Global Investor Winter 2021/22 by SRP & FOW

Winter 2021/22 www.globalinvestorgroup.com

SECURITIES FINANCE:

ISLA’S DYSON DETAILS PRIORITIES FOR THE NEW YEAR

Custody: SGSS to invest further in digitisation

DERIVATIVES: THE HEAD OF EUREX PLEDGES MORE INNOVATION

CARMIGNAC IS BACK Maxime Carmignac looks ahead to growth in 2022

GLOBAL SECURITIES FINANCING More than just securities financing, together we can create the right solution

Natixis Corporate and Investment Banking offers high quality solutions thanks to its indepth knowledge of the Securities Financing market. Collaboration *Group 2 Borrower - Global Market Lenders and Borrowers were split into 2 groups based on the volume traded

Contact: Romuald Orange, GSF - Global Head of Client Strategy Tel: +33 1 58 55 11 09 - romuald.orange@natixis.com www.cib.natixis.com

Financing

Solutions

EDITORIAL

Maintaining standards in uncertain times This year started as the last one ended. In fact this year started like the last one started – with the industry facing uncertainty linked to the ongoing effects of the COVID pandemic. A late January wobble saw many foresee the long-awaited stock market crash (the S&P 500 had a particularly bad January) but it didn’t materialise and at the time of writing many of the world’s major indices were sitting not far below their record highs. Yet there is a collective sense of foreboding. Increasing inflation is spooking central banks, including the Bank of England which hiked UK interest rates in early February for the second time in a little over one month. This uncertainty has contributed to sustained demand for futures and options products, with Intercontinental Exchange reporting records in its nascent SONIA suite. Deutsche Boerse-owned Eurex is also seeing strong demand for its equity derivatives segment, by far the largest in Europe As a European equity and fixed income manager, Carmignac is potentially on the front line of any correction but its Managing Director and head of UK branch, Maxime Carmignac seems to relish the challenge. In the cover feature of this issue, Carmignac said: “These are volatile markets but one thing we say at Carmignac is that we are here for the long-term. We are a family business owned by the family and employees which gives us the luxury of being able to think long-term. We don’t have quarterly targets to meet rather we have one objective: the long-term investment objectives of our clients.” She added: “Some of our fund managers have grey hairs, they have been through a crisis before. If you look back to 2008 and the terrible performance of benchmarks that year,

Winter 2021/22

EDITORIAL Managing editor Luke Jeffs Tel: +44 (0) 20 7779 8728 luke.jeffs@globalinvestorgroup.com

Carmignac was able to have a positive year. Carmignac has been through many crises. Our clients tell us that it is in times of crisis that Carmignac makes the greatest difference.” There is something refreshingly honest about this assessment. Firms like Carmignac were no doubt happy to watch their assets under management grow over the past two years as central banks propped up the equities markets but, now that stimulus is being removed, these firms have the opportunity to show what they are capable of. Dealing with uncertainty is a theme throughout this issue of Global Investor. Andy Dyson, the head of trade body the International Securities Lending Association, reflects on the changes sweeping the securities finance industry in the wake of last year’s Meme stocks debacle. His US members are braced for some draconian reporting rules from the Securities and Exchange Commission. Trading Technologies is the market leader in the highly-competitive trading software industry. No-one knows this better than its new chief executive Keith Todd, who says in an interview that he wants to consolidate TT’s position as market leader before looking at new opportunities. It is true this is not a time for sudden movements. Firms will likely be watching closely their key market indicators before making any changes for a while now. One thing hasn’t changed however: the asset management industry and its peripheral functions like custody, securities finance and derivatives trading have to be able to deliver returns in difficult times as well as stable conditions. Luke Jeffs, Managing Editor, Global Investor Group

Derivatives editor Radi Khasawneh Tel: +44 (0) 20 7779 7210 radi.khasawneh@euromoneyplc.com Senior reporter, Custody Perle Battistella, Tel: +44 (0) 207 779 8028 perle.battistella@globalinvestorgroup.com Senior reporter, Securities Finance Ramla Soni Tel +44 (0) 20 7779 7246 ramla.soni@euromoneyplc.com Design and production Antony Parselle aparselledesign@me.com BUSINESS DEVELOPMENT Business development executive Jamie McKay Tel: +44 (0) 207 779 8248 jamie.mckay@globalinvestorgroup.com Sales manager Federico Mancini federico.mancini@euromoneyplc.com Head of sales, News & Insight Sunil Sharma Tel: +44 (0)20 7779 8556 sunil.sharma@totalderivatives.com Divisional director Jeff Davis Chairman Leslie Van de Walle Chief executive Andrew Rashbass Directors Jan Babiak, Colin Day, Imogen Joss, Wendy Pallot, Tim Pennington, Lorna Tilbian © Euromoney Institutional Investor PLC London 2021 SUBSCRIPTIONS UK hotline (UK/ROW) Tel: +44 (0)20 7779 8999 US hotline (Americas) Tel: +1 212 224 3570 hotline@globalinvestorgroup.com RENEWALS Tel: +44 (0)20 7779 8938 renewals@globalinvestorgroup.com CUSTOMER SERVICES Tel: +44 (0)20 7779 8610 customerservices@globalinvestorgroup.com GLOBAL INVESTOR 8 Bouverie Street, London, EC4Y 8AX, UK globalinvestorgroup.com Next publication Spring 2022 Global Investor (USPS No 001-182) is a full service business website and e-news facility with supplementary printed magazines, published by Euromoney Institutional Investor PLC. ISSN 0951-3604

www.globalinvestorgroup.com

CONTENTS

REGULAR FEATURES 6

ASSET MANAGEMENT

Trading Places: Standard Chartered taps Credit Suisse’s Drew; BNY promotes Templeton to run securities finance; Citi appoints co-heads of funds business; RJO promotes Wright to run fixed income.

16 IQ-EQ’s Group Head of Funds Justin Partington talks to Global Investor about the challenges of servicing the new breed of hybrid funds. 17 2021 Year in Review: The asset management industry reacted to the ongoing COVID pandemic with senior appointments, innovation in new areas such as digital assets and the occasional takeover.

