and get into more sovereign and corporate bonds than we’re currently just doing in the Middle East, so the strategy is to continue to grow beyond listed derivatives as well as keep an eye out for interesting acquisition opportunities.”

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FX in focus as SGX doubles down on multi-asset plan Singapore Exchange’s Lee Beng Hong and KC Lam discuss with Radi Khasawneh the role that FX plays in the Asian group’s multi-product strategy. Singapore Exchange’s long-running plan to establish itself as a multi-asset platform passed a milestone in September when the Asian group unveiled a new management structure geared towards integrating its various businesses.

The exchange appointed Lee Beng Hong, currently head of its Fixed Income Currencies and Commodities (FICC) division, as head of wholesale markets and platforms division. Speaking to Global Investor, he

Lee: “We have brought all our product teams under a new global markets division, Within that, you have all asset classes under one umbrella.”

Autumn 2023

described the changes as the natural extension of years of work from the exchange. “We have brought all our product teams under a new global markets division,” Lee told global investor. “Within that, you have all asset classes under one umbrella. The top priority for us now is to further deepen the work that we have done. It really leverages everything that we have built over the last seven years – the new technology services (SaaS), and the platforms that we have brought together. We believe that with this renewed focus we can continue to scale and grow.” Under the management changes, Michael Syn becomes president and head of the global markets division that now comprises all business lines except indices. The changes, set to take effect at the beginning of October, are geared towards driving the next phase of growth at the exchange group. Lee joined the firm in 2019 from Deutsche Bank to run the consolidated FICC team. Since then, the FX business has grown from strength to strength. As the group presented results in August, SGX’s chief executive lauded the growth of its futures franchise. Loh Boon Chye said the business has grown from six contracts ten years ago to nearly forty today. And trading volume across SGX’s foreign exchange futures complex rose 61% year-on-year to 4.2 million lots in August, according to monthly figures published by the exchange. That included 2.8 million contracts in its flagship US dollar/offshore Renminbi future (USD/CNH), which

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DERIVATIVES

SINGAPORE EXCHANGE

DERIVATIVES CUSTODY

SINGAPORE EXCHANGE

Lam: “Now the interest rate cycle is normalising, the demand for active risk management in the front end becomes real.”

translates to $12 billion (£9.8bn) worth of trades each day in August (see chart below). “We can say that there is a solid growth trend in the segment. In the first two weeks of September, that figure is close to $15bn, representing a steep increase,” said KC Lam, head of FX and rates at the exchange. “Throughout this period, one thing that has been happening is that more people are aware that liquidity is there and price discovery is excellent. As a result, we have had more participants joining in the last three months than the previous quarter, so what we can say is that there are signs that we are really reaching a new threshold in terms of the futures franchise.” That growth stands SGX in good stead to compete with the much

Autumn 2023

larger over-the-counter (OTC) market dominated by dealer banks. “Within the OTC space, Asian currencies typically have better liquidity within Asian hours, the challenge is that once you move away from that window it dwindles,” Lee added. “Having a transparent 22.5 hours continuous market on CNH futures actually facilitates that globalisation process because you have a reference that is liquid and lit. The liquidity profile for futures continues to be healthy after the Asian hours which reflects the internationalisation of that market. “At 12 yards a day, we are probably comparable to most of the OTC marketplace. Within that, one of the key drivers has been increasing participation in the futures market from both international and regional banks.

That reflects the growing importance of futures as a source of liquidity and price discovery.” Beyond futures, the firm has been hard at work expanding the breadth of its FX offering through a series of launches and acquisitions. SGX in 2021 reached agreement to acquire foreign exchange trading platform MaxxTrader from fintech firm FlexTrade Systems for $125 million, and rolled out its FX ECN in November of that year. The exchange also acquired BidFX in July 2020, and launched a non-deliverable forward matching service on its CurrencyNode venue in September last year, adding to the venue’s FX spot and precious metals offering. The integration of those lines is core to the exchange’s vision for the new FX business. “Clearly one of the big pillars within our global markets division is the SGX FX vertical which offers a gateway to the global FX ecosystem, anchored by the world’s most liquid Asian FX futures exchange together with cuttingedge FX technology and workflow solutions from BidFX servicing the buyside and MaxxTrader focusing on the sell-side,” Lee said. “Furthermore, with SGX CurrencyNode, an FX electronic communication network that connects global participants anonymously to unique and deep OTC FX liquidity pools, this brings everything regarding FX under one umbrella, which is very compelling. We provide the end-to-end digitalisation, the venue and seamless access to futures and OTC markets.” The combined businesses in June hit a milestone of more than $100 billion notional traded a day on average in the month, a testament to SGX’s efforts to encourage adoption across the different platforms, Lee says. “We have been successful in gaining immense support from prime brokers, buyside and sellside regional clients to connect those markets,” he added. “The assumption was that all of those players would come together to create more

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liquid matching and price discovery. “It’s been great to see that support emerge from a diverse group of market participants and to develop a true all-to-all market. In June 2023, the combined average daily volume of SGX FX futures and OTC FX contracts from BidFX, MaxxTrader and SGX CurrencyNode rose above $100 billion for the first time, an important milestone for us.” The vision for the exchange, in common with other major players targeting the region, is to create a truly connected platform that allows traders to seamlessly pick and choose their execution style. The challenge is to have that ecosystem in place early to support the FX market’s expected growth, and that is where SGX feels it has an advantage. “The holy grail to all this is that you have a settlement processagnostic infrastructure in which there is a single technology for price discovery whether it is through OTC or futures,” Lee said. “To the extent that OTC and futures is the most efficient way of settlement, you then want to segregate that process so that you have the benefit of best execution and liquidity. At the same time, as a function of capital balance sheet settlement considerations you want to

have an infrastructure that is flexible enough for you to be able to send trades through both central clearing and bilateral markets. “If you look at the different ways to settle foreign exchange and NDFs, exchange-listed futures has to be the most efficient from a balance sheet risk/capital perspective. Once major liquidity providers are comfortable with that risk management and infrastructure change, the next step is to think about how they want to offer futures services to their clients.” Beyond the FX markets, SGX is also watching the rates market for tailored regional product development after a shift in central bank policy in the last two years. “Now the interest rate cycle is normalising, the demand for active risk management in the front end becomes real,” Lam said. “I would say that a large part of the work that every exchange is doing is to meet that new hedging demand. For us, that means actively looking at opportunities from a market perspective. “The nuance around that in APAC is that the predominance of proxy dollar markets means that there is already an active rates market out there, so it has to be specially tailored to specific use cases. International access to the

regional markets is growing, so it is natural that the demand for rates specific solutions will emerge.” Opportunities will also naturally arise while the new divisional umbrella includes assets with huge potential for growth, the firm believes. SGX early this year unveiled a partnership with Singapore sovereign wealth fund Temasek to develop MarketNode – a blockchain enabled digital asset trading platform - and enhanced the MaxxTrader offering with the rollout of MaxxAI, an augmented execution offering. “We think that the combination of digitalisation – together with cloud computing, big data and Artificial Intelligence/Machine learning – will set off the flywheel of the adoption of digitalisation and more end-to-end automation, driving the efficiency of entire financial service sector,” Lee said. “That will cut across office productivity, financial services, and sales/trader investment decision execution. We have taken a step towards that with the recent launch of MaxxAI, and that is really about facilitating client understanding of the quality of client and trading partners interaction. That will be the first phase of a process that ultimately leads to more demand for digitalisation.”

SGX FX Futures Trading Volumes by value of trading and number of contracts

Autumn 2023

Source: SGX

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SINGAPORE EXCHANGE

DERIVATIVES CUSTODY

EEX GROUP

EEX chief Reitz eyes key trends in global energy markets The Deutsche Boerse exchange has endured a turbulent period in the European energy markets, writes Radi Khasawneh European Energy Exchange Group (EEX) has seen trading hit record levels this year as markets bounced back from a slow first half of 2022 but the Deutsche Boerse-owned venue is also focused on structural trends such as the shift to clearing and emergence of hydrogen as a viable energy source, its chief executive has said. Speaking to Global Investor, Peter Reitz said: “We have record market shares in our core European markets, so the trend from uncleared overthe-counter (OTC) into the cleared world and even into the exchange is still ongoing,” he said. “In those core markets we are now at 80% cleared. When I started this job 12 years ago we were about 10% cleared. That change has been achieved through steady growth year-over-year, and now accelerated by the crisis that we have seen beginning in 2022. “What is interesting now is that we are not falling back from those record levels, the trend just continues on a higher level. That is true for the power markets, but is even more true for our gas markets. With the freed up capital from lower margin levels compared to a year ago, we are seeing longer

positions being taken and that also contributes to the volume growth.” The Leipzig-based exchange group saw in August an 11% year-on-year increase in European natural gas derivatives trading volume, including a 17% jump in TTF trading to 178.6 TeraWatt hours (TWh). Its US Nodal gas derivatives market increased 210% by the same measure to 4.5 TWh traded. The firm has also grown its power derivatives volume in Europe, Japan and the US over the period, by 53%, 62% and 61% respectively. That is a welcome contrast to the market in the first half of last year. A bulletin from the Bank for International Settlements, published after this interview took place, assessed the acute price surges in natural gas and electricity markets in February last year, as the Russian invasion of Ukraine roiled markets and inflated margin calls. That reduced derivatives trading volume as risk management became less cost effective. The BIS said average daily variation margin calls for exchange-traded Dutch Title Transfer Facility (TTF) natural gas contracts surged in the first half of 2022, to about €392 million (£337m)

Japan is our fastest growing market at the moment, volumes for the first half of the year have tripled from a year ago. Autumn 2023

which was 16 times more than a year before. At the same time, the ratio of initial margin to price per contract for natural gas and electricity contracts jumped from around 20% to 60% for electricity markets and 50% for natural gas, the BIS said. Since then, the main electricity and gas venues have seen a meaningful rebound in volumes as prices have normalised, and EEX has been no exception, but the firm is also pushing hard in new markets. EEX launched its Japanese power market in May 2020 and has since built an estimated 98% market share, according to its own estimates for July. The firm has also seen the number of its participants steadily increase, doubling to 40 in the year to May 2022. “Japan is our fastest growing market at the moment, volumes for the first half of the year have tripled from a year ago,” Reitz said. “I was in Tokyo a couple of weeks ago, and the meetings with clients showed me that there is still a lot of growth ahead of us. The volume growth has been a key part of that but also the number of participants and in particular the contribution from international firms engaging with that market. “It is the perfect blueprint of what we do. We develop markets together with our customers and this project started two years before we even opened the market. So that means community building, defining standards with

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DERIVATIVES

EEX GROUP

We have record market shares in our core European markets, so the trend from uncleared over-the-counter (OTC) into the cleared world and even into the exchange is still ongoing. Peter Reitz, EEX

customers and then launching a market bringing international distribution that supports liquidity. That goes hand in hand with educational work to encourage adoption and risk management. We have now over 60 active participants in the Japanese markets, and it is split in half between domestic and international clients.” While developing its global reach, EEX has kept a focus on sustainability solutions. EEX started in May publishing a hydrogen index, a weekly measure of traded hydrogen prices. A month later the exchange sealed a deal with a subsidiary of H2Global Foundation to develop a platform for the government-backed renewable hydrogen firm’s auctions.

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“With regard to indices, we have engaged in various parts of the world to determine a price for carbon,” Reitz said. “We have over 15 years of experience in Europe in the market, with Nodal we cover the US products in that sphere and we run the auction for the New Zealand government. That experience in designing Emission Trading Scheme (ETS) programmes, and now in a growing field of other instruments, ultimately put us in a position to link them.” The firm announced in September the introduction of its own Global Carbon Index (GCI) Family of carbon reference measures. “I am convinced the only way to solve the global problem we face is to

find a global solution,” he added. “We are working towards a global price for carbon and that is a very long shot, and the only way to get there is by taking small steps on a regional level. The key is to then be able to link them and ultimately develop a price signal on a global level. “The GCI Family is an effort to do just that, bringing transparency in markets that already have an ETS, and with a methodology that allows them to be combined in one place. Crucially, it has been designed to allow the extension of coverage as new ETSs are developed. The idea is that, over time, the index will become more and more a representation of the global price of carbon.”

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DERIVATIVES CUSTODY

THOUGHT LEADERSHIP: QNB GROUP

Ongoing success, achievements cemented throughout our journey QNB Group shares with Global Investor its ongoing path to success and accomplishments. QNB Group has grown to become the largest financial institution in the Middle East and Africa (MEA) region. Recognised as a trusted financial partner to a growing number of customers in more than 28 countries across three continents. Achieving the highest brand value amongst Middle Eastern Banks at $7.7bn (£6.2bn) by Brand Finance with a significant international presence, we serve more than 25 million customers across our network. We are proud of our Qatari heritage and of the continuing contribution we make to the region and beyond. Our aim is to leverage the strength of our relationships and the diversity of our footprint, to fuel growth across multiple, strategicallyselected regions, creating long-term sustainable value for individuals, institutions, countries, communities and our shareholders. Our unwavering commitment to our clients and their trust has resulted in QNB Group delivering another set of strong operating results continuously recognised by different entities across the globe.

Pioneering in excellence QNB Group over the years prominently maintained a leading position amongst financial institutions for our continuous efforts to provide our customers with the best banking experience. QNB Group received “Best Bank in Qatar” by Euromoney for its’ outstanding performance to provide the best banking products and services with a seamless experience. It is a testimony on our successful model, as it grows stronger by prioritising customer experience in local and international markets, through enhanced personal and corporate banking services and products across our international network. This achievement also reflects the group’s innovation and leading position in the banking sector in Qatar, represented by its financial strength, high ratings, and the diversification of its portfolio. The group has also been recognised as “Middle East’s Best for High Net Worth Individuals” and “Best Domestic Private Bank in Qatar” in the Euromoney Global

Japan is our fastest growing market at the moment, volumes for the first half of the year have tripled from a year ago. Autumn 2023

Private Banking Awards 2023. This is a testimony to QNB’s dedication and promises to our clients, and its continuous effort to develop a long-term relationship with our customers to achieve their financial objectives. With the resources and expertise, QNB Private provides a local bank relationship with an international perspective to cater to the individual financial needs, including an efficient daily management of their multi-currency accounts, deposits, loans and eBanking, as well as the best investment opportunities. Other services extend beyond banking services, to include; Lifestyle Privileges, real estate services and advisory, and asset and wealth management, where clients can benefit from exclusive services tailored to fit their unique requirements. Digital and innovative solutions As digitalisation is the core to our overall group corporate strategy that entails a plethora of businesses and countries, we rather have a matrix approach. The group focused its efforts to provide a seamless customer experience provided through the digital channels, along the bank’s success in achieving its digital transformation within its sustainability goals. QNB received “Best Digital Bank in the Middle

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THOUGHT LEADERSHIP: QNB GROUP

With the resources and expertise, QNB Private provides a local bank relationship with an international perspective to cater to the individual financial needs

East”, “Best Digital Bank in Qatar” and “Best Digital Wallet of the Year” from the Digital Banker as a testimony for its ongoing leadership in digital banking. The group aims to continuously focus its efforts on digital product development in mobile and internet banking, digital payments, innovative digital wallet, along with self-service machines with the aim to provide the best digital banking experience in the Middle East, and on an international landscape. As a testimony to its user-friendly interface, comprehensive features, and robust security measures QNB received “Best Mobile Banking App”, “Best Payment Innovation” and “Excellence in Product Marketing” by MEED MENA Banking Excellence Awards 2023.

Autumn 2023

QNB’s Mobile Banking App has become a channel of choice for customers, allowing them to manage their finances conveniently and efficiently anytime, anywhere. This comes in acknowledgement of the bank’s commitment in providing the most innovative banking solutions and is a testament to its contribution to enhance customer experience, in line with its strategy of digital transformation while consolidating its position as a leading banking institution in the region. Environmentally responsible At QNB, we define sustainability as the delivery of long-term value in financial, environmental, social and ethical terms, for the benefit of our customers, shareholders, employees and communities.

Our sustainability framework consists of three pillars; sustainable finance, sustainable operations and beyond banking. All three pillars contribute to QNB’s goal of ensuring sustainable financial performance, through reducing risks, opening up new business opportunities and strengthening our brand. As a testimony to its ongoing commitment towards sustainability, The group was recognised by Global Finance for “Outstanding Leadership in Green Bonds across Middle East”, “Outstanding Leadership in Sustainable Project Finance across Middle East”, and being the “Best Bank for Sustainable Finance in Qatar”. The awards are a clear recognition of the group’s commitment towards enhancing its sustainability agenda and

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DERIVATIVES CUSTODY

THOUGHT LEADERSHIP: QNB GROUP

The group was recognised as the “Best CSR Bank in Qatar” award during the Qatar CSR Summit 2023. This award reaffirms QNB’s commitment to the highest ESG performance standards through the development of sustainable business and operating models and adoption of the bestrelated practices in line with our sustainability strategy.

amplifying the group’s effort in raising awareness in the community to highlight its sustainability initiatives. It is also worth noting that the group’s continued execution of its sustainability framework has resulted in leading Environmental, Social and Governance (ESG) ratings in the region from international rating agencies. This is a testament to our purpose to promote prosperity and sustainable growth across the markets we serve. Serving the community QNB’s goal is to enable economic and social empowerment through our services across our footprint, particularly in developing and emerging economies. By helping individuals and companies achieve their aspirations, we help raise standards of living and encourage communities to come together for

Autumn 2023

good. The group was recognised as the “Best CSR Bank in Qatar” award during the Qatar CSR Summit 2023. This award reaffirms QNB’s commitment to the highest ESG performance standards through the development of sustainable business and operating models and adoption of the best-related practices in line with our sustainability strategy. The award also reflects the bank’s successful alignment between its CSR obligations and business profitability, in addition to its keenness to bolster the presence of its brand in all sustainability programmes and initiatives in Qatar and across it international network towards a healthier and more prosperous future. QNB is one of the main institutions supporting the state’s efforts in this domain and is keen to sponsor all relevant national events,

in addition to organising initiatives and programmes aimed at raising awareness among its customers and employees. We believe that having a purpose justifies our existence and underpins our contribution towards society. Our purpose is to promote prosperity and sustainable growth. This serves as a day-to-day reminder of our business ethics, and therefore is embedded into our vision, strategy, mission, values and behaviours. Our 2025 vision is to be one of the leading MEASEA banks while maintaining our number one position in MEA. We aim to ensure the bank is well-positioned to reap the rewards from greater efficiency, more customers, outstanding service and future growth opportunities that will create sustainable value for all our stakeholders.

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SECURITIES FINANCE

A DAY IN THE LIFE: DONIA ROUIGUEB, CACEIS INVESTOR SERVICES

A Day in the Life of… Global Investor presents “A day in the life”, where we spotlight trailblazers in the financial industry. For our Autumn feature we spoke to Donia Rouigueb, head of sales in charge of developing CACEIS Group’s Securities Finance and Repo services amongst the group custody franchise. How has 2023 been for you so far? It has been quite a busy year helping existing clients take advantage of lending and financing opportunities with all the changes in the markets. On top of that, CACEIS’ recent acquisition of RBC’s European activities also broadens our client base and brings both new growth opportunities and challenges for our business going forward. As you look forward, what are your career and professional development aspirations within your sector? Being part of a changing business sector definitely keeps things interesting. During my 17 years in the industry, it has gone from being barely regulated to the complex operational framework of today. Sustainability is a key topic for securities lending as

well as for the entire financial industry and looks set to remain so for decades to come. I could see my professional career development path evolve in this direction as I believe I have a lot to contribute to the sustainability debate. Amid challenging periods, how do you sustain your motivation and engagement in your job? Can you share how you achieve a balanced work-life dynamic and overall wellness? To keep myself motivated and engaged during moments of high stress and heavy workloads, I often think back to a quote I read a long time ago – “this too shall pass”. Giving one’s best in a situation and keeping a positive mental attitude is far better than overthinking things and worrying about issues we cannot change. Win or lose, there are positive life lessons to learn – you just have to carry on. Having said that, maintaining a good work/life balance is fundamental and requires excellent organisational and problem-solving skills. My job requires a lot of business travel, people management, and discussion on different and sometimes complex topics all day long, but if you are well prepared and well organised, you’ve done half the job already! An important aspect of a balanced

Giving one’s best in a situation and keeping a positive mental attitude is far better than overthinking things and worrying about issues we cannot change.

Summer 2023 Autumn 2023

work-life dynamic is focussing properly on your current priority. I give 100% at work, and 100% in my private life. Also, as you get older, you realise how important it is to take time for yourself, so you can mentally and physically recuperate and be more engaged with the people in your home and business life. For me, piano practice is a very relaxing activity that helps me mentally re-energise, and I find physical activities such as hiking in the mountains also an essential part of maintaining things in perspective. In what ways has the industry transformed over the years? As an OTC business, the industry was often criticised for lacking transparency, however the regulatory framework has evolved to such an extent that it now offers a high level of transparency for market participants and end-investors. The industry has come a long way but there remains some work to be done. We have also experienced a massive hike in trading volumes and in the complexity of transactions and associated reports. To handle these volumes and complexity, technology has become a central part of our business and now our junior traders all have an IT engineering background to handle their job. That wasn’t the case 15 years ago... Are there specific changes you’re anticipating? I sense that regulators want this OTC industry to act like a listed one, so

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Donia Rouigueb there will probably be some major changes involving standardisation and as consequence automation to handle it. I believe we will also see investors and markets taking a more practical view on ESG and sustainability as the current framework is still not totally clear. If you had to sum up your journey in the industry in a single word, what would it be and why? “Unexpected!” I started in the lending industry because I took a chance as a young graduate in Finance and didn’t know anything about this business. I just had a very good feeling about the person who wanted to hire me! 17 years later, I live in an another country, travel throughout Europe and meet so many different and interesting people, which satisfies my curiosity and constant need to learn. I never thought I would go this far.

I didn’t want to be involved in the beginning because like any woman or person in general, I want to be valued professionally for my skills and not because of my gender. But so much has changed since this type of initiative began and I now think that if we need to raise visibility to make a positive impact then I am of course happy to humbly participate. However, I think it is important to send the right message: it is about inclusion, and men have a crucial role to play in that too. It is not just about championing women but really about getting to a place where we don’t need to think about these biases in the workplace.

You’re a member of the Women in Securities Finance (WISF) group. What inspired you to join, and how has this initiative contributed positively to the industry? I think that like a lot a people, my thoughts on the topic have evolved.

Donia Rouigueb Donia Rouigueb is Head of Sales in charge of developing CACEIS Group’s Securities Finance and Repo services amongst the group custody franchise by developing tailor-made products for institutional, asset managers, sovereign and corporate entities. She started her career in the Securities Lending industry in 2007 as a Securities Lending Trader for CANDRIAM in Paris. In 2010, she

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moved to a Securities Finance Trader position at Mediobanca SpA between Milan and London to help with the creation of a dedicated securities finance desk to support equity derivatives activity before moving to CACEIS in 2015. Donia graduated from the Edhec Business School, majoring in risk and asset management as well as from the University of Paris 1 La Sorbonne as an economics major.

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SECURITIES FINANCE

A DAY IN THE LIFE: DONIA ROUIGUEB, CACEIS INVESTOR SERVICES

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ISF SURVEY 2023 The International Securities Finance survey recognises the achievements of agent lenders, prime brokers as well as the vendors of technology and data services

Global Trade Repository (GTR) THE EXPERTS IN TRADE REPORTING VISIT US AT DTCC.COM/GTR

Financial Markets. Forward.TM

ISF Survey 2023 Each year, the International Securities Finance survey monitors how the world’s top securities lenders and borrowers rate each other across different asset classes, regions and functions. The main body of the study covers equities lending and borrowing, breaking the constituent companies down into two groups, with group one (G1) comprising the 15 largest players and group two (G2) representing midtier financing firms. The survey also covers fixed income

lending as well as technology vendors and data firms. The survey publishes the leading six firms based on their counterparties’ rankings across the different categories so the entire lists are not included. The survey includes both weighted and unweighted scores. Weighted scores take into account the importance that the individual respondents give to that particular category while the unweighted scores are based on each category being given equal importance.

CONTENTS 40

GROUP ONE LENDERS

Navigating the Evolving Landscape of Securities Finance and RWA, by Simon Lee, Managing Director, Head of Business Development, EMEA & APAC for eSecLending.

GROUP TWO LENDERS

GROUP ONE BORROWERS

GROUP TWO BORROWERS

FIXED INCOME LENDING

TECHNOLOGY VENDORS

DATA VENDORS

Methodology

Autumn 2023

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ISF SURVEY 2023

ISF SURVEY 2023 • INTRODUCTION • CONTENTS

ISF SURVEY 2023

G1 EQUITY LENDERS

GROUP ONE LENDERS HSBC SECURITIES SERVICES HSBC Securities Services returned as top scorer in both the unweighted (with a score of 295.67) and weighted (254.34) Group One (G1) equity lending categories overall this year, having first appeared in this survey three years ago. Both the scores are down on the previous year results. The UK-headquartered lender also took the top spot in all three regions, notably maintaining its first place in Europe, the Middle East and Africa (EMEA) with a score of 88.00 (unweighted) and 75.57 (weighted). In Asia-Pacific, HSBC Securities Services kept the number one place for the third year in a row, leveraging its regional focus, with results of 126.83 (unweighted) and 108.98 (weighted) remained similar to the previous year’s levels. In the Americas, it placed ahead of last year’s winner, BNY Mellon, now in second place. It maintained the overall top spot when rated by G1 borrowers this year as well and continued its lead in Asia Pacific as well. However, it was second in the EMEA region, conceding the top of the ranking to BNY Mellon. HSBC Securities Services also scooped up the Most Innovative G1 Lender award this year, as voted by G1 Borrowers. US counterpart BNY Mellon was in 2022.

BNY MELLON The US’ BNY Mellon scored highly across all categories and regionally in this year’s ISF survey, remaining consistent in the top three in most categories. Overall, this marked an improvement on 2022’s results. While it received an unweighted score of 213.67 and a weighted one of 183.28 in the overall G1 lender rankings, it came in second place, a jump from last year’s third spot. It was also second in all regional categories, notably improving its

scores in EMEA and Asia Pacific this year. The US-headquartered lender saw numbers drop in the Americas, receiving 60.67 and 53.11 in the unweighted and weighted categories, respectively. It came out as top lender in EMEA jointly with HSBC Securities Services when G1 borrowers were polled (69.33 unweighted and 59.54 weighted), though lost its lead this year in the Americas portion of the survey. However, it improved its results in Asia Pacific, rising to

G1 LENDERS: GLOBAL

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

HSBC Securities Services

295.67

HSBC Securities Services

254.34

BNY Mellon

213.67

BNY Mellon

183.28

RBC Investor Services

132.75

RBC Investor Services

112.74

Citi

107.17

Citi

92.94

BNP Paribas Sec Services Agency Lending 69.17

5 6

BNP Paribas Sec Services Agency Lending 60.42 State Street

59.45

G1 LENDERS: AMERICAS

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

HSBC Securities Services

80.83

HSBC Securities Services

BNY Mellon

60.67

BNY Mellon

53.11

State Street

35.08

State Street

30.51

RBC Investor Services

30.17

RBC Investor Services

25.84

BNP Paribas Sec Services Agency Lending 25.00

4 5 6

Blackrock

18.50

G1 LENDERS: EMEA

HSBC Securities Services

88.00

BNY Mellon

83.17

Deutsche Agency Lending

54.50

RBC Investor Services

48.00

BNP Paribas Sec Services Agency Lending 34.33 Citi

BNP Paribas Sec Services Agency Lending 22.41 Blackrock

17.40

WEIGHTED BY IMPORTANCE

Rank Score

69.80

G1 LENDERS: EMEA

UNWEIGHTED

Autumn 2023

68.58

G1 LENDERS: AMERICAS

HSBC Securities Services returned as top scorer in both the unweighted and weighted equity lending categories overall this year

State Street

32.00

Rank Score 1

HSBC Securities Services

BNY Mellon

71.30

Deutsche Agency Lending

46.54

RBC Investor Services

41.22

4 5 6

75.57

BNP Paribas Sec Services Agency Lending 29.43 Citi

27.48

G1 LENDERS: ASIA-PACIFIC

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

HSBC Securities Services

126.83

HSBC Securities Services

108.98

BNY Mellon

69.83

BNY Mellon

58.88

Citi

59.17

Citi

51.72

RBC Investor Services

54.58

RBC Investor Services

45.68

Northern Trust

29.00

Northern Trust

24.68

Credit Suisse Zurich

14.17

Credit Suisse Zurich

11.99

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SECURITIES FINANCE

THOUGHT LEADERSHIP: BNY MELLON

Unlocking Insights

Global Investor/ISF sits down with BNY Mellon’s Nehal Udeshi, Global Head of Securities Finance and Simon Tomlinson, Head of Agency Trading, Borrow DIRECT and Agency Cash Collateral Investment, as they share their outlook on the securities lending business from group’s unique vantage point. GI: Nehal, congratulations on your new role as Global Head of Securities Finance at BNY Mellon. Having been in the financial services industry for over 17 years, what is your perspective on the current securities finance and lending landscape and how does BNY Mellon’s fit in to that? Nehal Udeshi: First, thank you. I am very proud to join a company with such rich history that continues to be at the forefront of innovation in the industry and happy to share my perspectives. 2023 has been another dynamic year for the securities finance industry, as we work our way through new capital rules, T+1 or mandatory clearing and I have every reason to expect more of the same on the forward.

But, the future is now! The regulatory landscape will continue to drive the agenda. Capital rules have brought even more attention on the cost of doing business, and focusing on how we can drive revenue given the expense of indemnification is central. There continues to be a focus on technology and automation and building further scale and value via fintech solutions, artificial intelligence and blockchain. For BNY Mellon and the entire industry, the key to success is working together. Borrowers, lenders and market partners must continue to work together to navigate an ever-changing environment. At BNY Mellon our clients are our focus, and we believe collaboration is the best way to evolve while finding innovative solutions to address their needs.

GI: What trends are you noting in terms of securities finance trading and where are you seeing the most opportunity for your clients? Simon Tomlinson: Overall, I’d say 2023 has been a year of lower volatility, which is somewhat contradictory when you think on the fact, we had the regional banking crisis in March, but even then the VIX average YTD is only 17 vs 25 in 2022. Rate uncertainty has been pervasive, so fixed income has fared well, but I would expect this to change due to expectations of a pause in the interest rate tightening cycle and the potential for easing in later 2024. 2023 has seen strong equity rallies with many indices up double digits and consequently inventory pools at

At BNY Mellon our clients are our focus, and we believe collaboration is the best way to evolve while finding innovative solutions to address their needs. Autumn 2023

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There is no big bang change to our tech, but instead a consistent evolution as we add new functionality and develop innovative solutions to meet the ever-changing needs of our clients and the market.

Prime Brokers have been bolstered. As equity inventory increases so does the need for more upgrade trades and that is something we are seeing more lately. The credit space has also continued to be strong from an impressive 2022 as the environment remains challenging. On the equity side it has been a relatively good year driven by highly concentrated specials that include AMC, JNJ and Kenvue however as these names roll off and we are seeing more internalisation occurring, balances and spreads are trending lower. Looking forward and as the interest rate cycle peaks there is a good chance that we see some improvement in the IPO landscape which has been lackluster and down significantly on the 2021 high. For clients, and this is not new, guideline flexibility remains key and this is true probably now more than ever as collateral mobility is now faster and more dynamic. GI: What are your priorities for H2 2023 and going forward into 2024? What can the industry expect next from BNY Mellon? NU: We will continue to focus on developing an even more solutionsoriented approach to assist our clients in connecting across the ecosystem, whether through financing, liquidity or collateral. Our goal is to continue to be at the forefront on innovation to solve for clients and counterparties needs, rather than just react to them. This includes working with the CCP’s to

Autumn 2023

develop meaningful solutions for scalability and cost effectiveness; and ensuring we have a robust product suite for the markets evolving needs. There will continue to be much debate on the impact of move to T+1 in the United States and Canada, and we anticipate seeing similar proposals across the EU and UK, but it is clear the shorter settlement cycle could have an impact on the lending of assets and the risk of fails. Alongside that the US market is awaiting rules on mandatory clearing. Ensuring we are maintaining the strong partnership with our clients to navigate both is key. GI: What updates are you making to your technology and business processes to support this? ST: Technology remains the cornerstone of the business and we have made material investments in this area dating back to our partnership with Trading Apps in 2012 and the subsequent purchase of the lending IP back in 2018. There is no big bang change to our tech, but instead a consistent evolution as we add new functionality and develop innovative solutions to meet the ever-changing needs of our clients and the market. We also plan further integration of our digital trading including HQLAx and the tokenisation of assets. This is an exciting area and one that we believe can bring some meaningful efficiency, alongside an opportunity to access new pools of liquidity.

Nehal Udeshi, Global Head of Securities Finance, BNY Mellon Nehal is Head of Securities Finance at Bank of New York Mellon. Prior to joining BNY Mellon in 2023, Nehal spent 17 years at Goldman Sachs in New York and London in a range of roles, including most recently co-heading Global Cross Asset Financing within Global Markets and Banking. In this role she partnered with Fixed Income, Equities, Prime Brokerage and Corporate Treasury to originate innovative solutions for liquidity and capital resource optimization for the firm’s liabilities and distributed these solutions to a breadth of institutional clients. During her tenure at the firm, she also had responsibilities in equity structuring and started her career in foreign exchange trading. Nehal holds a Bachelor of Arts (BA) in Mathematics from Imperial College London. Nehal serves on the board of trustees for Stevens Cooperative School, New Jersey.