Highlights from GlobalInvestorGroup.com: RadiantESG Global Investor launches first ESG fund; AIMA wants changes to SEC rules; State Street acquisition of BBH in Q1 now; ICE smashes SONIA futures trading record.

19 MENA Awards: In the annual Global Investor MENA awards Al Rajhi Capital won asset manager of the year while SICO was equities manager of the year and ADSS was the regional broker of the year.

COVER STORY SECURITIES FINANCE 10 Maxime Carmignac talks about the unique set of opportunities facing the Anglo-French asset management boutique.

34 The International Securities Lending Association’s chief executive Andy Dyson talks to Ramla Soni about the state of the industry it represents. 37 2021 Year in Review: The securities finance industry became front page news at the start of the year as retail traders sought to prop up the share prices of various firms being targeted by short-selling hedge funds.

Winter 2021/22

www.globalinvestorgroup.com

CONTENTS

CUSTODY:

DERIVATIVES:

39 Societe Generale Securities Services (SGSS) has identified further digitisation and the development of its environmental, social and governance (ESG) offering as key themes for 2022.

46 Michael Peters, chief executive officer of Eurex Frankfurt AG, spoke to Global Investor about the key themes for the exchange as the new year takes shape. 49 The new chief executive of Chicago-based Trading Technologies has outlined his plans to consolidate the firm’s dominance in listed derivatives trading software while exploring new products, markets and client segments.

42 RBC Thought Leadership: RBC Investor & Treasury Services (RBC I&TS) won at the end of last year the Global Investor Investment Excellence Award for Transfer Agency (TA) services for the second year running.

52 2021 year in Review: The futures and options markets remained volatile as exchanges reaped the rewards from high demand for hedging instruments.

44 2021 year in Review: Global Custodians saw their assets under administration climb last year despite the ongoing uncertainty presented by the COVID pandemic.

54 Smartstream Thought Leadership: Trevor Negus, senior product manager, TLM Collateral Management at SmartStream, discusses the various options facing firms that need to comply with the last phase of the Uncleared Margin Rules.

Winter 2021/22

www.globalinvestorgroup.com

TRADING PLACES

Trading Places People Moves as 2021 turned into 2022 ASSET MANAGEMENT: Standard Chartered hires sustainability head Drew Standard Chartered has appointed Marisa Drew as its new chief sustainability officer (CSO), joining from Credit Suisse. Effective from July 1, Drew will chair the group sustainability forum, drive its net zero commitments and oversee the existing sustainable finance and sustainability strategy teams, the bank said. Based in London, she will report to Simon Cooper, CEO, corporate, commercial & institutional banking, and join its management team. Neuberger Berman nabs Franklin Templeton equities expert Neuberger Berman has appointed Nicole Vettise as managing director and client portfolio manager for equities in Europe, the Middle East and Africa (Emea). In the newly-created role, she is based in London and reports to Dik van Lomwel, head of Emea and Latin America at Neuberger Berman, and Doug Kramer, head of institutional

equity and multi-asset at Neuberger Berman. Commenting on her appointment, van Lomwel, said: “With portfolio managers now located in Japan, China and more in Europe, along with advances to our global research, data science and ESG capabilities, we are building on our long history of equity management.” American Century nabs Schroders’ sustainability head American Century Investments has hired Schroders’ sustainability expert Sarah Bratton Hughes as its head of ESG and sustainable investing. Based in New York, she joined the investment manager on January 3 to lead the firm’s ESG and investment stewardship team efforts. In her new role, Bratton Hughes is responsible for executing the firm’s sustainable investing strategy, as well as the management of its ESG research platform and active ownership practices. Her team is also in charge of firmwide ESG research and training, innovating ESG assessment tools, and managing the ESG engagement

and proxy voting protocol, as well as driving sustainable investment initiatives and client solutions.

SECURITIES FINANCE: Fidelity boosts agency lending with hire from State Street Fidelity Investments has appointed Ryan Joyce as a senior international equity trader within its agency lending division. A Fidelity spokesperson told Global Investor that Joyce will focus on the management and distribution of the international equity book of business during Europe, the Middle East and Africa (EMEA) trading hours. Based in Boston, he will also focus on expanding existing distribution channels and opening new opportunities in the Asia-Pacific and EMEA regions. BNY Mellon promotes Templeton to run securities finance sales BNY Mellon has promoted John Templeton to global head of securities finance sales and relationship management, in a newly created role. Based in New York, Templeton reports to Bill Kelly, global head of agency securities finance, and Mark Haas, global head of principal securities finance, a BNY Mellon spokesperson told Global Investor. Templeton has spent the past two decades at BNY Mellon as head of financial institutions, intermediaries and market groups since March 2000. WeMatch hires Tellez as CFO from JP Morgan WeMatch has hired former JP Morgan veteran Guillaume Tellez as the new

NICOLE VETTISE

Winter 2021/22

GUILLAUME TELLEZ

www.globalinvestorgroup.com

TRADING PLACES

chief financial officer of the securities finance tech firm. Prior to joining the London-based fintech, Tellez spent a decade at JP Morgan in various roles including M&A from 2011 to 2013 and investor relations from 2013 to 2016 in the bank’s London and New York offices respectively. From 2016 to April 2021, he led all principal strategic investments in European start-ups at JP Morgan, until he most recently became head of partnerships for international consumers.

CUSTODY: Citi’s Crowe to co-lead fund services with Panjwani Dominic Crowe, Citi’s former managing director, head of custody and funds business for North America, has been appointed in a global product role to focus on the fund services as part of a management reshuffle at the US bank. Crowe has also been promoted to co-lead the funds business alongside Pervaiz Panjwani, managing director, custody and fund services head for Europe, the Middle East and Africa (Emea). Rebekah Flohr replaced him as head of custody for North America, effective January 1, joining from Deutsche Bank where she served for more than two years as head of securities services. Standard Chartered appoints tech, ops and transformation officer Standard Chartered has appointed Roel Louwhoff as chief technology, operations and transformation officer. Based in Singapore, Louwhoff will lead the bank’s transformation, operations and technology agenda from April 1. Louwhoff joined Standard Chartered on November 1 as group chief digital, technology and innovation officer, leading the bank’s technology

Winter 2021/22

where he worked in commodities for almost five years.