Simon Tomlinson, Head of Agency Trading, Borrow + and Agency Cash Collateral Investment , BNY Mellon Simon is Head of Agency Trading, Borrow + and Agency Cash Collateral Investment at Bank of New York Mellon within the Markets Division. Simon has global responsibilities for the agency trading and cash collateral investment businesses alongside our Borrow + product which facilitates alternative managers borrowing securities. Prior to Joining BNY Mellon, Simon served as senior trader at Northern Trust Global Investments, spending eleven years in both a trading and operational capacity. He has 26 years’ experience in Securities Lending.

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SECURITIES FINANCE

THOUGHT LEADERSHIP: BNY MELLON

ISF SURVEY 2023

G1 EQUITY LENDERS

second place from fourth spot the previous year. It came in second place in the Most Innovative Group One Lenders when rated by Group Two borrowers. RBC INVESTOR SERVICES RBC Investor Services continued its top lender streak, closing the top three in the global G1 lender awards, with scores of 132.75 (unweighted) and 112.74 (weighted). For reference,

it came fifth in these categories in 2022. It kept the fourth spot in the Americas and EMEA league tables with scores on par with the previous year’s results, though dropped to this place in Asia Pacific, having been in third place last year. It received scores of 54.58 (unweighted) and 45.68 (weighted) in that region. The Canadian organisation also improved its scores in all regions

RBC Investor Services continued its top lender streak, closing the top three in the global G1 lender awards G1 LENDERS RATED BY G1 BORROWERS: GLOBAL

G1 LENDERS RATED BY G1 BORROWERS: GLOBAL

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

HSBC Securities Services

200.33

HSBC Securities Services

172.15

BNY Mellon

144.00

BNY Mellon

123.66

RBC Investor Services

93.00

RBC Investor Services

79.75

Citi

80.00

Citi

68.70

Deutsche Agency Lending

53.33

Deutsche Agency Lending

45.80

State Street

42.67

State Street

36.64

G1 LENDERS RATED BY G1 BORROWERS: AMERICAS

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

HSBC Securities Services

69.33

HSBC Securities Services

59.54

BNY Mellon

37.33

BNY Mellon

32.06

RBC Investor Services

26.67

RBC Investor Services

22.90

State Street

21.33

State Street

18.32

Citi

16.00

Citi

13.74

G1 LENDERS RATED BY G1 BORROWERS: EMEA

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

BNY Mellon

69.33

BNY Mellon

HSBC Securities Services

69.33

HSBC Securities Services

59.54

Deutsche Agency Lending

53.33

Deutsche Agency Lending

45.80

Citi

32.00

Citi

27.48

RBC Investor Services

32.00

RBC Investor Services

27.48

Northern Trust

26.67

Northern Trust

22.90

59.54

G1 LENDERS RATED BY G1 BORROWERS: ASIA-PACIFIC

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

HSBC Securities Services

61.67

HSBC Securities Services

53.07

BNY Mellon

37.33

BNY Mellon

32.06

RBC Investor Services

34.33

RBC Investor Services

29.37

Citi

32.00

Citi

27.48

Autumn 2023

except EMEA – where it was joint fourth with Citi (both unweighted and weighted) - when G1 borrowers were surveyed, closing the top three. CITI The US institution was in fourth place in the global G1 lender survey, having been awarded scores of 107.17 (unweighted) and 92.94 (weighted), down from second place in 2022. Citi’s place also fell in the Americas, to seventh and in EMEA to sixth. It also fell in Asia Pacific, though stayed in the top three (second place last year) in both weighted and unweighted rankings. It continued to feature consistently in the top six lenders rated by G1 borrowers, taking the fourth spot overall, slipping back into the level previously seen in 2021. On a regional basis, it dropped to fifth place in Americas with scores of 16.00 (unweighted) and 13.74 (weighted), and fourth in EMEA and Asia Pacific. BNP PARIBAS SECURITIES SERVICES AGENCY LENDING The French lender placed fifth in the overall global G1 rankings, having not been featured in the category last year. It secured scores of 69.17 (unweighted) and 60.42 (weighted) in that particular part of the survey. It continued to make an appearance in the regional rankings this year, placing fifth again in EMEA with scores of 34.33 (unweighted) and 29.43 (weighted), as well as in the Americas. It didn’t feature in the top five in Asia Pacific.

BNP Paribas Securities Services Agency Lending placed fifth in the overall global G1 rankings, having not been featured in the category last year. www.globalinvestorgroup.com

The lending arm of the French custodian, also the only European firm in the top six, did not appear in the top five G1 lenders when rated by G1 borrowers, though placed eighth in the overall and EMEA rankings. It was, however, another story, when Group Two (G2) borrowers were consulted: BNP Paribas Securities Services Agency Lending came out third in the overall category, securing figures of 58.50 (unweighted) and 51.26 (weighted). It also came top in the Americas and EMEA regions, improving its places on last year. STATE STREET The US bank did not feature in the top G1 lenders globally though did make an appearance in the Americas categories, in third place, with scores of 35.08 (unweighted) and 30.51 (weighted) respectively. This is an improvement on last year’s placement. It dropped to eighth place in EMEA (top three in 2022) and Asia Pacific (sixth in 2022). The US Group was also fourth in the unweighted and weighted lists when ranked by its largest G1 borrowers in Americas, with scores of 21.33 and 18.32 respectively, having placed higher last year. It did not feature in Asia Pacific though came seventh in EMEA. DEUTSCHE AGENCY LENDING The lending arm of giant Deutsche Bank appeared in third place in the G1 rankings in EMEA, with results of 54.50 (unweighted) and 46.54 (weighted). This is improvement on

Deutsche Bank appeared in third place in the G1 rankings in EMEA, an improvement on 2022 results, when the lender did not break the top six. Autumn 2023

2022 results, when the lender did not break the top six. It also secured the fifth place in the overall category when G1 borrowers were consulted, and the third spot in EMEA, having not featured in these rankings last year either. It came second as Most Innovative G1 Lender when rated by G1 borrower counterparts, behind HSBC Securities Services. NORTHERN TRUST The lender closed the top five in the Asia tables, with results of 29.00

ISF SURVEY 2023

G1 EQUITY LENDERS

G1 LENDERS Most Innovative G1 Lenders as voted by G1 borrowers HSBC Securities Services

(unweighted) and 24.68 (weighted), having not featured there in the previous year. It managed to stay in the top 10 rankings in other regions, except the Americas where it did not appear at all.

G1 LENDERS RATED BY G2 BORROWERS: GLOBAL

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

HSBC Securities Services

95.33

HSBC Securities Services

82.19

BNY Mellon

69.67

BNY Mellon

59.62

BNP Paribas Sec Services Agency Lending 58.50

BNP Paribas Sec Services Agency Lending 51.26

RBC Investor Services

39.75

Blackrock

37.17

RBC Investor Services

34.82 32.99

Northern Trust

29.00

Northern Trust

24.68

G1 LENDERS RATED BY G2 BORROWERS: AMERICAS

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

BNP Paribas Sec Services Agency Lending 25.00

BNP Paribas Sec Services Agency Lending 22.41

BNY Mellon

23.33

BNY Mellon

21.05

Blackrock

18.50

Blackrock

17.40

State Street

13.75

State Street

12.19

HSBC Securities Services

11.50

HSBC Securities Services

10.26

Deutsche Agency Lending

3.67

Deutsche Agency Lending

3.26

G1 LENDERS RATED BY G2 BORROWERS: EMEA

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

BNP Paribas Sec Services Agency Lending 23.67

BNP Paribas Sec Services Agency Lending 20.27

HSBC Securities Services

18.67

HSBC Securities Services

16.03

RBC Investor Services

16.00

RBC Investor Services

13.74

BNY Mellon

13.83

Blackrock

11.91

Credit Suisse Zurich

13.33

BNY Mellon

11.76

Blackrock

12.00

Credit Suisse Zurich

11.45

G1 LENDERS RATED BY G2 BORROWERS: ASIA-PACIFIC

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

HSBC Securities Services

65.17

HSBC Securities Services

55.91

BNY Mellon

32.50

BNY Mellon

26.82

Northern Trust

29.00

Northern Trust

24.68

Citi

27.17

Citi

24.24

RBC Investor Services

20.25

RBC Investor Services

16.31

Credit Suisse Zurich

14.17

Credit Suisse Zurich

11.99

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SECURITIES FINANCE

THOUGHT LEADERSHIP

Navigating the Evolving Landscape of Securities Finance and RWA

By Simon Lee, Managing Director, Head of Business Development, EMEA & APAC for eSecLending With the IMN Beneficial Owner Conference in London and the ISLA Conference in Lisbon recently behind us, it seems an appropriate time to take a moment to reflect on the key theme affecting our industry at present, that of the increasing cost of risk-weightedasset (RWA) affecting all market participants. Given the dynamic nature of the subject and the everevolving adaptations of the impacted parties, it is increasingly important for organisations to stay on top of these current challenges as well as consider what may come to pass in 2024 and beyond. Top of the agenda remains counterparty indemnification, which we expect to continue to be the case for the next few years. Many column inches have been devoted, hours of podcasts broadcast, and conference

panels dedicated to the topic, indicative of the importance market participants place on indemnification, which has been a cornerstone of the securities lending risk management framework for decades. To boil down the subject in simple terms; due to the regulatory requirement for banks to allocate more capital to support counterparty indemnification, combined with a general increase in the value of capital, these indemnities now inflict a material cost to the securities lending programmes managed by custody banks. In order to maintain profitability and to offset these costs, banks have a variety of options available to them, all of which can negatively impact the performance of asset owners that participate in those lending programmes.

Top of the agenda remains counterparty indemnification, which we expect to continue to be the case for the next few years. Autumn 2023

These changes, as well as the impact they may have on programme participants, are summarised thus. • Modified trading strategies that focus on transactions that are most capital efficient for the bank. - Reduces revenue for client, lowers performance, bifurcates alignment of interest between agent bank and asset owner. • Higher bank fees via adjusted fee split. - Reduced revenue, reduced performance, increased agent costs borne by asset owner. • Reduce or limit counterparty indemnification. - Transfers counterparty default risk to asset owner. As this storyline continues to play out it is likely that beneficial owners that lend via an agent will take one of two paths in the short to medium term, either acknowledging and accepting this new paradigm, or implementing measures to counter the hit on performance such as expanding eligible collateral schedules, trading with new counterparties, and accessing alternative routes to market.

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As we observe agent lenders reacting to increased RWA costs, so too is the borrower community adapting their practises and trading strategies to improve their profit and loss in this environment. The focus here is on shifting trading volumes into more capital-friendly structures, and in much the same way that beneficial owners can increase revenues by meeting borrower demand to expand collateral schedules, similarly those that can participate in these new trade types may benefit from an increase in trade volume on a relative basis. Lending under a Pledge collateral structure has seen increased momentum in 2023, which will continue into 2024 and beyond, with an expectation that an increasing number of borrower counterparties will look to transact via pledge as time progresses. Certain categories of beneficial owners may not be able to participate in these trades due to regulatory restrictions, which in and of itself may benefit those that can. Elsewhere, the CCP conversation was brought back to the table in 2023. Given the challenges the industry previously faced in transacting over this medium it remains to be seen whether things will be different this time around. The cost benefit discussion has of course evolved, amplifying the incentives for interested parties to participate; regardless, the expectation is for a clearer understanding of the landscape through 2024. Lastly, we note a theme that has been slowly gathering momentum in recent years, and saw a meaningful upturn in 2023, that of beneficial owners – and buy-side firms more generally – engaging directly in securities lending trading activity outside of the agency construct. This is typically manifesting in what are commonly known as peer-to-peer (P2P) transactions, the lending and borrowing of cash and/or securities

Autumn 2023

Lending under a Pledge collateral structure has seen increased momentum in 2023, which will continue into 2024

directly between two beneficial owners. These transactions facilitate an alternative source of financing, diversifying counterparty exposure, and as the traditional agency route to market meets RWA challenges, can offer better pricing and stability of supply. These transactions bring with them their own operational, legal, and credit challenges, and are subsequently executed selectively, but volumes are expected to increase next year, nonetheless. Historically the preserve of the very largest asset owners, discussions around self-managed programmes are also expected to become more prevalent in the coming year. As the largest beneficial owners get even larger, as their buying power increases, and as sophisticated trading and benchmarking tools proliferate, more organisations will have both the scale and capabilities to take what have effectively been outsourced securities lending programmes, in-house, either in part or in whole. This however is not a small undertaking, especially when one considers the resources to manage the operational and risk elements of the business, so to what extent this materialises remains to be seen, but with the impact of RWA costs as discussed here, and an increased focus on counterparty quality, the market may be positively disposed toward a shift of this nature. While the securities lending marketplace undergoes continuous evolution, there are instances where the rate of change appears to lag behind expectations. Yet, at this juncture, a notable shift is evident, with the influence of rising RWA costs driving change for all market

participants. As we approach Q4 and direct our attention to the year’s conclusion, the outlook for 2024 points to examples of material change being more likely than not.

Simon Lee, Managing Director, Head of Business Development, EMEA & APAC, eSecLending

Simon is managing director and head of business development for the EMEA and APAC regions, and is responsible for developing and implementing eSecLending’s business development strategy across Europe, the Middle East, Africa and Asia. Simon joined eSecLending (Europe) Ltd. in 2008 and has been employed in the financial services industry since 1992. Before working at eSecLending, Simon spent 16 years at J.P. Morgan Chase, including three years in the company’s Sydney office from 2002-2005.

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SECURITIES FINANCE

THOUGHT LEADERSHIP

ISF SURVEY 2023

G2 EQUITY LENDERS

GROUP TWO LENDERS CACEIS BANK The asset servicing arm of France’s Crédit Agricole and Spain’s Santander came out top in the overall G2 lenders’ rankings, with respective unweighted and weighted scores of 169.00 and 146.43. It also came top in EMEA and improved its place in Asia Pacific as well, having come third in 2022. When rated by G1 borrowers, it was in first place in EMEA (73.67 and 63.19 for unweighted and weighted respectively), and overall, but did

not place in Asia Pacific. It was also voted the Most Innovative G2 lender by these borrowers. G2 borrowers painted a similar picture, with CACEIS Bank coming top globally and in all regions. BNP PARIBAS SECURITIES SERVICES PRINCIPAL LENDING A second European lender came second in the overall G2 lender rankings, having secured scores of 91.00 (unweighted) and 79.83 (weighted). It was also in the same place in the Americas and EMEA regions – the latter being its market

G2 LENDERS: GLOBAL

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

169.00

BNP Paribas Sec Services Principal Lending 91.00

CACEIS Bank

146.43

BNP Paribas Sec Services Principal Lending 79.83

Amundi

54.33

Amundi

44.91

Natixis Asset Management Finance

44.17

Natixis Asset Management Finance

37.68

Sumitomo Mitsui Trust Bank USA

40.67

Sumitomo Mitsui Trust Bank USA

37.21

Handelsbanken

40.00

Societe Generale Agency Lending

34.84

G2 LENDERS: AMERICAS

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

CACEIS Bank

22.33

BNP Paribas Sec Services Principal Lending

21.17

Sumitomo Mitsui Trust Bank USA

20.33

Sumitomo Mitsui Trust Bank USA

18.61

National Bank Financial

14.33

National Bank Financial

12.29

CACEIS Bank

19.87

BNP Paribas Sec Services Principal Lending 18.73

Amundi

7.50

Societe Generale Agency Lending

5.97

Societe Generale Agency Lending

6.50

Amundi

5.89

G2 LENDERS: EMEA

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

CACEIS Bank

112.00

BNP Paribas Sec Services Principal Lending

51.17

Handelsbanken

40.00

Handelsbanken

34.35

Societe Generale Agency Lending

33.17

Societe Generale Agency Lending

28.87

Danske Bank

32.00

Danske Bank

27.48

Amundi

28.17

Santander

24.39

CACEIS Bank

96.79

BNP Paribas Sec Services Principal Lending 45.07

G2 LENDERS: ASIA-PACIFIC

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

CACEIS Bank

34.67

CACEIS Bank

Natixis Asset Management Finance

29.33

Natixis Asset Management Finance

25.19

Amundi

18.67

Amundi

16.03

BNP Paribas Sec Services Principal Lending 18.67

3= 5

MUFG Investor Services

Autumn 2023

7.00

29.77

BNP Paribas Sec Services Principal Lending 16.03 MUFG Investor Services

8.68

of origin - though slipped to third place in Asia Pacific, a category it won in 2022. The story was a similar one when its smaller (G2) borrowers were considered: BNP Paribas Securities Services Principal Lending slipped to second globally (first in 2022’s survey), in EMEA and in the Americas, and placed third in Asia Pacific (also first in 2022). In EMEA, G1 borrowers placed BNP Paribas Securities Services Principal Lending in second place in the two global categories, and in EMEA. AMUNDI Another European firm made the top three overall G2 lender category, with results amounting to 91.00 (unweighted) and 44.91 (weighted). Amundi also featured in joint third place in Asia Pacific alongside BNP Paribas Securities Services Principal Lending, though did not feature in the top three EMEA or Americas rankings. The French group was voted Most Innovative G2 lender by its smaller (G2) borrowers, like last year. It was also recognised by G2 borrowers at as the third top G2 lender overall, and claimed third place in Asia Pacific too. When G1 borrowers were asked, Amundi dropped to sixth place overall and in EMEA. NATIXIS ASSET MANAGEMENT FINANCE While the French lender was top in 2022’s G2 lender survey, it dropped to fourth place this year on the back of an unweighted score of 44.17 and a weighted one of 37.68. It failed to make the top five in its home market of EMEA or the Americas but did manage to claim second place in Asia Pacific (weighted: 25.19 and unweighted: 29.33). When rated by its smaller borrowers, it stayed in the second spot in Asia Pacific and remained in fourth overall. When G1 borrowers

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SUMITOMO MITSUI The first non-European banking group to enter the rankings this year, Sumitomo Mitsui Trust Bank USA closed the top five G1 lenders. The Japanese firm’s scores of 20.33 (unweighted) and 18.61 (weighted) kept it in the top three G2 lenders in the Americas rankings, in third place, down from first last year. Its G2 borrowers placed it in fifth place overall, and eighth in EMEA, while their G1 counterparts ranked the Asia-based firm eighth overall and in EMEA. NATIONAL BANK FINANCIAL Canada’s National Bank Financial made an appearance in the Americas G2 league table, in fourth place with unweighted and weighted results of 14.33 and 12.29 respectively. G2 borrowers estimated the lender to be seventh overall, and fourth in the Americas region. It did not appear when the larger G1 borrowers voted. SOCIETE GENERALE AGENCY LENDING The French bank’s lending arm was featured just out of the top five in the overall G2 lender rankings but finished fourth in the EMEA leaderboard, an improvement on last year’s sixth. It received scores of 33.17 (unweighted) and 28.87 (weighted) in that region. However, it slipped in the EMEA rankings when rated by G2 borrowers. When it came to G1 borrowers, Societe Generale Agency Lending claimed the fourth spot overall and in EMEA. HANDELSBANKEN In third place in EMEA among G2 lenders this year was Handelsbanken, which received scores of 40.00 (unweighted) and 34.35 (weighted).

Autumn 2023

G2 LENDERS RATED BY G1 BORROWERS: GLOBAL UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score 1 2=

CACEIS Bank

73.67

BNP Paribas Sec Services Principal Lending 32.00

Danske Bank

32.00

Societe Generale Agency Lending

26.67

Handelsbanken

21.33

Amundi

20.67

G2 LENDERS RATED BY G1 BORROWERS: ASIA

1 2

CACEIS Bank

63.19

BNP Paribas Sec Services Principal Lending 28.09

Danske Bank

27.48

Societe Generale Agency Lending

22.90

Handelsbanken

18.32

Amundi

17.10

WEIGHTED BY IMPORTANCE

Rank Score MUFG Investor Services

Rank Score

G2 LENDERS RATED BY G1 BORROWERS: ASIA

UNWEIGHTED

G2 LENDERS RATED BY G1 BORROWERS: GLOBAL

7.00

Rank Score 1

MUFG Investor Services

8.68

G2 LENDERS RATED BY G1 BORROWERS: EMEA

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

73.67

BNP Paribas Sec Services Principal Lending 32.00

CACEIS Bank

63.19

BNP Paribas Sec Services Principal Lending 28.09

Danske Bank

32.00

Danske Bank

27.48

Societe Generale Agency Lending

26.67

Societe Generale Agency Lending

22.90

Handelsbanken

21.33

Handelsbanken

18.32

Amundi

20.67

Amundi

17.10

G2 LENDERS RATED BY G2 BORROWERS: GLOBAL

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

95.33

BNP Paribas Sec Services Principal Lending 59.00

CACEIS Bank

83.24

BNP Paribas Sec Services Principal Lending 51.74

Amundi

33.67

Amundi

27.81

Natixis Asset Management Finance

29.33

Natixis Asset Management Finance

25.19

Sumitomo Mitsui Trust Bank USA

24.67

Sumitomo Mitsui Trust Bank USA

23.47

Handelsbanken

18.67

Handelsbanken

16.03

G2 LENDERS RATED BY G2 BORROWERS: AMERICAS

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

CACEIS Bank

22.33

BNP Paribas Sec Services Principal Lending

21.17

Sumitomo Mitsui Trust Bank USA

20.33

Sumitomo Mitsui Trust Bank USA

18.61

National Bank Financial

14.33

National Bank Financial

12.29

CACEIS Bank

19.87

BNP Paribas Sec Services Principal Lending 18.73

Amundi

7.50

Societe Generale Agency Lending

5.97

Societe Generale Agency Lending

6.50

Amundi

5.89

G2 LENDERS RATED BY G2 BORROWERS: EMEA

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

CACEIS Bank

38.33

BNP Paribas Sec Services Principal Lending

19.17

Handelsbanken

18.67

Handelsbanken

16.03

Santander

10.33

Santander

8.76

DekaBank

9.50

DekaBank

8.22

Amundi

7.50

Societe Generale Agency Lending

5.97

CACEIS Bank

33.61

BNP Paribas Sec Services Principal Lending 16.98

G2 LENDERS RATED BY G2 BORROWERS: ASIA-PACIFIC

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

CACEIS Bank

34.67

CACEIS Bank

Natixis Asset Management Finance

29.33

Natixis Asset Management Finance

25.19

Amundi

18.67

Amundi

16.03

BNP Paribas Sec Services Principal Lending 18.67

29.77

BNP Paribas Sec Services Principal Lending 16.03

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ISF SURVEY 2023

were surveyed, Natixis Asset Management Finance was to second to last in the top 10, ahead only of DekaBank.

ISF SURVEY 2023

G2 EQUITY LENDERS

The Swedish lender dropped from first spot last year in that region. It came in sixth place when G2 borrowers were surveyed about overall rankings, and third in EMEA, an improvement on 2022 results which did not feature the firm. G1 borrowers put Handelsbanken in fifth place in overall as well as in EMEA. DANSKE BANK Scores of 32.00 (unweighted) and 27.48 (weighted) meant that another Nordic lender featured in the top five EMEA league table, in fifth place. It did not place at that level in

the overall global league table. One bright spot was Danske’s joint second overall and EMEA places (unweighted) when rated by G1 borrowers, along with BNP Paribas Securities Services Principal Lending. MUFG INVESTOR SERVICES MUFG Investor Services was the only lender to have been awarded a spot in the Asia Pacific table when G2 borrowers voted. It finished in fifth place in the Asia Pacific rankings, on par with last year, with scores of 7.00 (unweighted) and 8.68 (weighted).

G2 LENDERS Most Innovative G2 lender as voted by G1 borrowers CACEIS Bank

G2 LENDERS Most Innovative G2 lender as voted by G2 borrowers Amundi

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Autumn 2023

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GROUP ONE BORROWERS: HSBC BANK The UK-headquartered bank was voted the winner in the overall Group One (G1) borrower category, on the back of scores of 146.67 (unweighted) and 134.06 (weighted). It also picked up the top place in the Europe, Middle East and Africa (EMEA) region and the Americas – both wins are improvements on 2022’s fifth and sixth place, respectively. In Asia Pacific, the Anglo-Asian borrower was second, behind Barclays Bank with results of 32.33 (unweighted) and 28.99 (weighted). When rated by its larger G1 lenders, HSBC was also top in the same

regions and overall. In Asia, it still lost the top spot to Barclays. However, the smaller Group 2 (G2) lenders placed HSBC in fourth place globally, with results of 39.67 (unweighted) and 36.75 (weighted), and fifth in EMEA and the Americas. BARCLAYS The UK bank retreated to second place in this year’s G1 overall borrower ranking, with an unweighted score of 106.00 and a weighted one of 98.24. While Barclays dropped to second in the EMEA and fourth in the Americas lists, across the weighted and unweighted sections, it came first in Asia Pacific, maintaining its lead from 2022.

G1 BORROWERS: GLOBAL

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

HSBC Bank Plc

146.67

HSBC Bank Plc

134.06

Barclays

106.00

Barclays

98.24

UBS

88.00

UBS

82.38

Bank of America Merrill Lynch

60.50

Bank of America Merrill Lynch

57.74

Societe Generale CIB

48.75

Societe Generale CIB

44.39

Goldman Sachs

37.67

Goldman Sachs

36.26

G1 BORROWERS: AMERICAS

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

HSBC Bank Plc

50.50

HSBC Bank Plc

46.33

UBS

39.00

UBS

36.17

Bank of America Merrill Lynch

20.33

Bank of America Merrill Lynch

19.74

Barclays

15.83

Barclays

14.94

Goldman Sachs

15.50

Goldman Sachs

14.11

Citi

11.83

Citi

10.44

G1 BORROWERS: EMEA

UNWEIGHTED

WEIGHTED BY IMPORTANCE

It was also the third rated borrower by G1 lenders overall and in EMEA and in Asia but also first in Asia, with scores of 33.67 and 31.71. G2 lenders decided the UK borrower was third overall, second in the Americas and third in EMEA, consistent with its 2022 placements. UBS Like last year, UBS closed the top three group of G1 borrowers overall, with scores of 88.00 (unweighted) and 82.38 (weighted), having come first in 2021. It came in the same place in EMEA and second in the Americas, though did not appear in the Asia Pacific rankings. The Swiss borrower consistently placed second overall, in EMEA and in the Americas when evaluated by G1 lenders, having been first the Americas in 2022. It did not appear in the top six rankings when smaller lenders were polled. BANK OF AMERICA MERRILL LYNCH In fourth place overall is Bank of America Merrill Lynch, which continued to make an appearance in this year’s overall rankings, with higher scores of 60.50 (unweighted) and 57.74 (weighted). It placed third in its home market of the Americas, across both categories, and fourth in the EMEA weighted list. It was voted as most innovative

G1 BORROWERS

Rank Score

HSBC Bank Plc

63.83

HSBC Bank Plc

Barclays

56.50

Barclays

51.59

Most Innovative

UBS

49.00

UBS

46.21

Rated by Group 1 Lenders

Societe Generale CIB

40.33

Bank of America Merrill Lynch

38.00

HSBC

Bank of America Merrill Lynch

40.17

Societe Generale CIB

37.00

BNP Paribas

27.17

BNP Paribas

24.78

58.74

G1 BORROWERS: ASIA-PACIFIC

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

33.67

Barclays

Most Innovative

Barclays

31.71

Rated by Group 2 Lenders Bank of America Merrill Lynch

HSBC Bank Plc

32.33

HSBC Bank Plc

28.99

RBC Capital Markets

30.00

RBC Capital Markets

27.14

Autumn 2023

G1 BORROWERS

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G1 BORROWERS

ISF SURVEY 2023

G1 BORROWERS

G1 borrower by G2 lenders, which also decided it was the top lender overall (60.50 unweighted and 57.74 weighted) and in the Americas region. The US bank did not appear in the rankings when rated by its larger G1 lenders. SOCIETE GENERALE CIB Société Générale CIB came second in the overall G1 borrowers rated by G2 lenders, thanks to figures of 48.75 (unweighted) and 44.39 (weighted). The French borrower came fourth in the EMEA rankings, leveraging its regional expertise but did not feature in the Asia Pacific and Americas lists. It did not appear in any of the Group One lender ratings, but reappeared in second place overall when G2 lenders were polled, up one place from 2022. It won the first in the EMEA unweighted category (with a score of 40.33) and second in its weighted counterpart.

GOLDMAN SACHS Goldman Sachs moved into the top five Americas overall categories, on the back of unweighted and weighted results of 15.50 and 14.11, respectively. It was sixth globally. Group Two lenders voted the US bank their fifth preferred G1 borrower overall, and third in the Americas. It did not appear in G1 lender rankings. RBC CAPITAL MARKETS Canada’s RBC Capital Markets came third in the Asia Pacific G1 borrower rankings, with an unweighted score of 30.00 and 27.13 for the weighted list. It also was awarded fourth spot in the G1 lender list overall and returned as third in Asia Pacific. CITI Citi finished sixth in the G1 borrower Americas lists, and the third US bank in these rankings. When rated by G2 lenders, it was also in sixth place overall and fifth in the Americas region.

G1 BORROWERS RATED BY G2 LENDERS: GLOBAL UNWEIGHTED Rank Score 1

Bank of America Merrill Lynch

Societe Generale CIB

60.50 48.75

Barclays

45.67

HSBC Bank Plc

39.67

Goldman Sachs

37.67

Citi

32.00

G1 BORROWERS RATED BY G2 LENDERS: GLOBAL WEIGHTED BY IMPORTANCE Rank Score 1

Bank of America Merrill Lynch

57.74

Societe Generale CIB

44.39

Barclays

42.13

HSBC Bank Plc

36.75

Goldman Sachs

36.26

Citi

27.51

G1 BORROWERS RATED BY G2 LENDERS: AMERICAS UNWEIGHTED Rank Score 1

Bank of America Merrill Lynch

Barclays

20.33 15.83

Goldman Sachs

15.50

HSBC Bank Plc

13.17

Citi

11.83

TD Securities

8.50

G1 BORROWERS RATED BY G2 LENDERS: AMERICAS WEIGHTED BY IMPORTANCE

G1 BORROWERS RATED BY G1 LENDERS: GLOBAL

Rank Score

WEIGHTED BY IMPORTANCE

UNWEIGHTED

Bank of America Merrill Lynch

19.74

Rank Score

Barclays

14.94

HSBC Bank Plc

107.00

HSBC Bank Plc

97.31

Goldman Sachs

14.11

UBS

64.00

UBS

58.56

HSBC Bank Plc

12.17

Barclays

60.33

Barclays

56.11

Citi

10.44

RBC Capital Markets

30.00

RBC Capital Markets

27.14

TD Securities

8.93

G1 BORROWERS RATED BY G1 LENDERS: AMERICAS

WEIGHTED BY IMPORTANCE

UNWEIGHTED

Rank Score

HSBC Bank Plc

37.33

HSBC Bank Plc

34.16

UBS

32.00

UBS

29.28

G1 BORROWERS RATED BY G2 LENDERS: EMEA UNWEIGHTED Rank Score 1

Societe Generale CIB

Bank of America Merrill Lynch

40.33 40.17

Barclays

29.83

G1 BORROWERS RATED BY G1 LENDERS: EMEA

BNP Paribas

27.17

WEIGHTED BY IMPORTANCE

UNWEIGHTED

HSBC Bank Plc

26.50

Rank Score

Goldman Sachs

22.17

HSBC Bank Plc

37.33

HSBC Bank Plc

34.16

UBS

32.00

UBS

29.28

Barclays

26.67

Barclays

24.40

G1 BORROWERS RATED BY G2 LENDERS: EMEA WEIGHTED BY IMPORTANCE Rank Score

G1 BORROWERS RATED BY G1 LENDERS: ASIA-PACIFIC

Bank of America Merrill Lynch

38.00

WEIGHTED BY IMPORTANCE

UNWEIGHTED

Societe Generale CIB

37.00

Rank Score

Barclays

27.19

33.67

BNP Paribas

24.78

Barclays

31.71

HSBC Bank Plc

32.33

HSBC Bank Plc

28.99

HSBC Bank Plc

24.58

RBC Capital Markets

30.00

RBC Capital Markets

27.14

Goldman Sachs

22.15

Autumn 2023

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GROUP TWO BORROWERS: NATIXIS France’s Natixis was crowned the top global G2 borrower of 2023, with an unweighted score of 117.17 and a weighted counterpart at 108.40. It also placed first in the Americas but conceded the top spot in EMEA and Asia Pacific to Banco Santander and National Bank Financial, respectively. The European borrower also received the most votes overall when G1 lenders were asked, as results of 98.67 (unweighted) and

90.53 (weighted) put it in first place. It also won in EMEA and the Americas lists in this category. It did not appear in the G2 lender categories, except for a sixth place in the EMEA rankings. BANCO SANTANDER Voted the most innovative G2 borrower by G1 lenders, Banco Santander was second in the overall list, because of results of 94.83 (unweighted) and 85.70 (weighted) and in the same place in the Americas. It won in EMEA, beating overall winner and fellow European borrower Natixis.