ROEL LOUWHOFF

strategy and the development of its technology systems and infrastructure. Deutsche hires ex-BNY Mellon exec to Asian team Deutsche Bank has hired former BNY head of Asian product Mathew Kathayanat as head of securities services product management for Asia Pacific (APAC), effective immediately. Based in Singapore, he reports to Anand Rengarajan, head of securities services for APAC at Deutsche Bank, and Mike Clarke, global head of product management at Deutsche Bank. Rengarajan said: “Asia Pacific continues to be a key and strategically critical region for our Securities Services business globally.”

DERIVATIVES: Marex’s global head of energy to leave firm Marex’s global head of energy is set to leave the firm to be replaced by the broker’s North American head of energy, marking a key change at Marex after a period of volatility in the energy markets. Jeremy Elliott, who joined the British broker as its global head of energy in September 2013, is leaving the firm and has been replaced with immediate effect by Matt Thistle, formerly Marex’s head of energy in North America. Elliott joined Marex from ICAP, the London-based inter-dealer broker

RJ O’Brien promotes Wright to run global fixed income R.J. O’Brien & Associates (RJO) has promoted Amber Wright to the new post of global head of fixed income in a move aimed at expanding the broker’s rates business. Wright is now the firm’s global head of fixed income rates and e-trading sales. She is based in London but has responsibilities across all of RJO’s global affiliates to expand institutional fixed income products and build cross asset algorithmic trading functionality. Former CFTC chair Giancarlo takes Digital Asset role Chris Giancarlo, the former head of the US Commodity Futures Trading Commission (CFTC), has joined Digital Asset as a member of the fintech’s board of directors. Giancarlo was chair of the CFTC between 2014 and 2019, overseeing a period of market structure change for the US derivatives markets. He has since held several advisory and board level positions at firms such as Nomura and the American Financial Exchange. “We are on the precipice of a digital economic transformation that will necessitate safe and secure ways for businesses to interconnect and share assets,” Giancarlo said in a statement.

CHRIS GIANCARLO

www.globalinvestorgroup.com

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: Female asset manager launches first ESG strategy RadiantESG Global Investors, the women-run asset manager backed by HSBC, has launched its first environmental, social and governance (ESG) strategy. The new Positive Change Smaller Companies strategy seeks to address the growing demand for firms that exhibit positive change in achieving sustainable and measurable results with respect to ESG factors. RadiantESG said its approach to ESG analysis uses its proprietary Mosaic data platform to find investment opportunities. NN IP’s green strategies unchanged by new EU Taxonomy NN Investment Partners (NN IP) has said it does not hold natural gas within its green bond funds and that the European Commission’s announcement on December 31 to include natural gas and nuclear in the EU Taxonomy will not change this. Moreover, the Hague-based asset

Winter 2021/22

manager said it does not have nuclear power-related exposure that was constructed after 2019 in its impact strategies. At the start of the year, the European Commission began consulting with Member States on a draft text of a Taxonomy Complementary Delegated Act, which would also cover nuclear and gas activities. BlackRock outlines investments in the metaverse BlackRock has said investment opportunities in the metaverse are a reality today and outlined how the world’s largest asset manager is looking to capitalise in this space. Nigel Bolton, co-chief investment officer of BlackRock Fundamental Equities, said that it’s “not a question of if, but when and how” when it comes to the existence of the metaverse, as global tech giants have clearly highlighted that it’ll be the next frontier in the digital world. He continued by comparing the metaverse to the rise of the internet in the 1990s or the smartphone in the 2000s.

SECURITIES FINANCE: SEC lending rules require ‘important changes’ - AIMA The US securities regulator’s proposed rule of reporting security loans requires “important changes”, according to the Alternative Investment Management Association (AIMA). AIMA told Global Investor: “We have filed a response to the US Securities and Exchange Commission (SEC) encouraging them to make several important changes to this proposal before considering a final rule.” The trade body’s changes include limiting the scope of the proposal to the wholesale segment of the securities lending market, revising the SEC’s loan definition to exclude all customer short positions and replacing its proposed 15-minute loan-by-loan reporting framework with publishing aggregate, wholesale market loan data on a T+1 basis. MUFG eyes US custody and global lending business Mitsubishi UFJ Financial Group has said it is looking to grow its US custody and global securities lending businesses in parallel, as it welcomes its latest recruit from Deutsche. Based in New York, Bill Browne joins Mitsubishi UFJ Trust and Banking Corporation (MUTB), the bank’s trust arm, as vice president. Akira Iwamoto, head of the trust division at MUTB New York, told Global Investor: “Bill will be part of a team reporting to Anthony Mogavero which is tasked with supporting both our growing US domestic custody business as well as our global securities lending solutions business.” Industrials most shorted European stocks in January - data Concerns over global supply chains made industrial firms the most shorted European stocks last month, according to new data. Short-position data from SEI Novus, an intelligence firm formed when

www.globalinvestorgroup.com

EXCLUSIVES FROM GLOBAL INVESTOR GROUP

the US asset manager bought Novus in November last year, shows that industrial firms made up 21.25% of European short positions last month, beating consumer discretionary firms which accounted for 18% of short positions. Industrials’ short positions increased by more than 3% in January, more than any other sector, while communications and materials firms saw the greatest reductions in their short exposures, by 1.49% and 1.43% respectively.