G2 BORROWERS: GLOBAL

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

Natixis

117.17

Natixis

108.40

Banco Santander

94.83

Banco Santander

85.70

ABN Amro Clearing Bank

57.83

ABN Amro Clearing Bank

55.78

National Bank Financial

55.33

National Bank Financial

51.56

Nomura

52.00

Nomura

47.97

Credit Agricole CIB

46.33

Credit Agricole CIB

41.13

G2 BORROWERS: AMERICAS

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

Natixis

38.33

Natixis

35.41

Banco Santander

32.00

Banco Santander

29.28

Nomura

18.17

Nomura

16.63

Macquarie

16.50

Macquarie

15.09

National Bank Financial

13.33

Cowen

12.33

Cowen

12.17

National Bank Financial

12.20

G2 BORROWERS: EMEA

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

Banco Santander

62.83

Banco Santander

56.42

Natixis

54.83

Natixis

50.78

ABN Amro Clearing Bank

51.33

ABN Amro Clearing Bank

49.10

Credit Agricole CIB

46.33

Credit Agricole CIB

41.13

Wells Fargo

18.50

Jefferies

19.13

Jefferies

18.00

Wells Fargo

17.05

G2 BORROWERS: ASIA-PACIFIC

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

National Bank Financial

31.00

National Bank Financial

29.60

Natixis

24.00

SMBC Nikko Securities

24.15

SMBC Nikko Securities

23.33

Natixis

22.21

Nomura

21.00

Nomura

21.03

Macquarie

18.00

Macquarie

16.64

Autumn 2023

Group Two lenders said it was the third best borrower overall, but the winner in EMEA, as results of 30.83 (unweighted) and 27.14 (weighted) ensured it had the top spot. The larger G1 lenders placed the Spanish bank in second place overall, in EMEA and in the Americas. ABN AMRO CLEARING BANK The Dutch firm was the third best placed G2 borrower, with results of 57.83 (unweighted) and 55.78 (weighted). It was in the same place across the two EMEA categories. It was the top G2 borrower when rated by G2 lenders, ahead of Nomura and Banco Santander, though retreated to third place in the EMEA unweighted category. NATIONAL BANK FINANCIAL National Bank Financial was the first non-European borrower in the overall G2 category, in fourth place with scores of 55.33 (unweighted) and 51.56 (weighted). It won in Asia Pacific but was only fifth in its home Americas jurisdiction. The larger lenders (G1) decided it was third rated overall, and also first in Asia. Their smaller counterparts (G2) placed the Canadian borrower third in the Americas unweighted category. NOMURA Nomura featured in the top five G2 borrower awards, with an unweighted figure of 52.00 and a weighted mark of 47.97. The Asian bank was the first borrower from that home market to join the top five in the Americas, in third place. It received the fourth spot in Asia Pacific, a place it was also in when rated by G1 lenders in that region. Nomura was second only to ABN Amro Clearing Bank overall when rated by G2 lenders in the unweighted category. It placed first in the Americas.

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G2 BORROWERS

ISF SURVEY 2023

G2 BORROWERS

MACQUARIE The second Asian borrower to feature in the G2 lists is Macquarie, which placed fourth in the Americas and fifth in Asia Pacific. Group one lenders revealed it was also the fifth rated borrowed in Asia Pacific, but it did not appear in any other regional rankings. Their G2 counterparts voted that Macquarie was second in the Americas, with scores of 16.50 (unweighted) and 15.09 (weighted). CREDIT AGRICOLE CIB The sixth best rated borrower overall is Credit Agricole CIB, with scores of 46.33 (unweighted) and 41.13 (weighted). The French bank was also fourth in EMEA. It placed second in that same region when rated by G2 lenders in the unweighted space.

WELLS FARGO The US bank was fifth in the Americas G2 borrower unweighted category but did not appear in any other list. Group two lenders placed Wells Fargo in second place overall with a weighted score of 28.36, though it fell to fourth in the unweighted list. It was fifth in the Americas and fourth in the EMEA unweighted part of the survey. SMBC NIKKO SECURITIES Japan’s SMBC Nikko Securities placed second in the Asia Pacific G2 weighted lists with a score of 24.15 though was third in the unweighted version. It was in the same places when rated by G1 lenders and in fifth place in the overall category.

G2 BORROWERS RATED BY G2 LENDERS: GLOBAL UNWEIGHTED Rank Score 1

ABN Amro Clearing Bank

31.17

Nomura

31.00

Banco Santander

30.83

Wells Fargo

30.17

Credit Agricole CIB

25.00

National Bank Financial

24.33

G2 BORROWERS RATED BY G2 LENDERS: GLOBAL WEIGHTED BY IMPORTANCE Rank Score 1

ABN Amro Clearing Bank

31.38

Wells Fargo

28.36

Banco Santander

27.14

Nomura

26.94

Jefferies

26.60

National Bank Financial

21.96

G2 BORROWERS RATED BY G2 LENDERS: AMERICAS UNWEIGHTED Rank Score 1

Nomura

18.17

Macquarie

16.50 13.33

G2 BORROWERS RATED BY G1 LENDERS: GLOBAL

National Bank Financial

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Cowen

12.17

Rank Score

Wells Fargo

11.67

Natixis

98.67

Mitsubishi Securities

10.17

Banco Santander

64.00

Banco Santander

58.56

National Bank Financial

31.00

National Bank Financial

29.60

ABN Amro Clearing Bank

26.67

ABN Amro Clearing Bank

24.40

SMBC Nikko Securities

23.33

SMBC Nikko Securities

24.15

Credit Agricole CIB

21.33

Nomura

21.03

Natixis

90.53

G2 BORROWERS RATED BY G2 LENDERS: AMERICAS WEIGHTED BY IMPORTANCE Rank Score 1

Nomura

16.63

Macquarie

15.09

Cowen

12.33

G2 BORROWERS RATED BY G1 LENDERS: AMERICAS

National Bank Financial

12.20

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Wells Fargo

11.31

Rank Score

Mitsubishi Securities

9.39

Natixis

37.33

Natixis

34.16

Banco Santander

32.00

Banco Santander

29.28

G2 BORROWERS RATED BY G2 LENDERS: EMEA UNWEIGHTED

G2 BORROWERS RATED BY G1 LENDERS: EMEA

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

Natixis

37.33

Natixis

34.16

Banco Santander

32.00

Banco Santander

29.28

ABN Amro Clearing Bank

26.67

ABN Amro Clearing Bank

24.40

Credit Agricole CIB

21.33

Credit Agricole CIB

19.52

Rank Score 1

Banco Santander

30.83

Credit Agricole CIB

25.00

ABN Amro Clearing Bank

24.67

Wells Fargo

18.50

Jefferies

18.00

Natixis

17.50

G2 BORROWERS RATED BY G2 LENDERS: EMEA G2 BORROWERS RATED BY G1 LENDERS: ASIA-PACIFIC

G2 BORROWERS RATED BY G1 LENDERS: ASIA-PACIFIC

WEIGHTED BY IMPORTANCE

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

Banco Santander

27.14

National Bank Financial

31.00

National Bank Financial

29.60

ABN Amro Clearing Bank

24.70

Natixis

24.00

SMBC Nikko Securities

24.15

Credit Agricole CIB

21.61

SMBC Nikko Securities

23.33

Natixis

22.21

Jefferies

19.13

Nomura

21.00

Nomura

21.03

Wells Fargo

17.05

Macquarie

18.00

Macquarie

16.64

Natixis

16.62

Autumn 2023

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FIXED INCOME LENDING: CLEARSTREAM The Luxembourg-based firm rose to the number one spot in the global fixed income winners’ list, up from second place last year. Clearstream received scores of 631.50 (unweighted) and 602.69 (weighted) in that category. It also won the top billing in the Europe,

G1 BORROWERS Most Innovative Lender, Lifetime Achievement CLEARSTREAM

Middle East and Africa (EMEA) and Americas regions, the latter placement off the back of results of 583.50 (unweighted) and 556.09 (weighted). It continued to perform well in EMEA, up from third last year. The Deutsche Börse-owned securities settlement company won the most innovative fixed income lender award this year for the second time running. BNY MELLON BNY Mellon dropped to second place in 2023’s global fixed income rankings, with scores of 281.00 in the unweighted section and 263.85 the weighted class. It was last second

GLOBAL FIXED INCOME

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

Clearstream

631.50

Clearstream

602.69

BNY Mellon

281.00

Deutsche Agency Lending

157.00

BNY Mellon

263.85

Deutsche Agency Lending

CACEIS Bank

153.82

130.00

CACEIS Bank

124.09

5 6=

Northern Trust

123.00

Northern Trust

107.36

Credit Suisse Zurich

99.00

State Street

99.00

95.68

AMERICAS FIXED INCOME

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

Clearstream

48.00

Clearstream

HSBC Agent Lender

34.00

HSBC Agent Lender

31.68

BNY Mellon

13.00

BNY Mellon

14.59

46.60

Blackrock

7.00

BNP Paribas Securities Services

5.10

BNP Paribas Securities Services

5.00

Blackrock

3.99

EMEA FIXED INCOME

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

Clearstream

583.50

Clearstream

556.09

BNY Mellon

250.00

BNY Mellon

234.75

Deutsche Agency Lending

157.00

Deutsche Agency Lending

153.82

CACEIS Bank

130.00

CACEIS Bank

124.09

Northern Trust

106.00

State Street

95.68

State Street

99.00

Northern Trust

93.65

ASIA-PACIFIC FIXED INCOME

UNWEIGHTED

WEIGHTED BY IMPORTANCE

Rank Score

Credit Suisse Zurich

19.00

Credit Suisse Zurich

14.62

BNY Mellon

18.00

BNY Mellon

14.51

Northern Trust

17.00

Northern Trust

13.71

Autumn 2023

in 2021, having won first place last year. It came third in its home jurisdiction of the Americas, and second in EMEA, like in 2022. In Asia Pacific, the US group improved on the sixth place it received in 2022, rising to second spot, and one of only three firms to qualify in the top three. DEUTSCHE AGENCY LENDING A second European firm, Deutsche Agency Lending, was listed in the global top three rankings with resulting scores of 157.00

Deutsche Agency Lending closed the global top three rankings (unweighted) and 153.82 (weighted). It also placed at the same level in its home EMEA market, up from sixth place in the previous year’s survey. Deutsche Agency Lending was also voted third most innovative lender this year. CACEIS BANK CACEIS Bank made an appearance in this year’s fixed income lending survey and settled in fourth place in the global list with scores of 130.00 (unweighted) and 124.09 (weighted). The asset servicer also won fourth place in the EMEA market list, though did not place in Asia Pacific and the Americas. NORTHERN TRUST With scores of 123.00 (unweighted) and 107.36 (weighted), Northern Trust improved on last year’s sixth place by coming in fifth in the global list. The US banking group also finished in fifth place in EMEA, and third in Asia Pacific. CREDIT SUISSE ZURICH In joint sixth place with State Street in the global fixed income lending

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ISF SURVEY 2023

FIXED INCOME LENDING

ISF SURVEY 2023

FIXED INCOME LENDING

unweighted list is Credit Suisse Zurich, with a score of 99.00. The firm did not feature in the top six in the weighted overall category. However, the Swiss lender topped the Asia Pacific list, one of only three firms to feature in these rankings. STATE STREET The US group was sixth in the overall fixed income lending category, with scores of 99.00 (unweighted) and 95.68 (weighted). State Street was also in the same spot in EMEA unweighted rankings (fifth in the weighted version, like last year). In comparison, the US asset manager was consistently represented in the top six fixed income lender in 2022. BLACKROCK The US group did not feature in most of this year’s top six rated fixed income lenders, except in the Americas unweighted rankings, in fourth place behind Clearstream, HSBC agent Lender and BNY Mellon. It came fifth in the weighted category. It was named the second most innovative lender this year, behind Clearstream. BNP SECURITIES SERVICES The French lender made an appearance for the first time this year, dropping in at the fifth place in the Americas unweighted rankings, and fourth in the weighted list.

LIFETIME ACHIEVEMENT AWARD

ISF Directory of Securities Lending & Repo 2023 Sponsored by:

Available Now View digitally at globalinvestor magazine.com Or log on at directory.globalinvestormagazine.com to use the database of industry contacts on the move. For all other enquiries, including the printed version, sponsorship, advertising or inclusion in the next issue please contact federico.mancini@delinian.com

Lifetime Achievement Award 2023

Sponsored by:

John Templeton, BNY Mellon

Autumn 2023

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TECHNOLOGY VENDORS: GLMX The US electronic securities financing trading platform swooped in again to win across the board in the SBL Trading Platform lists, returning as number one globally and in the

Americas this year again. It was the only firm to place in the global category, with scores of 6.80 (unweighted) and 8.50 (weighted), the first an improvement on last year’s total. In the Americas region, it received scores of 6.94 (unweighted) and 8.43 (weighted), both of which

are slightly higher than in the previous year’s survey. GLMX returned in first place in Europe ahead of WeMatch, which won in 2022, and also placed in top spot in Asia Pacific, the only firm to do so. WEMATCH US fintech Wematch appeared in the Americas and Europe SBL trading platform lists and was only one of two firms (with GLMX) to place in these two regions. It received scores of 6.63 across both the weighted and unweighted categories in the Americas. In the Europe SBL Trading Platform space, Wematch was awarded results of 6.37 (unweighted) and 6.53 (weighted). It did not appear in the Asia Pacific winners’ list.

TECHNOLOGY VENDORS - SBL TRADING PLATFORM (UNWEIGHTED) GLOBAL

AMERICAS

EMEA

Rank Score

GLMX

6.94

GLMX

6.98

wematch

6.63

wematch

6.37

GLMX

6.80

ASIA-PACIFIC

GLMX

6.44

TECHNOLOGY VENDORS - SBL TRADING PLATFORM (WEIGHTED) GLOBAL

AMERICAS

EMEA

Rank Score

GLMX

8.43

GLMX

9.07

wematch

6.63

wematch

6.53

GLMX

8.50

CLIENT SERVICES

ASIA-PACIFIC

GLMX

8.03

ORDER MANAGEMENT

UNWEIGHTED

WEIGHTED

UNWEIGHTED

Rank Score

GLMX

6.94

GLMX

8.67

GLMX

6.76

GLMX

8.46

wematch

6.67

wematch

6.73

wematch

6.44

wematch

6.58

EASE OF INTEGRATION AND CUSTOMISATION

WEIGHTED

RELIABILITY OF PLATFORM

UNWEIGHTED

WEIGHTED

UNWEIGHTED

Rank Score

GLMX

6.94

GLMX

8.67

GLMX

6.88

GLMX

8.59

wematch

6.44

wematch

6.58

wematch

6.78

wematch

6.81

FOOTPRINT

WEIGHTED

USER INTERFACE

UNWEIGHTED

WEIGHTED

UNWEIGHTED

Rank Score

GLMX

6.59

GLMX

8.25

GLMX

6.88

GLMX

8.59

wematch

6.25

wematch

6.36

wematch

6.44

wematch

6.54

INNOVATION

WEIGHTED

VALUE FOR MONEY

UNWEIGHTED

WEIGHTED

UNWEIGHTED

Rank Score

GLMX

6.71

GLMX

8.38

GLMX

6.81

GLMX

8.59

wematch

6.67

wematch

6.77

wematch

5.88

wematch

6.29

Autumn 2023

WEIGHTED

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ISF SURVEY 2023

TECHNOLOGY VENDORS

THOUGHT LEADERSHIP: GLMX

GLMX – Best Global Technology Provider

Andrew Turvey, GLMX’s Director of EMEA Sales, explains to Global Investor the company’s prominence as a leading provider of electronic securities finance trading technology, offering insights into GLMX’s background and expertise in the field. For the third consecutive year, GLMX is honored to receive the award for Best Global Technology Provider in ISF’s annual client-driven survey of Securities Borrowing and Lending Technology. GLMX, the global leader in dealer-to-client (D2C) electronic securities finance trading technology, swept this year’s awards in its category. For the first time, in addition to winning the Americas and the EMEA categories as it has in previous years, GLMX entered and won the APAC category. This complete sweep of each region voted on by an array of GLMX clients who actively use its technology – resulted in GLMX receiving near perfect “7” scores in all components of the unweighted categories. GLMX’s core mission has long been to build comprehensively capable electronic trading technology for the global money markets. No surprise, then, that these “Global Liquid Markets” made their way into the company’s name, with an added “X” to reflect the interconnectedness of this massive ecosystem. Since its inception nearly fourteen years ago, the Firm’s mission has been to build a single technology solution to seamlessly link the highly fragmented money markets. GLMX

Autumn 2023

is delivering on this objective and is living up to its name. Mirroring those global ambitions, GLMX is now active in the Americas, EMEA and APAC. Given increased activity in the Japanese and Australian government bond markets this year, and the enhanced functionality the platform provides to aid the funding activities undertaken by our sell- and buy-side subscribers for these products, GLMX has now taken the top spot in APAC. GLMX has been servicing both the Americas and EMEA successfully for many years and is proud that global market leaders in each of these regions are vocal advocates of our technology, which has proven to enhance complex interactions with their trading partners. Users achieve immediate operational benefits by pivoting away from anachronistic, analog, operationally intensive daily workflows, which can feel more like survival than success, empowering them to thrive and to focus on growing their franchises. Underlying GLMX technology has become the unifying factor in delivering this connectivity - whether an APAC user transacting in local Credit collateral, or a GSIB managing US Treasuries. At the end of the day, access to

Liquidity is the universal objective of participants in the global money market. GLMX technology is specifically designed to maximise access to these fragmented liquidity pools. We count over 40, highestquality liquidity providers as clients. As such, GLMX delivers access to geographically disparate, deep and diverse liquidity pools. With a total of over 115 of the world’s largest financial institutions, transacting over $600 billion (£494 billion) in new transactions daily, GLMX can lay claim to proving the deepest single source of liquidity within the D2C securities financing space. This will grow, with the number of new sell-side firms expected to reach 50 by year end. We also continue to see impressive demand from the buy-side, across every type of institution: asset managers, pension funds, money market funds, insurance companies, hedge funds, sovereign wealth funds, pension funds, corporate treasurers, municipalities and securities lenders. The global money market relies upon a massive network-effect – overlapping clients accessing fragmented liquidity pools results in maximal overall liquidity for the system. After decades of phone, messaging and email providing

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THOUGHT LEADERSHIP: GLMX

that network effect and after many years of underinvestment in fixed income technology – driven in no small measure by persistent nearzero global interest rates – finally capable technology has coalesced with favorable market conditions to push the global money market past the tipping point of digitalisation. The momentum for the adoption of modern technology continues to build and is likely to persist for many years as the global money markets have significant ground to make up as relates to the use of trading technology in other major financial markets. A virtuous cycle of growth has been established, where skeptics have become converts and converts have become evangelists: it’s apparent that engaging in securities finance transactions through a digital platform empowers both sides of the trade, by eliminating the “toil”, and allowing market professionals to focus on the real value-add within their specific roles. Conversely, legacy protocols look increasingly archaic, increasingly manual, and increasingly frictional relative to those in the digital GLMX network. Market consensus has confirmed that we have well and truly passed the inflexion point where negotiation, execution, and trade processing via electronic platforms, initially considered as “ nice to have ‘’ have now indubitably become “ impossible to live without.’’ The growth of the GLMX network, driven by the need for the transactional efficiency which our technology delivers, leads to access to a much deeper aggregate pool of liquidity, all with increased efficiency and transparency. While GLMX has long been recognised as an innovator in Repo trading technology, our core journey is not finished. For roughly a decade, the firm has been building technology and developing an ecosystem to support its growth. As balances on the platform have continued to grow, we have worked tirelessly to expand available functionality in order to

Autumn 2023

The growth of the GLMX network, driven by the need for the transactional efficiency which our technology delivers, leads to access to a much deeper aggregate pool of liquidity, all with increased efficiency and transparency.

better service the entire mosaic of repo activity. This intentional move beyond “vanilla” flows, encompassing every kind of term structure, across the broadest range of collateral, for every type of client, has set GLMX apart. Developing beyond what many thought advisable or even possible, GLMX is now positioned to leverage its flexible technology into other front-end markets. Each segment of the global money market has its own idiosyncrasies, but our extensive work within perhaps the most complicated segment ensures that our ability to innovate will extend seamlessly across other portions of the global money market. In fact, GLMX has been building quietly for these critical and adjacent market segments for several years. We now have a full suite of securities lending functionality that is actively being used by some of the industry’s largest securities lenders. We have engaged pilots for Time Deposits (TD) and Certificates of Deposit (CD). On top of those, GLMX is currently developing trading functionality for both Commercial Paper and Total Return Swaps. With this expansion into new market segments, GLMX continues to execute on its vision of building the single access point for money market trading. As GLMX methodically and systematically pursues its ambition to become a single access point for all segments of the global money market, its technology increasingly delivers value as a nexus of liquidity for its clients. The value of its network is further strengthened through the integration we have successfully

delivered with over 20 third party OMS/EMS providers that service our clients, as well as with a large number of our clients’ proprietary trading systems via industry standard and bespoke API connections. Also, integration with industry utilities, such as Triparty agents and Central Clearing counterparties (CCPs), provide more industry interoperability which reduces input errors and speeds up trade information flow. By creating an environment where trade information can flow freely, quickly and accurately, the market benefits from a faster and more accurate settlement process. Finally, should any of the many promising potential DLT solutions become reality in the near future, GLMX will be prepared to seamlessly extend its connectivity to them. In sum, GLMX efficiently provides for the three basic needs of any marketplace - digital or otherwise: ease, convenience and choice. Clients convene wherever they can accomplish their primary business objective. This behavior is heightened when that primary objective is critical and urgent. Access to liquidity IS an existential need. GLMX continues to weave itself into the fabric of the global money market in order to execute its mission to serve the existential need for liquidity access across that entire, massive, systemically critical ecosystem.

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SECURITIES FINANCE

THOUGHT LEADERSHIP: OCC

From Encore to Ovation

Global Investor speaks to The OCC’s Mike Hansen, Chief Clearing and Settlement Services Officer, and Karen Glad, Executive Director, Technical Certification and Documentation Services as OCC preps for 2024 industry-wide testing of the forthcoming clearing system. Could you provide us with insights into OCC’s new clearing system and its significance for the industry? What key features or improvements will it bring to the table?

send and receive data electronically, and if they have a large transactional load for a single day or multiple days, the csv upload capabilities will alleviate the manual data entry process.

Karen: We’re building our new clearing system Ovation with stateof-the-art technology, moving from a single mainframe to microservices in the cloud that will help us to accelerate time to market for new exchange products, enhance access to data for our stakeholders, and quickly deploy technical upgrades. The new user interface will provide more flexibility in accessing data, such as export capabilities for all list views. For the transactional components, if users need to quickly make updates, they may do so using csv upload capabilities. If they don’t normally

Mike: Whereas our current system ENCORE offers a one size fits all approach to data, the new clearing system will provide our market participants, both exchanges and clearing members, with access to Application Programming Interfaces (APIs), allowing them to customise their experience within the new system. This will allow users to pick and choose the data they want to see. This is something our stakeholders asked for – they might say, ‘I only want this piece of data,’ or ‘I want data in a slightly different format,’ and Ovation will give them that flexibility.

Industry-wide testing for Ovation is set to commence next year. Can you elaborate on the scope of this testing? Who and what will be included, and how does OCC plan to ensure a comprehensive evaluation? Mike: Testing encompasses members, exchanges, banks, stock loan participants – basically, the entire OCC ecosystem. Anybody who sends or receives data electronically to or from OCC will be engaged in testing. It’s far reaching in terms of who and what it will impact. For retail traders specifically, it’s the responsibility of their respective clearing members to participate in testing. There is no testing for retail traders. Karen: There will be two types of testing, both internal and external.

We’re building our new clearing system Ovation with stateof-the-art technology, moving from a single mainframe to microservices in the cloud that will help us to accelerate time to market for new exchange products, enhance access to data for our stakeholders, and quickly deploy technical upgrades. Autumn 2023

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formatting issue for external users. For external data issues, we’ll work with the affected users to adjust their data formats and make sure they input it accurately. If there’s an internal issue, we would identify the appropriate team to address it and, once a fix has been identified, deploy an update into the Ovation environment to retest. Our primary goal for the

implementation and testing is to ensure minimal impact to the market. We want to make sure everybody is ready to go live when Ovation launches. Our external stakeholders should not be impacted by OCC flipping the switch to the new system, and what users currently send and receive through OCC should continue to be processed on an ongoing basis. We are not implementing wholesale changes to all our messaging and data formats, or the protocols for them – they have remained relatively constant so we can make this huge infrastructure change while minimising disruption for our system’s users.

Mike Hansen, Chief Clearing & Settlement Services Officer, Dallas Site Leader, OCC

Karen Glad, Executive Director, Technical Certification & Documentation Services, OCC

In this role, Mike is responsible for OCC’s day-to-day clearance and settlement functions and oversees the Collateral Services, Technical Certification & Documentation Services, Corporate Actions, and Market Operations functions. Mike has more than 20 years of options industry leadership experience and has served in various roles throughout his tenure at OCC, including in back office processing, pricing, and Member Services. He joined OCC in 2004 as an Investor Services representative.

In this role, Karen is currently overseeing the release acceptance testing and transition activities of OCC’s Clearing Members and participant exchanges for the firm’s forthcoming clearing platform, Ovation. In the past, Karen has coordinated industrywide testing for other transformational projects including OCC’s Options Symbology Initiative and Y2K. She joined OCC in 1990 and has served in various roles throughout her tenure, including as the Business Continuity Officer, in enterprise portfolio & project management, and in business operations.

Our primary goal for the implementation and testing is to ensure minimal impact to the market. Mandatory external certification testing will encompass sending and receiving data to and from OCC. Once completed, exchanges and members can then test their daily processing environments and perform ad hoc testing on their own and try out unique combinations with production-like data. Everyone will have to attest to certification and readiness, and we’ll then validate that they completed the testing correctly. The second type of testing is our own operational readiness testing internally. We’ll be running the two systems, ENCORE and Ovation, simultaneously side-by-side for a minimum of six months. This will simulate and process all the inputs from external parties; we’ll run them in production and in Ovation on a daily basis, and we’ll reconcile the data between the two throughout each day. This will give us a good understanding of the data that comes in daily that we’re able to process and reconcile in addition to the specific testing the industry is doing. External industry-wide testing is slated to begin in May 2024 and run for about nine months. We expect internal operational readiness testing to start in August 2024 and run for at least six months, with Ovation fully launching mid-year 2025. How does OCC plan to address any issues or concerns that may arise during the testing process, and what is the expected outcome of the testing phase overall? Karen: Issues identified during the testing will be analysed to determine if the issue is an application defect within Ovation, or a potential data

Autumn 2023

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SECURITIES FINANCE

THOUGHT LEADERSHIP: OCC

Your equity financing, centrally cleared With the world’s largest U.S. equities lending counterparty

For 30 years, OCC’s Stock Loan Programs have reduced operational risk while enabling capital and collateral savings for Clearing Members. To learn more, visit www.theocc.com/securities-lending.

30 YEARS

*At year end 2022

H E D G E LO A N PROGR AM MEMBERS*

$126B AV E R A G E D A I LY LO A N VA L U E *

ISF SURVEY 2023

DATA VENDORS

DATA VENDORS: IHS MARKIT SECURITIES The US firm, part of S&P Global Market Intelligence, placed top again in several equity single data vendor categories including in the Americas (5.67 result) and Asia Pacific, the latter a return win from 2022, with a score of 5.54. It secured an average score of 5.02 out of 7 for that category overall,

slightly down on 2022. IHS Markit also came out first in the two vendor in the equities space category, with results of 1.00 in Europe, 1.22 in the Americas, 1.50 in Asia Pacific. It also secured 1.19 as the average total in that part of the survey. In the fixed income world, it won in Asia Pacific in the category where firms using single vendors voted, with a score of 5.00. It also

secured an average score of 4.79 in that space. FIS US fintech FIS won the single vendor fixed income category with a score of 6.00, placing ahead of IHS Markit Securities. It did not qualify in any other region in that particular part of the survey this year. It received an average result of 6.00, the highest in that category.

DATA VENDORS SINGLE VENDOR EQUITIES VENDOR

EMEA

AMERICAS

ASIA-PACIFIC

GLOBAL TOTAL

AVERAGE

FIS

6.00

S&P Global (IHS Markit)

4.79

5.67

5.54

5.02

VENDOR

EMEA

Americas

ASIA-PACIFIC

GLOBAL TOTAL

AVERAGE

FIS

2.00

1.78

1.57

1.83

S&P Global (IHS Markit)

1.00

1.22

1.50

1.19

VENDOR

EMEA

AMERICAS

ASIA-PACIFIC

GLOBAL TOTAL

AVERAGE

FIS

6.00

0.00

6.00

S&P Global (IHS Markit)

4.75

0.00

5.00

0.00

4.79

DATA VENDORS TWO VENDOR EQUITIES

DATA VENDORS SINGLE VENDOR FIXED INCOME:

Autumn 2023

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ISF SURVEY 2023

ISF EQUITY LENDING SURVEY 2023 METHODOLOGY

EQUITY LENDERS The ISF Equity Lending Survey 2023 is designed to identify excellence in the industry. Respondents – lenders or borrowers – are asked to rank their counterparties. There is a separate survey questionnaire for each side of the trade. Respondents are asked to rank their top counterparties in each of the categories (see below) separately for each region. A global entity is asked to rate its counterparties for every relevant geographical region: Europe, Middle East and Africa (EMEA), the Americas and Asia Pacific. The region is defined by where the underlying securities are listed (not where either the respondent or counterparty is based). Therefore, global entity Lender X is asked to rank its top counterparties, in each category, for every region where the equities it trades are listed. Overall scores are defined as ones where all the category scores are combined (there are global overall scores and regional overall scores) Global scores are defined as ones where scores from all regions are combined (there are global overall scores and global category scores). All entities that meet the qualification criteria are included in the appropriate tables regardless of whether the entity actively “participated” in the survey (i.e. circulated the survey in the industry). MARKET DIVISION BY SCALE Only the largest borrowers and lenders are eligible to be ranked in the survey. Likewise, these same two groups are the only entities eligible to rank their counterparts. There is also a distinction between group one and group two entities. Group one consists of the largest counterparts and group two the remainder. This is to reflect the differences in the business models of these firms and ensure that more relevant comparisons are made. Both group one and group two counterparties are asked to fill out an identical survey. All respondents are asked to rank seven group one counterparts in order of excellence exhibited in that category (from the list of group one counterparties). Similarly, all respondents are then also asked to rank their top seven group two counterparties. In theory any group two firm could receive a higher total score than any group one firm – however they will not be compared in the same tables. However, the rankings provided by group two respondents have a lower weighting than those of group one when calculating the total scores (see details below under Calculation Method). RESPONSE VALIDATION A global entity is only allowed to rank its counterparties once for each region (i.e. two people from Bank X cannot rank its counterparties in the same category and same region). A global entity can rank its top counterparties in each category, for either one, two or all three regions. If ISF receives multiple responses from the same entity for the same region we will ask the global head of the business to choose which should be used (Global Investor/ISF reserves the right to make the decision after reasonable efforts are made to get a decision). Respondents are encouraged to rank as many counterparties in as many categories as possible. However, there is no minimum number required for the response to be valid and no categories are mandatory – e.g. a firm could choose to only rank their top 4 Group Two counterparties if they only use 4 from the approved list. Responses are not permitted if they are submitted via one of the counterparties being ranked. IP addresses for all responses will be checked. WINNERS AND HIGHLY COMMENDED In line with the objective of recognising excellence in the industry, winners will be announced for the lenders and borrowers ranked highest by their counterparties.

Autumn 2023

In addition, a select group of firms will be declared highly commended. These are the borrowers and lenders that secured the next highest scores after the winners. For both group one and two a list of highly commended firms will also be published. Winners and highly commended lists will be declared for the firms ranked highest on average for the following methodologies: • Global overall • Global categories • Regional overall • Regional categories This list will be replicated for four groups: • Group one lenders • Group one borrowers • Group two lenders • Group two borrowers QUALIFICATION Fundamentally, winners and highly commended lists are calculated by the total amount of points accumulated. This means that only the most-qualified firms will be published. CALCULATION METHOD Unweighted All respondents (groups one and two) are asked to rank their top seven counterparties in both groups for each category, in each region. The rankings are then inverted to provide scores (i.e. a number one rank produces a score of seven). These scores are then added together and the firm with the highest total score is declared the winner (it does not matter which firm is ranked number one by the most counterparts). The counterparties with the next highest scores are declared highly commended. Being ranked by a group one respondent results in a full score; being ranked by a group two counterpart results in 50% of the inverted score being added to the total. Rank 1 2 3 4 5 6 7

Group one respondent score

Group two respondent score

7 5

3.5 2.5

1.5

• Global overall: Global category scores are weighted by importance and then added together to create an overall score for the entire globe. CATEGORIES & OPERATIONS SUBCATEGORIES When respondents rank counterparties they are asked to do so for nine categories including three operations categories. However, the three operations categories are combined into one operational efficiency category for the purposes of creating overall tables (global overall and regional overall). Therefore, when calculating overall scores (combining categories) the operations scores count for one third as much as each of the other categories. Likewise, when respondents are asked to rank the categories by importance the operations categories are combined into a single operational efficiency category. Lenders rating borrowers 1. Breadth of demand – including general international markets, exclusives, corporate actions and emerging markets 2. Stability of demand – including overnight balance and term balance 3. Collateral funding capabilities 4. Trading capability – including idea generation, product knowledge and automation 5. Relationship management – including senior management engagement, trading desk engagement, sales desk engagement and coordination/ communication between internal desks globally 6. Operational efficiency a. Trading connectivity & automation b. Trade matching and settlement c. Dividend collection and fees & billing Borrowers rating lenders 1. Breadth of supply – including general international markets, exclusives, corporate actions and emerging markets. 2. Stability of supply – including recall frequency and transparency around stability 3. Trading capability – including idea generation, product knowledge and automation 4. Collateral funding capabilities 5. Relationship management – including senior management engagement, trading desk engagement, sales desk engagement and coordination/ communication between internal desks globally 6. Operational efficiency a. Trading connectivity & automation b. Trade matching and settlement c. Dividend collection and fees & billing

0.5

Weighted by importance In the survey questionnaire, respondents are asked to rank the categories according to how important they consider that attribute to be. These ranks are combined to provide weightings theoretically between 0 and 2 (but are likely to be much less extreme) for each category. For example, if relationship management is considered very important by respondents and generates a weighting of 1.5, and Bank X achieves a score of 25 in that category, 37.5 will be added to the overall score (1.5 x 25 = 37.5). These weightings are calculated on a global basis and applied to all overall tables (even if there is a disparity between how important attributes are between the regions). Therefore the combined scores are calculated as follows: • Regional categories: All scores for the relevant category, for the relevant region, are simply added together. • Global categories: All scores for the relevant category, for every region, are added together. • Regional overall: Regional category scores are weighted by importance and then added together to create an overall score for that region.