CUSTODY: State Street’s BBH acquisition extended to end of Q1 State Street has issued new guidance on the Brown Brothers Harriman Investor Services (BBH) acquisition, suggesting the deal will now close by the end of March this year. A spokesperson from State Street told Global Investor: “Due to the timing of completing regulatory approvals across multiple jurisdictions, we have updated anticipated timing for the close of the transaction to be first quarter of this year.” The bank had previously said the acquisition would complete by the end of 2021. ‘Teething problems’ expected as CSDR goes live The introduction on February 1 of the settlement discipline regime of the Europe’s Central Securities Depositories Regulation (CSDR) may cause initial problems for firms bound by the rules, a European settlement expert has claimed. Jesús Benito, head BME’s CSD Iberclear at SIX, reflected on the introduction of cash penalties for settlement failures by saying: “We can expect teething problems as from 1 February. This regulation is really complicated and in some instances the regulatory technical details have not been provided with sufficient time or clarity so as to allow the stakeholders to be well prepared in advance.”

Winter 2021/22

Gemini looks to expand products into UK, Europe Cryptocurrency exchange and custodian Gemini has said it is looking to roll-out its US products and services into the UK and Europe markets. Stephanie Ramezan, director of business development at Gemini Europe, said: “We are looking to see how we can deliver some of the same products and services that we have in the United States, or even different ones, to suits the UK market. “In the US we have Gemini Earn which is a way for people to earn interest on their crypto balances. We’re looking to see how we can roll that out in the UK and Europe. We haven’t done it yet and we do not have a timeline, but it’s certainly something we’re looking at.”

DERIVATIVES: ICE smashes Sonia record after UK rate hike The European arm of Intercontinental Exchange smashed in early February its previous record for trading SONIA futures as traders reacted to the Bank of England’s rate hike. London-based ICE Futures Europe reported 752,930 lots of SONIA futures, up 56% on the previous daily record of 482,800 lots in June last year. The ICE SONIA futures contract came close to setting a new daily record in late January but was boosted by the Bank of England’s decision in early February to increase the UK borrowing rate to 0.5% from 0.25%. 2021 trading volume growth dominated by EM – FIA Record levels of trading in 2021

were driven by growth in emerging derivative markets in the Asia Pacific and Latin America, according to the FIA. The trade body said trading jumped by a third last year, to 62.58 billion futures and options contracts. Options trading accounted for the largest increase, up 56% to 33.3 billion lots last year, and that growth was driven by a 47% growth in the equity segment. Cboe cites new initiatives for quarterly revenue boost Cboe Global Markets has cited the extension of its trading hours, the launch of its first European derivatives market and increasing demand for options from retail traders for a 27% hike in quarterly revenue. Ed Tilly, president, chairman and chief executive officer of Cboe Global Markets, said in a presentation on Friday the fourth quarter of 2021 was “an exciting quarter for our derivatives businesses”. Tilly said: “We continue to expand access to our products and services globally through new initiatives, including the successful launch of 24x5 trading for SPX and VIX options, scaling of our new European derivatives businesses and the continued engagement of retail customers in the options market.”

ED TILLY

www.globalinvestorgroup.com

ASSET MANAGEMENT

COVER FEATURE: MAXIME CARMIGNAC, CARMIGNAC

“Carmignac is back” Carmignac is well-known as one of Europe’s leading independent asset managers but less well-known is the quiet transformation that has taken place at the firm in recent years. By Luke Jeffs Central to that effort is Maxime Carmignac, the Managing Director of Carmignac’s UK Branch and the daughter of the company’s founder Edouard Carmignac, now chairman and Chief Investment Officer of the firm. Maxime first joined the family firm in 2006 after a spell in investment banking in London and Paris, and two years at management consultancy McKinsey before leaving in 2008 for a hedge fund in New York. She rejoined the firm in 2010 as a portfolio manager and became managing director of the Carmignac UK branch in 2013, a position she holds alongside her membership of the firm’s Strategic Development Committee and her chairman-

ship of the Strategic Product Committee. Speaking in late January from the company’s plush London offices, located a stone’s throw from Buckingham Palace, Carmignac reflects on a solid performance in 2021 and looks ahead optimistically to the remainder of this year. “Looking back on 2021, I am most pleased about the performance of some of our funds and the subsequent positive flows. We were able last year, in a challenging fixed income environment, to have all of our fixed income range in positive territory in terms of performance whereas all the benchmarks were negative so it was a perfect mirror in terms of performance versus benchmark.” She added: “Carmignac is half fixed income and half equity so it was important for us to show clients that we are

Reflecting that performance, we have raised more money and we have just disclosed an additional €3.7bn in 2021 of net flows which underlines the fact that now, Carmignac is back. Winter 2021/22

here managing positive returns in a challenging fixed income market. This performance was partly thanks to our unconstrained mandate. Rose Ouahba, our head of fixed income, has built a strong team within our fixed income range while I am proud also of what our equity long-short fund has achieved, which is showing a sixth year of top decile performance.” Ouahba, who joined Carmignac in 2007, is one of 53 fund managers and analysts in London and Paris handling some €41.7billion (£34.8bn) of assets under management across 23 investment strategies. A long-term, convictions-based investment manager, Carmignac has relied on French financial investment advisers to distribute its products. Today, their network of professional partners covers the entire country and they are considered ambassadors for the company. Carmignac funds are currently available in 15 countries worldwide. Looking back on 2021, Carmignac said: “Reflecting that performance, we have raised more money and we have just disclosed an additional €3.7bn in 2021 of net flows which underlines the fact that now, Carmignac is back.” This comment is a thinly-veiled reference to the low-point in the company’s 30 years history. In June 2019, Carmignac paid a €30m fine as part of a settlement to end a tax investigation. More than two years on, however, Maxime Carmignac is keen to stress the changes that have taken place at the firm. “Carmignac today is different from the Carmignac of the past. Carmignac used to be a bit of one man show, with one product and one strategy. This enabled spectacular growth between 2000 and 2010 but Carmignac has changed over time so today we have a wide bench of