VOTING CATEGORIES In addition to ranking counterparties, respondents are invited to nominate individuals for our lifetime achievement award and elaborate on why their nomination should receive this accolade. The ‘Most Innovative’ awards are calculated as in previous years from the highest total votes. • Lifetime achievement award • Most innovative borrower of the year (Group One) • Most innovative borrower of the year (Group Two) • Most innovative lender of the year (Group One) • Most innovative lender of the year (Group Two) DATA PROVIDER VOTING We are also asking all respondents (both borrowers and lenders) to score their securities lending data vendors (DataLend, IHS Markit Securities Finance and FIS Astec Analytics) while completing each region of the equity lending survey. We kindly ask respondents to respond for all vendors that they are using. The scores will be across 6 categories. • Breadth/coverage of data • Speed/frequency of data • Reliability of data • Client service • Innovation • Usability & interaction

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For voters with one data source, please rate it between 1 for unacceptable to 7 for excellent. The scores will be averaged to provide global, regional and category scores for the qualifying data providers. These will be published in separate tables alongside the equity lending survey. For voters with two or three data sources, please rank them on each category for a comparative result in each area. Minimum qualification requirements for the data vendors: Global tables: qualification in two regions Regional tables: 5 votes for Americas, 5 votes for EMEA, 3 votes for Asia-Pacific Category tables: qualification in two regions .

FIXED INCOME The ISF Fixed Income Lending Survey 2023 is designed to identify excellence in the industry, and is designed to complement the highly regarded and longstanding Equity Lending Survey. Borrowers are invited to rank their lending counterparties. Respondents are asked to rank their top counterparties in each of the categories separately for each region. There are three geographical regions. Global entities are asked to rate their counterparties for every relevant region: Europe, Middle East & Africa (EMEA), the Americas and Asia Pacific. Regions are defined by where the underlying securities originate (not where either the respondent or counterparty is based). Therefore, global entity Borrower X is asked to rank its top counterparties, in each category, for every region where the fixed income securities that it trades originate. Overall scores are defined as ones where all the category scores are combined (there are global overall scores and regional overall scores) Global scores are defined as ones where scores from all regions are combined (there are global overall scores and global category scores). All entities that meet the qualification criteria are included in the appropriate tables regardless of whether the entity actively participated in the survey (i.e. helped to circulate the survey in the industry). RESPONSE VALIDATION A global entity is only allowed to rank its counterparties once for each region (i.e. two people from Borrower X cannot rank its counterparties in the same category and same region). A global entity can rank its top counterparties in each category, for either one, two or all three regions. If ISF receives multiple responses from the same entity for the same region we will ask the global head of the business to choose which should be used (ISF reserves the right to make the decision after reasonable efforts have been made). Respondents are asked to rank seven counterparties in as many categories as possible. However, there is no minimum number required for the response to be valid and no categories are mandatory. Responses are not permitted if they are submitted via one of the counterparties being ranked. IP addresses for all responses will be checked. WINNERS AND HIGHLY COMMENDED In line with the objective of recognising excellence in the industry, winners will be announced for the lenders ranked highest by their counterparties. In addition, a select group of firms will be declared highly commended. These are the lenders that secured the next highest scores after the winners.

Autumn 2023

Winners and highly commended lists will be declared for: • Global overall • Global categories • Regional overall • Regional categories CALCULATION METHOD Respondents are asked to rank their top seven counterparties. These rankings are then inverted to create scores. These scores are then added together and the firm with the highest total score is declared the winner (it does not matter which firm is ranked number one by the most counterparts). The counterparties with the next highest scores are declared highly commended. All respondents are asked to rank their top seven counterparties for each category, in each region. The rankings are then inverted to provide points awarded (i.e. a number one rank produces a score of seven). Rank

Score

1 3

Overall Firms need a minimum of 9 responses to qualify overall. The firm must also qualify in a minimum of two regions (EMEA, Asia-Pacific, Americas). If two or more people from the same entity rate the same provider in the same region, the ratings will be averaged and the responses will count as a single response for qualification and table calculation purposes. Regional For regional tables the qualification requirements are 5, 5 and 3 responses for EMEA, Americas and Asia Pacific respectively. QUALIFICATION FOR SOFTWARE SOLUTIONS Overall Firms need a minimum of 7 responses to qualify overall. The firm must also qualify in a minimum of two regions (EMEA, Asia-Pacific, Americas). If two or more people from the same entity rate the same provider in the same region, the ratings will be averaged and the responses will count as a single response for qualification and table calculation purposes.

QUALIFICATION FOR SECURITIES FINANCE TRADING PLATFORM AND POST-TRADE SERVICES:

Regional For regional tables (EMEA, Asia-Pacific, Americas) firms need a minimum of 3 responses to qualify.

TECHNOLOGY & VENDOR All securities finance market participants are invited to rate three types of technology provider: securities finance trading platform, post-trade service and software solutions. Respondents are asked to rate these providers between 1 (unacceptable) and 7 (excellent) across several service categories. Six of these categories are the same for each of the provider types and three or four categories are unique to each. TABLES The responses of borrowers and lenders are combined, averaged and presented in an overall table for each technology provider type. There will be regional tables for EMEA, Asia-Pacific and the Americas. The respondent’s specified location will determine the region of the response. A firm will need to qualify in at least 2 of the 3 regions to qualify for the overall table. There will also be category tables to highlight areas of excellence among qualifying firms. Trading Platform will have both unweighted and weighted overall tables. Unweighted will be the average score divided by the number of responses – as has been the case in previous years. Weighted tables will apply a multiplier to a respondents vote based on the approximate annual balances on that platform as follows: Approximate annual balance of respondent (%)

Weighting multiplier

25-75

1.0

0-25

75-100

0.7 1.3

CATEGORIES The following five categories are applied to all three technology provider types: • ROI/Value-for-money • Ease of integration • User interface – including system responsiveness/speed • Client service & responsiveness/relationship management • Innovation In addition, each type of technology has unique categories Securities Finance Trading Platform • Footprint/breadth of functionality – including available inventory management • Reliability of platform • Order management/STP process • Post trade/lifecycle management Post-trade Services • Reconciliation ability (including overnight versus intraday processing) • Proportion of STP/Effectiveness of trade lifecycle processing • Market connectivity Software Solutions • Inventory management/collateral optimisation • Connectivity (e.g. to external infrastructure, internal systems) • Front to back lifecycle support (e.g. margin calls, corporate actions, settlement, trade lifecycle event automation, reporting)

PRACTICALITIES & DISCLAIMER Respondents could re-enter their survey form after completion. Even if the form was finished and submitted, the respondent could revise their answers until the final deadline. All responses are strictly confidential. Borrowers and lenders will never be able to find out which counterparts ranked them. ISF reserves the right to amend the methodology or invalidate results in the event of genuine anomalies – however we will remain transparent and publicise if this is ever the case.

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ISF SURVEY 2023

ISF EQUITY LENDING SURVEY 2023 METHODOLOGY

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THOUGHT LEADERSHIP: PICTET

Pictet Asset Services’ commitment to UK clients

Global Investor spoke with Rob Lowe, Market Head at Pictet, regarding the group’s remarkable journey and achievements in establishing a strong presence in both the UK and diverse European markets. This discussion encompasses pivotal growth drivers, forward-looking expectations, Pictet’s sustainable initiatives, tailoring services to accommodate regional nuances, the harmonisation of core values with growth pursuits, and the spotlighting of significant milestones and success anecdotes from their expansive venture. How has Pictet’s journey in the UK market evolved over the years, and what were the key factors that contributed to your development and successful expansion given the highly competitive and diverse nature of the market? Pictet Asset Services has enjoyed relationships with UK-based clients for nearly 30 years. Testament to the nature of the client partnerships we build, the first 2 UK-based managers we onboarded in 1995 remain keystone clients today. As an independent group, Pictet’s guiding principles have always allowed for a differentiating proposition, focused on long-term thinking and an entrepreneurial mindset. This translates to a peopleoriented culture enabling our

relationship managers to build an often personal rapport with clients who themselves have a vested interest in successful collaboration. Our credibility has also been a key protagonist to our success over the last few decades but it’s really the last 5 years or so that our core beliefs have become key buying criteria for the market as a whole. This is especially true for mid-tier managers seeking a flexible and boutique one-stop-shopoffering for their business. A key trend we have observed is the hybridisation of client types, for example traditional wealth managers have turned to unitised or pooled fund vehicles to gain economies of scale for their underlying investors. The reverse is also true where segregated mandates or separately managed accounts (SMAs) are

offered to key investors seeking further customisation from their fund manager. In response to this trend we have hired and trained our relationship management teams who provide multi-segment expertise to clients as their business evolves. There are lots of talented managers here in the UK and we see a big opportunity in this market. We have positioned ourselves as a credible alternative for managers reducing counterparty risk and seeking the best partner for the clients. We are focused on long-term, sustained growth rather than shortterm trends. We have the critical size to be credible and to be able to invest in the platform, technology and people but we are still small enough to remain agile and be able to listen to our clients.

We have positioned ourselves as a credible alternative for managers reducing counterparty risk and seeking the best partner for the clients. Autumn 2023

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Sustainability and responsible investing have become increasingly important for investors and businesses alike. How has Pictet incorporated sustainability initiatives in its expansion plans in the UK? As a group, ‘responsibility’ is one of our guiding principles. Thanks to the foresight of our investment colleagues, Pictet Asset Management has been at the forefront of responsible investing; in 2000 we launched the Water fund, not only the first but today the largest in its sector. Among other such products our Timber fund was open to investors from 2008. From an Asset Services perspective, we are proud to partner with clients who are transforming the investment landscape directly. A few years ago we established a dedicated ESG reporting suite for fund managers wishing to embrace Article 8 or 9 ESG standards. Our online tool provides decision makers with assessment guides to better define their requirements and reporting needs as this landscape evolves and we also advise on how they can comply with the regulations. Each country in Europe has its unique cultural, economic, and regulatory characteristics. How does Pictet tailor its services and offerings to meet the specific needs and preferences of its UKbased clients? Whilst we have catered to UK clients for decades, 2017 was the right time to recognise the market’s continued importance by committing to an Asset Services presence in the UK. We now have a team of 6 client servicing experts who support local relationships, which has been a resounding success by enabling proximity to decision makers. This was a logical progression to our own group-wide ambitions having already established strong Asset Management and Wealth Management businesses in London.

Autumn 2023

With this in mind, there are 3 important considerations as we continue to tailor our services: The first is the increasing desire of Independent Asset Managers wishing to book UK-domiciled clients directly in the UK. Not only is this driven by client repatriation, it also vindicates our local value proposition which aligns well to this important client segment. The second is a reflection of the Brexit decision; many managers have had to resource themselves effectively to manage clients and products in continental Europe. Pictet is well positioned to offer the flexibility and optionality managers need by offering 6 overseas booking centres with local expertise, respecting the cultural nuances this entails. I work closely with my European and Swiss counterparts at executive level to ensure clients needs are being effectively shared cross-jurisdiction. Lastly, as we pursue the overarching ‘human’ approach to local client servicing in the UK, it has enabled us to deepen client partnerships and be better positioned to respond to local nuances, product needs and regulatory changes. Lastly, could you share some key milestones or success stories from Pictet’s journey of development and expansion in the UK that you are particularly proud of? I am proud of our achievements in growing and developing the franchise locally, but it is clear to me that as we lean in to a new digital age, faceto-face human interaction remains essential. These personal connections have been important building blocks in garnering feedback to develop our client solutions suite. For example, Pictet responded to UK IAM’s needs by developing ISA Plan Manager and SIPP Custody solutions - an important piece of the asset servicing jigsaw enabling a comprehensive custody

service provision, leaving managers to focus on their core investment convictions. In my 6 years with Pictet, I have been fortunate enough to meet many industry participants - from c-suite executives to operations staff - all of whom value Pictet’s local relationship management team who are at the heart of our business. This human connection creates long-term trust and is accompanied by a unique banking platform alongside our hallmarks of security and safety. Rob Lowe, Market Head at Pictet

Rob Lowe is Market Head for Pictet Asset Services in London. He joined Pictet in 2017 as Head of UK Business Development to support the growth and development of Pictet’s Asset Servicing franchise. Previously, Rob worked at Standard Chartered for 6 years in leadership positions across the Middle East, Luxembourg and the UK; his last role being Chairman and Global Head of Investments for the group’s Trust and Fiduciary business. Rob’s has spent nearly 3 decades in the financial services industry, gaining a broad range of experience working for hedge funds, private banks and custodians since 1995.

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CUSTODY

THOUGHT LEADERSHIP: PICTET

CUSTODY

THOUGHT LEADERSHIP: CIBC MELLON

Next Level

Alistair Almeida, Executive Director and Segment Lead, Asset Owners at CIBC Mellon tells Global Investor how Canadian pension asset managers work to deliver long-term outperformance and sustainable outcomes for retirees and sponsors. “No one size fits all, but some sizes fit more” Pensions are a cornerstone of financial security in retirement, yet the challenge of maximising returns while maintaining liquidity as well as diverse calculations of social impact has led to the emergence of pension organisations achieving success across a variety of different structures and approaches. Canadian pension plans recognise that differences across organisational structures, talent, geography, scale, and even political context can critically influence which strategies are most likely to deliver optimal outcomes. As a result, plans are thoughtful and willing to deploy a diversity of approaches. Performance and Collaborative Engagement The cornerstone of the Canadian pension landscape lies in its emphasis on continuous and respectful engagement among

diverse stakeholders, united by a shared purpose. This shared purpose is underpinned by a commitment to strong governance, leadership, accountability, and transparency. While Canadian pension plans have demonstrated a history of success, with a remarkable return on investment, it is their unique approach to collaboration that stands out. Rather than operating in silos, stakeholders, including plan members, plan sponsor entities both corporate and government, legislators, regulators, labor unions, and employers, and especially the leaders at pension entities recognise the symbiotic relationship and collectively contribute to the overall success of the pension plans – typically independently from the individual success of each stakeholder group. Canadian pension plan sponsors and fund managers remain relentless in their pursuit of stronger outcomes for stakeholders. Boards and trustees

demand sustainable returns, dependable operations and attentive service to plan members - all while reinforcing sharp focus on compliance and sound governance. Even the largest plans increasingly recognise they lack the scale and resources to be the very best at everything for which they are ultimately accountable. As a result, they continue turning to strong and specialised providers for support as they focus their time and resources on the areas where they can drive greatest value for plan members. The Hunt for Scale Across markets, segments and business lines, for Canadian asset owners, asset managers, insurance companies, and indeed across many other industry verticals, the hunt for scale has been a key driver of stronger outcomes. For asset owners and asset managers alike, the collection and consolidation of larger asset pools is at the heart of driving scale. Scale can enable efficiencies, stronger

Canadian pension plans recognise that differences across organisational structures, talent, geography, scale, and even political context can critically influence which strategies are most likely to deliver optimal outcomes. Autumn 2023

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The Canadian pension landscape presents a blueprint for unlocking the potential of pension funds into longer-term, socially productive investment assets.

pricing power and the development of more specialist capabilities to achieve key organisational goals. Greater scale can confer the ability to amortise research, technology, operational efforts across a broader cost base. Others see scale as enabling greater access to desirable investment opportunities (or indeed, desirable investment talent). Consolidation can take many forms; while many in the industry are familiar with annuitisation or risk transfer of assets and liabilities to a larger provider, Canadian organisations have also launched other structures to enable asset management consolidation. Various government entities across Canada have established independent pension asset management entities designed to deliver professional and advanced asset management to underlying sponsors. Some private pension entities are competing with asset managers to manage outside capital on behalf of other plans, or even embarking on campaigns to merge in and take on the pension assets and liabilities of other plans. The use of an Outsourced Chief Investment Officer (OCIO) is another route to access scale and efficiency while maintaining control over overall strategy. Still other structures may yet emerge. In each case, the consolidators offer a compelling proposition to smaller plan sponsors, who see opportunities to simplify their cost structures or even exit the business of pension management to refocus on their own core businesses. Talent, Governance Models and Investment Expertise Canadian plans are well recognised

Autumn 2023

but like any investment organisation you don’t always go up without fluctuation. There have been a number of losses – either large in dollar amount or simply just high profile. However, pension plan sponsors, pension asset managers, OCIO providers, insurers and other Canadian pension industry participants are leveraging their leading talent, advanced governance models, and investment expertise as they compete in a challenging market, seek to more efficiently access scale, and above all, work to deliver better results for their stakeholders. In addition to in-house expertise, many participants are engaging third-party experts for insights, advice, independent oversight and even hands-on participation in such aspects as governance, transformational project management, complex investment and operational strategies, and plan member services. Looking Ahead The Canadian pension landscape presents a blueprint for unlocking the potential of pension funds into longer-term, socially productive investment assets. This success is grounded in an interplay of factors, including independence, collaborative engagement, performance, and a clear, shared purpose. The lessons gleaned from the Canadian model are invaluable to those seeking to cultivate robust, purpose-driven pension investment frameworks in other jurisdictions. As the global financial landscape evolves, the Canadian model serves as a beacon of collaboration, stewardship, and value creation in pension investments.