www.globalinvestorgroup.com

Meet the future of the French asset manager

Winter 2021/22

www.globalinvestorgroup.com

ASSET MANAGEMENT

COVER FEATURE: MAXIME CARMIGNAC, CARMIGNAC

ASSET MANAGEMENT

COVER FEATURE: MAXIME CARMIGNAC, CARMIGNAC

Carmignac: “These are volatile markets but one thing we say at Carmignac is that we are here for the long-term. We are a family business owned by the family and employees which gives us the luxury of being able to think longterm.” talents. We now have more than 50 people in our investment team, half in London and half in Paris. We have developed a more bottom-up, stock-picking strategy that combines both Alpha and Beta.” Carmignac likes the product diversification that the company has fostered, something she can take credit for after

founding the Carmignac LAB in 2014 to test new fund ideas. “Today we are proud to say we have more than seven funds over €1bn with another three around €800m. That is positive because it makes Carmignac more sustainable and has enabled us to provide more solutions to our clients. It is also positive

because it creates a virtuous circle with our flagship funds. Our funds are like Russian dolls. If you look at Carmignac Patrimoine, the credit part was super-strong so we made a new fund out of it and here was born Carmignac Portfolio Credit, which is now €1.3bn, with close to €600m raised last year. This has been a big commercial success for us. Step-by-step we are building a more diversified product range.” Looking ahead to 2022, Carmignac points to further successes linked to the Carmignac LAB. “In June 2022, we will celebrate the anniversary of two promising funds. For fund buyers, the third anniversary is important so these two funds that were in the laboratory will finally see the spotlight. One is a fund that I built thinking about women called Carmignac Global Equity Compounders and the other one is called Carmignac Portfolio FamilyGoverned, which invests only in family businesses, which of course is something we know well at Carmignac. “2022 also marks the anniversary of our OEIC range which was set up in May 2019 with six funds and we are looking forward to celebrating that three-year anniversary this year.”

Carmignac in numbers

e41.7 billion of assets under management

53 fund

managers and analysts

Winter 2021/22

More than

countries in which funds are marketed

23 investment strategies

€2 billion of equity capital*

300 Staff

www.globalinvestorgroup.com

Thinking of diversification, Carmignac is quick to assert her firm’s credentials in emerging markets. “Carmignac has a long history of investing in emerging markets. In March 2000 our global equity fund had a 69% allocation to emerging markets. Everyone else was looking at US tech while we had a strong commitment to emerging markets. Our emerging market fund (Carmignac Emergents) is one of the oldest in Europe so this a theme at Carmignac.” Looking to 2022, the firm likes China but offers a note of caution. Indeed Haiyan Li-Labbé, Carmignac’s fund manager with a focus on Greater China published in mid-January a paper that suggests investing in China requires selective positioning and a long-term approach. Li-Labbé goes on to suggest that foreign investors’ recent fears about the

country underline the need for a comprehensive understanding of the regulatory reforms taking place in China. Carmignac said: “Looking at today, we know that China did well in 2020 and less well in 2021 but today there is a dissynchronisation in terms of quantitative easing between China and the rest of the world. We believe this will create strong opportunities but we have to be humble. We cannot ignore how China will react to the new Covid variant so that remains a big question mark for all of us.” At the time of our meeting in late January, the world’s main equities indices were sliding precipitously though they have stabilised somewhat in recent sessions. Carmignac stressed the importance of the long-term nature of the firm’s outlook, something that is partly made possible by its ownership. “These are volatile markets but one thing we say at Carmignac is that we are here for the long-term. We are a family business owned by the family and employees which gives us the luxury of being able to think long-term. We don’t have quarterly targets to meet rather we have one objective: the long-term investment objectives of our clients.” She added: “Some of our fund man-

Winter 2021/22

Carmignac: “Everybody talks about ESG so the challenge is how do you differentiate yourself.”

agers have grey hairs, they have been through a crisis before. If you look back to 2008 and the terrible performance of benchmarks that year, Carmignac was able to have a positive year. Carmignac has been through many crises. Our clients tell us that it is in times of crisis that Carmignac makes the greatest difference.” With €40+ billion under management and 300 staff, Carmignac is not a small fund manager. But it is undoubtedly at the boutique end of the market given some of the largest managers can these days count their assets under management in the multiple trillions. This presents a challenge when it comes to investing in technology, a key differentiator for some investors who have come to expect real-time, online access to investment reports.

Carmignac said: “The cost of doing business has increased in terms of technology, risk, compliance and ESG which is a problem because it raises the barrier of entry to new entrants and may limit entrepreneurialism. The technology costs have increased but there are two ways to compete. “On the other hand of course, you have the boutiques. I tell my team: “We don’t pretend to be good at everything, we just want to be the best in some specific niches.” There will always be a need for boutiques.” She added: “With the increased cost of technology, there is going to be a polarisation between the fight for scale and cost while there will still be a need for boutiques that offer the brand and the human side with emotions.”

With the increased cost of technology, there is going to be a polarisation between the fight for scale and cost while there will still be a need for boutiques that offer the brand and the human side with emotions.

www.globalinvestorgroup.com

ASSET MANAGEMENT

COVER FEATURE: MAXIME CARMIGNAC, CARMIGNAC

ASSET MANAGEMENT

COVER FEATURE: MAXIME CARMIGNAC, CARMIGNAC

Another key debate in the asset management industry is the rise of Environmental, Social and Governance (ESG) investing, and how firms can make themselves heard in a market where everyone is keen to promote their ESG credentials. Carmignac said: “Everybody talks about ESG so the challenge is how do

gaging with the biggest polluters that have committed to go to 0% coal by 2040 for example, we think we can have more impact as an active manager engaging with the firm that has further to go. If the company is not heading in the right direction after three to six months we will divest.” Carmignac thinks about the three ele-

management sector should remember what has made it a success – conviction and leadership. She said: “Green-washing is a problem but I think there is more awareness around this risk. As I said, we are still at the beginning of this secular trend so we need to find time to adapt if the regulation doesn’t make sense. With the current EU Taxonomy for example there is a sequencing issue which puts asset managers in a tricky situation as they are needed to report data two years ahead of the corporate that are supposed to provide them with those data (Q1 2022 vs Q1 2024)).” “So we need to stay agile as an industry to monitor the new regulation and I think there is greater awareness around greenwashing. Asset managers will be more careful in future.” She concluded by stating that only one

in the best-in-class renewable firms or en-

mon name) is a challenge but the asset

you look in the UCITS world, in the top

We were able last year, in a challenging fixed income environment, to have all of our fixed income range in positive territory in terms of performance whereas all the benchmarks were negative so it was a perfect mirror in terms of performance versus benchmark.

you differentiate yourself. Firstly, we take it seriously, we think about it actively so through engagement with the companies we invest in and we think about it with humility. “We have been investing in ESG for many years, but we are aware that we are only at the beginning of being more aware of investments in ESG and it is only now we are getting clear guidelines. As we speak, we are starting to write new pages in the history of finance, especially for an industry that has a greedy image from the last financial crisis so this is exciting. She added: “Sometimes we hear a lot from people talking about how they are going to change the world but, at Carmignac, we are a boutique, there are 300 of us managing €41.7bn so we have to be humble and that is important at this stage.” Carmignac continued: “Having said that, how can we differentiate ourself at Carmignac? We have decided to be focused so to become experts in some parts of ESG. For the E, we have decided to focus on climate change. We have a fund that is focused on the energy transition (Carmignac Portfolio Green Gold) but we think about the trajectory rather than the levels. “So if we had a choice between investing

Winter 2021/22

ments of ESG as distinct from each other: “The S part of ESG is a subject that fascinates me. A lot of money and effort has been dedicated to the E part of ESG whereas the S is an evolving area. Before it could have been seen to be wishy-washy but now there is more data available so we can approach this sector with more conviction and quantitative analysis. “At Carmignac, for us the S is about empowerment so that is empowerment of employees, the empowerment of customers and the empowerment of investors. We believe that a focus on those three empowerments will lead to a long-term over-performance for our investors.” Lastly, Carmignac has a similarly specific approach to corporate governance: “In governance, we think about leadership. Given that everyone supports ESG, one of the risks we are running is that the industry is engaged in box-ticking. There is so much regulation there is a risk that we will lose the entrepreneurial spirit. I like the quote that governance and leadership are the Yin and the Yang of a successful firm but if you have leadership without governance this is a tyranny and if you have governance without leadership, this is an administration.” Carmignac admits that box-ticking (or green-washing to give it its more com-

third of CO2 emissions are from public companies (as opposed to large stateowned oil firms) so institutional investors must be realistic in terms of their ambitions. Another key theme in asset management is diversity and inclusion. It is also one that is important to Carmignac (the firm and the woman). She said: “In 2016, I was lucky enough to work on the “diversity project” in London and set-up the mid-career workstream. At that time women made up only 14% of C-suite positions so there was obviously a problem in the mid-career stage. “We identified four things that can help address this mid-career gap. They are: more flexible working, which Covid has accelerated; realistic internal and external role models; firms should provide more coaching to encourage women to “lean-in”; and engaging men to promote diversity.” Carmignac feels that men have an important role to play in the promotion of equality in the work-place. “I have seen so many groups of women together with no men that tend to look self-promoting and lacking in gender diversity. At Carmignac, we are lucky because 65% of our assets under management are co-managed by women and, if

www.globalinvestorgroup.com

eight funds in Europe managed by women, two are from Carmignac, which is huge for our size. We are punching above our weight.” Stepping back, she added: “Thinking about the long-term, there is a huge push towards diversity but we have to be careful to ensure that women are not being promoted simply because they are women. We have to be sure not to compromise on quality.” Much of the diversity agenda has focused until now on engaging women more effectively at work but Carmignac thinks there is another important challenge. “I think there is an elephant in the room, however. We talk a lot about women in the workplace but we are ignoring women as investors. I think the largest inequality between men and women is how

to empower women as investors. There are studies that suggest that women will in four decades account for 70% of the total wealth because of their higher participation in the workforce and education and the gender pay-gap starting to close as well as the fact that 68% of women outlive men.” She added: “So women are becoming more wealthy, but women are totally under-addressed by the financial community. There are studies that show women have different needs to men regarding finance but there are very few products on the market that can help them achieve their long-term goals.” Carmignac cites one of her own funds - Carmignac Global Equity Compounders – as a good example of a fund tailored specifically to the investment requirements of women. She concluded: “At Carmignac, I would like to help raise awareness among women about how to invest early in your life to benefit from compounding and then to provide them with easy, sustainable and purposeful investment products.” Carmignac added: “Increased diversity in asset management will help engage women as investors but it is not enough on its own. There is a lot of attention to women as professionals but I see so little

Maxime Carmignac Managing Director of Carmignac’s UK Branch

Maxime Carmignac is the Managing Director of Carmignac UK office since 2013, responsible for the firm’s long-term strategy in the UK. She is a Member of Carmignac’s Strategic Development Committee, where she is instrumental in setting up the strategy of the firm with a particular focus on responsible investment and investment solutions. She also chairs the Strategic Product Committee. She started her career in Investment Banking in London and Paris and then joined McKinsey for two years before moving to Carmignac in 2006 as an analyst, covering the Energy & Consumer Sector. In 2008, Maxime expanded her international career by joining Visium Asset Management, an alternative investment firm in New York. Maxime returned to Carmignac in Paris in 2010 as a Portfolio Manager. Maxime graduated from ESSEC Business School.

to women as investors.”