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THOUGHT LEADERSHIP: CIBC MELLON

Alistair Almeida, Executive Director & Segment Lead, Asset Owners

Alistair Almeida is Segment Lead, Asset Owners, for CIBC Mellon. Alistair is responsible for engaging with leading Canadian asset owners, growing CIBC Mellon’s market share among Canadian asset owners, and engaging with multinational pension plans as they grow in Canada. Alistair joined CIBC Mellon in 2007 and has held various senior business and relationship management roles for a wide breadth of client segments, including banks, brokerdealers, insurance companies, strategic funds, alternative investment managers, and global financial institutions whose clients invest in Canada. Alistair has more than 30 years of experience, including positions held in Toronto, London, and Singapore. He has a Master of Business Administration (MBA) from the University of Toronto Rotman School of Management.

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Canada’s Leader in Sub-custody With more than 1,800 professionals focused on servicing Canadian investors and global investors into Canada, CIBC Mellon delivers on-the-ground execution, expertise and insights to help clients navigate the Canadian market. Leveraging the technology and scale of BNY Mellon, a global leader in investment servicing, and the local presence of CIBC, one of Canada’s leading financial institutions, CIBC Mellon has the experience and the capabilities to help you succeed in Canada. Canadian custody and sub-custody

Brokerage1

Canadian correspondent banking1

Investment fund services

Broker-dealer clearing

MIS (Workbench, STP scorecard, trade match report card)

Securities lending

Data analytics2

Provided by CIBC

Provided by BNY Mellon

Learn more, contact: Richard Anton at +1 416 643 5240 Lloyd Sebastian at +1 416 643 5437 Alistair Almeida at +1 416 643 5126 www.cibcmellon.com

©2023 CIBC Mellon. A BNY Mellon and CIBC Joint Venture Company. CIBC Mellon is a licensed user of the CIBC trade-mark and certain BNY Mellon trade-marks, is the corporate brand of CIBC Mellon Trust Company and CIBC Mellon Global Securities Services Company and may be used as a generic term to reference either or both companies.

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GLOBAL CUSTODY

SURVEY 2023

CUSTODY

GLOBAL CUSTODY SURVEY 2022

Pictet remains #1 in the 2023 Global Custody Survey Pictet and BNP Paribas have claimed top spots in this year’s Global Custody survey along with Northern Trust following suit in the various regional and service categories. total, the score remained similar to last year’s, at 11.25. In the weighted segment of the survey, the French banking group also remained in second place behind Pictet, though both its global total and average saw a rise on last year with scores of 9.55 and 4.93, respectively. In both EMEA and Asia Pacific regions for the weighted and unweighted categories, it came second with weighted scores of 5.02 and 4.53 and unweighted scores of 5.49 and 5.76. However, it did not qualify in the Americas region. BNP Paribas qualified in 14 out of 20 service categories in both the weighted and unweighted portions of the survey. When looking at the unweighted part, results were varied compared to last year: the group saw a rise in the scores for cash management, execution services, income collections, network and tax services. In the weighted section, it noted a rise in areas including client services, corporate action, reporting and relationship management. BNP Paribas managed to place this year in the class action category, with a score of 5.50 unweighted and 4.70 weighted. On the other hand, it lost out in placing in commission recapture and foreign exchange services. The categories where the French bank saw a year-onyear decline in both the weighted and unweighted spaces include fund accounting investment accounting, industry knowledge and influence, safety of client assets and settlements. Looking at firms which use multiple custodians, BNP Paribas ranked second, beating Northern Trust. The group did not rank in Asia Pacific or Americas in either the weighted or unweighted sections. However, BNP Paribas did secure an average score of 5.45 unweighted and 5.31 weighted, and 5.51 and 5.34 respectively in EMEA. BNP Paribas came in after Pictet in the section of the

PICTET Pictet was in first place again in the global weighted category of this year’s survey, boasting a total score of 17.57, up from 2023’s 16.52. Notably, Pictet also emerged victorious in the unweighted segment of the survey, once again exceeding last year’s figure of 18.28 (2023: 19.16). Pictet’s performance is underscored with the highest total average scores in both the weighted and unweighted portion of the survey, with a remarkable 6.00 and 6.30. The Swiss financial group also secured the first place in both the Asia Pacific and EMEA regions in both the weighted and unweighted categories. In Asia Pacific, Pictet had an unweighted score of 6.40, exceeding last year’s 6.32, and was awarded 4.83 in the weighted portion, unchanged from last year’s result. In EMEA, it rose to the top with a weighted score of 5.92 and an unweighted score of 6.17. It also dominated the Americas in both categories with 6.82 and 6.59 respectively. It was the only firm the qualify in that region. The survey evaluated the top custodians over some 20 categories ranging from cash management, client services, corporate actions, relationship management and reporting. Pictet emerged as the top-rated global custodian in 16 of the categories in both the weighted and unweighted segments. Pictet’s winning streak continued as it was rated first globally in both the weighted and unweighted categories among respondents who used multiple custodians. It also remained on top when average scores were taken into account. When considering respondents relying on a single custodian, Pictet boasted the highest average score in the weighted and unweighted lists. The group once again stood as the sole firm to qualify in the Asia Pacific region.

survey where firms using single custodians rate them. It secured an unweighted score of 5.43 in EMEA and an average result of 5.83. In the weighted category, figures were 3.96 and 3.8 respectively.

BNP PARIBAS France’s BNP Paribas rose to the second position overall, behind Pictet, despite a slight drop in its unweighted global average from 5.73 in 2022 to 5.54 this year. In terms of global

The methodology for this survey is on page 73

Autumn 2023

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the part of the survey dedicated to firms with multiple custodians with a weighted score of 4.9 and an unweighted score of 5.38, placing it in second place after Pictet. In that same section, Northern Trust placed third in the survey with a weighted average score of 4.28 and unweighted average score of 5.23.

NORTHERN TRUST Northern Trust secured a place in the top three in the Global Custody Survey this year. However, it did not qualify in the overall general weighted and unweighted sections of the survey. It did rank on home turf, ie in the Americas region in

OVERALL (UNWEIGHTED) Company Name

EMEA

Asia-Pacific

Global Total

BNP Paribas

5.49

Americas

5.76

11.25

Average 5.54

Pictet

6.17

6.59

6.40

19.16

6.30

Company Name

EMEA

Americas

Asia-Pacific

Global Total

Average

BNP Paribas

5.51

MULTIPLE CUSTODIAN (UNWEIGHTED)

Northern Trust

5.45

5.38 5.23

Pictet

6.15

6.59 12.74

6.28

SINGLE CUSTODIAN (UNWEIGHTED) Company Name

EMEA

BNP Paribas

5.43

5.83

Pictet

6.20 6.95

6.33

Americas

Asia-Pacific

Global Total

Average

13.15

OVERALL SERVICE CATEGORIES (UNWEIGHTED) Company Cash Class Client Commission Corporate Name Management Actions Services Recapture Actions BNP Paribas

5.52

Pictet

5.95 6.72 6.30

5.50

5.73

5.46

OVERALL SERVICE CATEGORIES (UNWEIGHTED) Company Derivatives Execution Foreign Name Services Exchange Services

Fund Accounting Investment Accounting

Income Collections

BNP Paribas

5.77

5.41

5.74

Pictet

6.38

6.48

6.24

6.11

OVERALL SERVICE CATEGORIES (UNWEIGHTED) Company Name

Industry Knowledge & Influence

Innovation Network Performance & Technology Measurement Investment

Relationship Management

BNP Paribas

5.67 5.69

5.91

Pictet

6.39

6.54

6.17

6.24

6.38

OVERALL SERVICE CATEGORIES (UNWEIGHTED) Company Reporting Risk Safety Settlements Name Management Of Client Assets BNP Paribas

5.44 5.67

5.66

Pictet

6.23

6.41

6.28

Autumn 2023

6.61

Tax Services 5.33

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CUSTODY

GLOBAL CUSTODY SURVEY 2023

CUSTODY

GLOBAL CUSTODY SURVEY 2023

OVERALL (WEIGHTED) Company Name

EMEA

Asia-Pacific

Global Total

BNP Paribas

5.02

Americas

4.53

9.55

Average 4.93

Pictet

5.92

6.82

4.83

17.57

6.00

Company Name

EMEA

Americas

Asia-Pacific

Global Total

Average

BNP Paribas

5.34

MULTIPLE CUSTODIAN (WEIGHTED)

Northern Trust

5.31

4.90 4.28

Pictet

6.74

6.82 13.56

6.72

SINGLE CUSTODIAN (WEIGHTED) Company Name

EMEA

BNP Paribas

3.96

3.80

Pictet

4.83 3.41

4.57

Americas

Asia-Pacific

Global Total

Average

8.24

OVERALL SERVICE CATEGORIES (WEIGHTED) Company Cash Class Client Commission Corporate Name Management Actions Services Recapture Actions BNP Paribas

4.68

Pictet

5.37 6.23 6.07

4.70

4.98

4.65

OVERALL SERVICE CATEGORIES (WEIGHTED) Company Derivatives Execution Foreign Name Services Exchange Services

Fund Accounting Investment Accounting

Income Collections

BNP Paribas

4.64

4.59

4.55

Pictet

5.84

5.80

5.88

5.62

OVERALL SERVICE CATEGORIES (WEIGHTED) Company Name

Industry Knowledge & Influence

Innovation Network Performance & Technology Measurement Investment

Relationship Management

BNP Paribas

4.83

5.17

5.07

Pictet

5.82

5.80

6.07

5.52

5.70

OVERALL SERVICE CATEGORIES (WEIGHTED) Company Reporting Risk Safety Settlements Name Management Of Client Assets BNP Paribas

4.67

4.63

4.83

Pictet

5.81

6.05

6.00

5.99

Tax Services 4.23

PENSION FUND (UNWEIGHTED) Company Name

EMEA

BNP Paribas

6.42 6.05

Pictet

6.11

Americas

Asia-Pacific

Global Total

Average 6.11

PENSION FUND (WEIGHTED) Company Name

EMEA

BNP Paribas

3.58

Pictet

5.26 5.26

Autumn 2023

Americas

Asia-Pacific

Global Total

Average

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4.21

INSURANCE COMPANY (UNWEIGHTED) Company Name

EMEA

BNP Paribas

5.22 5.58

Americas

Asia-Pacific

Global Total

Average

INSURANCE COMPANY (WEIGHTED) Company Name

EMEA

BNP Paribas

5.00 4.66

Americas

Asia-Pacific

Global Total

Average

BANK/BROKER DEALER (UNWEIGHTED) Company Name

EMEA

BNP Paribas

5.50

Pictet

6.71 6.75

Americas

Asia-Pacific

Global Total

Average 5.50

BANK/BROKER DEALER (WEIGHTED) Company Name

EMEA

BNP Paribas

2.68

Pictet

3.31 4.39

Americas

Asia-Pacific

Global Total

Average 2.68

MUTUAL FUND/UCITS (UNWEIGHTED) Company Name

EMEA

BNP Paribas

5.29

Northern Trust

Americas

Asia-Pacific

Global Total

Average 5.29

6.50 6.50

MUTUAL FUND/UCITS (WEIGHTED) Company Name

EMEA

BNP Paribas

6.89 6.89

Northern Trust

Americas

Asia-Pacific

Global Total

Average

6.47 6.47

ASSETS UNDER MANAGEMENT GREATER THAN $3BN (UNWEIGHTED) Company Name

EMEA

BNP Paribas

5.30 5.26

Pictet

6.17

Americas

Asia-Pacific

Global Total

Average

6.79 12.96

6.35

ASSETS UNDER MANAGEMENT GREATER THAN $3BN (UNWEIGHTED) Company Name

EMEA

BNP Paribas

6.41

6.13

Pictet

7.14

7.51

Americas

Asia-Pacific

Global Total

Average

8.02 15.16

ASSETS UNDER MANAGEMENT LESSS THAN $3BN (UNWEIGHTED) Company Name

EMEA

BNP Paribas

5.72

5.90

Pictet

6.17 6.41

12.58

6.20

Global Total

Average

Americas

Asia-Pacific

Global Total

Average

ASSETS UNDER MANAGEMENT LESS THAN $3BN (WEIGHTED) Company Name

EMEA

BNP Paribas

3.41

3.40

Pictet

3.48 3.24

3.38

Autumn 2023

Americas

Asia-Pacific

6.72

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CUSTODY

GLOBAL CUSTODY SURVEY 2023

CUSTODY

GLOBAL CUSTODY SURVEY 2022

Global Custody Survey 2023 – methodology

CALCULATION METHODS Raw data The Raw data tables (labelled unweighted in previous surveys) simply contain an average of the relevant scores of the category tables (which are themselves averages of the sub-category scores). Each category is assigned an equal weighting, regardless of how many sub-categories there are for that category or how important they are considered by respondents. Weighted The weighted tables contain a two stage calculation process for the first time, combining stages that allow for the respondents AuM and the importance that the respondents attach to each service category.

SYNOPSIS Asset managers, asset owners and banks are asked to rate their global custodians. Results for custodians that qualify will be published regardless of whether or not they actively participated in the survey.

Stage 1: Weighted by AuM: The first stage attributes greater weight to the ratings of respondents with larger amount assets under management (AuM). Each respondent is put into a quartile depending on its AuM. The scores of the respondent are then given a weighting based on this quartile. As the boundaries of each

CATEGORY TABLES There are 21 service category tables. Each of these categories is

broken down into sub-categories, on which the global custodians are actually rated by respondents Respondents are asked to rate their global custodians from 1 (very poor) to 7 (flawless) in each of the sub-categories (see list below). The scores of these sub-categories are combined to create an overall score for that service category. For example, for the tax services category, respondents are asked to rate global custodians in three sub-categories: efficiency of obtaining tax relief at source; efficiency of reclaiming taxes; and solicitation of timely tax documentation. Each of the sub-categories is given an equal weighting and combined to create a table for tax services to be published in the magazine. The all responses category tables, both raw data and weighted, will appear in the magazine, but others such as for multiple custodian may only be available online.

quartile are determined by all the responses received in this year’s survey, the boundaries are unknown until the survey closes. Note: This stage is the entire methodology of the weighted service category tables (as category importance is not relevant) and is the first stage of creating the weighted overall tables. The weighted category tables are published in print and online. Criteria AuM in lowest quartile AuM in middle two quartiles AuM in the top quartile

Stage 2: Weighted by category importance: The respondents are asked to rank the service categories (not sub-categories) in order of importance. The core and value added categories are mingled in this list (i.e. some value added services may be considered more important than some core categories). An average is then created based on the rankings of all respondents. These weightings are then applied to the weighted (by AuM) service category tables to create the overall weighted tables. The more important a category is considered, on average by all respondents, the greater the weight is attached to that category (and by extension all the sub-category scores in that category). Weightings are normalised around 1 to preserve comparability with the raw data scores.

TABLES Global custodians’ results are presented in alphabetical order with the winning score in each column highlighted. There are two global columns – global total and global average. There are three regional columns for Emea, the Americas and Asia Pacific (defined by where the respondent is based). There will be at least six tables published in the magazine: • All responses (weighted & raw data) • Multiple custodian (weighted & raw data) • Single custodian (weighted & raw data) • Other heatmaps are published at the discretion of Global Investor/ISF, depending on the editorial value they represent, in print and/or online

Autumn 2023

Weighting 0.5 1 1.5

QUALIFICATION CRITERIA All responses tables To be included in the global average and global total columns, a global custodian needs to qualify in at least two geographical

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regions. Global custodians need to receive a minimum number of respondents to qualify for a region: 7 in the Americas; 7 in Emea; and 3 in Asia Pacific.