Winter 2021/22

www.globalinvestorgroup.com

ASSET MANAGEMENT

COVER FEATURE: MAXIME CARMIGNAC, CARMIGNAC

THOUGHT LEADERSHIP: IQ-EQ

IQ-EQ Hybrid Fund Services What are the unique administrative challenges associated with hybrid funds? Hybrid funds offer several distinct advantages over more traditional investment vehicles, both for investors and managers. For investors, hybrid funds provide liquidity options suited to the types of assets held in the fund and flexible requirements for investors to enter and exit the fund easily. However, the non-standard nature of hybrid funds presents several challenges when it comes to their management. Holding different types of assets, with different fee structures, adds considerable complexity. Along with the need to match the liquidity offered to investors to the cash flow profiles of the underlying assets, managers need to ensure that redemptions do not cascade into a run on the fund. Furthermore, accounting and reporting requirements for hybrid funds place an additional burden on a manager’s operations, with different valuation frequencies and reporting requirements between public and private assets. How does IQ-EQ ensure the requisite level of transparency into these complex funds? The need for transparency and increased reporting has been growing, particularly from investors and managers, who are more familiar with openended or hedge fund structures. The ability to integrate technology platforms across the fund structure from asset level all the way through to investor reporting is increasingly critically linked to subject matter experts knowing and understanding the unique aspects of the fund. One of the ways IQ-EQ has supported this is through combining subject matter experts from private markets with public market experts to support the onboarding and set up of the hybrid funds structure within our systems. This ensures that the fund

Winter 2021/22

Justin Partington, IQ-EQ’s Group Head of Funds talks to Global Investor

Justin is responsible for leading IQ-EQ’s global offering for alternative asset managers. He also sits as an Independent Director on the boards of several real estate and private equity funds.

is running on rails and any specifics or complexities for reporting, data aggregation or portfolio monitoring, can be set up from the start through working closely with our clients. What role does technology play in helping to administer this new breed of funds? Technology has played a key role in the expansion of hybrid funds. At IQ-EQ, our offering has been developed around a sophisticated and integrated technology platform that leverages PFS Paxus as a single integrated system that services both liquid and illiquid asset classes end-to-end. On top of our core offering, we combine market-leading solutions and dedicated software platforms to provide value-add asset level, SPV, middle office and AML/KYC services. We have also leveraged our IQ-EQ Cosmos

platform which allows us to combine data feeds from custodians, prime brokers, and other accounting platforms to produce enhanced consolidated reporting and analytics. How are you planning to further develop the service into 2022? IQ-EQ will continue to integrate our reporting capabilities across new asset classes and jurisdictions as we build out this offering. Working collaboratively with our clients enables us to identify other opportunities to deploy technology, third-party integrations, or services to meet the needs of this growing market. The benefit of IQ-EQ’s broad service offering means client service teams can engage experts from across the business as clients increasingly demand traditional value add services such as ESG, middle office and client portals. What other innovation can we expect from IQ-EQ in 2022? We are currently working on several exciting technology-led solutions for fund managers including an automated platform for complex carry waterfall calculations. The platform will be powered by a sector-leading carry tool which uses configurable algorithms with an intuitive bespoke dashboard to provide complex carry waterfall calculations and scenarios.

Video available to view on digital version of Global Investor at www.globalinvestorgroup.com

www.iqeq.com

www.globalinvestorgroup.com

Asset Management

$226 billion (£165 billion) worth of issuance last year, up from $38 billion in 2015.

FEBRUARY

2021 Year in Review

The asset management industry responded to a second year of the Covid pandemic with further consolidation and a great focus on sustainability. JANUARY Aviva Investors appoints new chief executive Aviva Investors has promoted Mark Versey as chief executive officer for the London-headquartered asset manager, effective immediately. Versey, who previously served as chief investments officer of real assets for the asset management arm of Aviva for just under three years, will report to Amanda Blanc, CEO of the Aviva Group. Greenwashing risks rise as green bond issuances soar Aegon Asset Management has warned investors that the threat of greenwashing is rising as the number of green bonds issued soars. The asset manager said the demand for green bonds, which raise money for climate and environmental projects, reached new heights with

Winter 2020/21

BNP Paribas AM names deputy CEO BNP Paribas’ asset management business has named Sandro Pierri as deputy CEO, effective from January 1. In this newly-created role, he is based in London and reports to Frédéric Janbon, CEO of BNP Paribas Asset Management. HSBC announces aggressive expansion in Asia HSBC will “stop trying to be everything to everyone” and instead capitalise on the advantages that it has, while continuing its aggressive redundancy strategy, stated Noel Quinn, chief exec of the bank. Quinn said: “Global Banking and Market (GB&M) will retain the capacity to serve clients globally but we will invest in the markets that set us apart whilst also moving the heart of the business to Asia, including leadership.”

MARCH Amundi launches technology arm for smaller firms French asset management giant Amundi has launched a technology business to offer smaller fund managers low-cost, cloud-based access to the full range of front-to-back office solutions and services such as outsourced dealing and back office outsourcing. Amundi said the new service, called Alto, is aimed at all firms involved in savings, asset management and asset servicing, and has been launched now because smaller firms are struggling to keep pace with technology innovation. State Street offers Fund Connect ETF to all issuers State Street has made its Fund Connect

ETF platform open to support all exchange-traded fund (ETF) issuers, regardless of their service provider. Nadine Chakar, head of State Street’s global markets business, said: “With connectivity to so many ETF sponsors and authorised participants, Fund Connect ETF is well positioned to make the workflow even more automated and efficient, accelerating the creation and redemption process.”

APRIL Sourcing liquidity is top challenge for traders - JP Morgan Sourcing liquidity is the main problem facing equities traders despite their access to liquidity having improved over the past year, a report has concluded. Some 27.9% of respondents to JP Morgan’s 2021 Equities Execution Survey said that liquidity availability was their main challenge, ahead of regulatory changes (16.4%) and the imposition of best execution requirements (12.3%).

MAY Almost a half of investors back green bonds - NN IP Nearly a half of investors think green bonds are the most effective debt product for delivering environmental objectives, according to a new study from NN Investment Partners. The Dutch ESG specialist published the results of a survey of 230 institutional investors that found some 45% of respondents believe green bonds are the most effective fixed income instrument for promoting sustainable environmental practices.

JUNE BlackRock wins British Airways pensions contract BlackRock has landed a mandate from British Airways Pensions to serve as the outsourced chief investment officer for £21.5 billion worth of assets.

www.globalinvestorgroup.com

ASSET MANAGEMENT

2021 YEAR IN REVIEW | ASSET MANAGEMENT

ASSET MANAGEMENT

2021 YEAR IN REVIEW | ASSET MANAGEMENT

In a statement on June 2, the asset manager said the agreement encompassed assets under management for Airways Pension Scheme (APS) and New Airways Pension Schemes (NAPS). Climate change has the potential to raise GDP – Pictet Climate change has the potential to raise gross domestic product (GDP) across the world in the next 10 years, according to Pictet Wealth Management. Christophe Donay, head of asset allocation and macro research at Pictet Wealth Management commented: “When you internalise externalities, you create friction which is inflationary pressure. This is why we consider that climate change is on the one hand a potential stimulus in terms of real GDP growth, especially for Europe and China.” Market has ‘priced out’ Covid for 2022 - BlueBay BlueBay Asset Management is optimistic about growth for the second half of the year, stating that the market has largely priced out the pandemic. David Riley, Chief Investment Strategist at BlueBay Asset Management, said: “Part of the reason why we are also quite positive about the outlook going into 2022 is because we think the fiscal policy will remain very supportive. And fiscal policy has been absolutely crucial to limiting the scarring from the pandemic in economic terms and also supporting the recovery.”

JULY Hedge funds more confident in one year outlook - report Hedge funds are becoming more confident as the world emerges from lockdown, with US alternative investors the most bullish about their prospects over the next year, a new report has found. Trade body the Alternative

Winter 2020/21

Investment Management Association published the latest instalment of the AIMA Hedge Fund Confidence Index, reflecting an improving 12 month outlook among the 300 hedge funds polled.

AUGUST PGIM Investments names ex-Goldman exec as head of Asia PGIM Investments has named exGoldman Sachs executive Jessica Jones as managing director, head of Asia, effective immediately. In the newly created role, she is responsible for expanding the firm’s business into Asia whilst building teams in Hong Kong and Singapore to support sales and distribution efforts. Goldman Sachs to acquire NN Investment Partners Goldman Sachs has entered into an agreement to acquire NN Investment Partners (NN IP) from NN Group for €1.6 billion (£1.2 billion). The transaction, yet to receive regulatory approval, is expected to close by the end of March next year.

SEPTEMBER Nordea to establish ESG hub in Singapore Nordea Asset Management has said it will establish an environmental, social and governance (ESG) hub in Singapore. The firm said the new hub will give it the ability to be closer to clients in the Asia Pacific (APAC) region to better understand how companies in the region are being more sustainable.

OCTOBER Robeco deputy Karin Van Baardwijk to become CEO Robeco has said its deputy CEO Karin van Baardwijk will become the Dutch asset manager’s next chief executive in January. Van Baardwijk will replace Gilbert

Van Hassel who has served as chief executive since 2016 and is moving next year to a senior role at Robeco’s owner ORIX. Investors to boost exposure to private assets - Schroders Investors want to increase their holdings in private assets and reduce their exposure to the listed markets in a bid to diversify their portfolios after COVID, Schroders has said. The British asset manager published the results of its annual institutional investor survey and found that demand for private assets is a dominant theme.

NOVEMBER JP Morgan AM outsources middle office to custody arm JP Morgan Asset Management (JPMAM) has selected JP Morgan’s securities services arm, which sits within the bank’s corporate & investment bank division, to provide the full range of middle office services. Fred Crosnier, global head of operations at JPMAM, said: “We reviewed a number of alternative strategic operating models and after extensive due diligence selected JP Morgan.”

DECEMBER Fidelity Digital Assets lands UK regulatory approval The UK’s Financial Conduct Authority (FCA) has awarded Fidelity Digital Assets regulatory approval for its custody and trade execution business. With this registration, the firm can continue to offer its platform for securing, trading and supporting digital assets on a permanent basis. Prior to the approval, Fidelity Digital Assets was listed as a temporary member in the UK. For Asset Management daily news go to: www.globalinvestorgroup.com

www.globalinvestorgroup.com

• Asset Manager of the Year • Sharia Manager of the Year • Equities Manager of the Year • Sukuk Manager of the Year • Bahrain Asset Manager of the Year • Bahrain Broker of the Year • Broker of the Year • Clearing House of the Year • Cash Manager of the Year • Consultant of the Year • Custodian of the Year • Fund Administrator of the Year • Egypt Manager of the Year • ETF Manager of the Year • Qatar Manager of the Year • Exchange of the Year • Jordan Broker of the Year • Jordan Manager of the Year • International Exchange of the Year • Real Estate Manager of the Year • Qatar Broker of the Year • Oman Manager of the Year • Transition Manager of the Year • UAE Broker of the Year • Sub-Custodian of the Year • Wealth Manager of the Year • Kuwait Manager of the Year

Crowned with Trust Crowned with Trust ENT BANK TM

T INVES BES

ARD 2021 AW

Crowned with Trust T INVT INV BES BES ES ES

02D12021 ARD A2R AW AW

ENT BANK TM ENT BANK TM

Throughout the past decade, Kuwait Financial Centre “Markaz” won more than 60 awards from prestigious financial institutions and publications. These awards reflect “Markaz’s” reliable performance and constant endeavor to achieve excellence in the investment banking and asset management fields. Throughout the past decade, Kuwait Financial Centre “Markaz” won more than 60 Throughout the past decade, Kuwait Financial Centre “Markaz” won more than 60 awards from prestigious institutions publications. awards reflect With commitment towardsfinancial wealth creation for itsand clients, dedicationThese in offering innovative awards from prestigious financial institutions and publications. These awards reflect “Markaz’s” reliableand performance and constant endeavor achieve excellence in the financial solutions professionalism in all that it offers,to Markaz has proudly gained “Markaz’s” reliable performance and constant endeavor to achieve excellence in the investment banking and asset who management fields. the trust of its clients and international experts, remain a key priority at Markaz. investment banking and asset management fields. Throughout the past decade, Kuwait Financial Centre “Markaz” won more than 60 With commitment towards wealth creation for its clients, dedication in offering innovative awards from prestigious institutions publications. awards reflect With commitment towardsfinancial wealth creation for itsand clients, dedicationThese in offering innovative financial solutions and professionalism in all that it offers, Markaz has proudly gained “Markaz’s” reliableand performance and constant endeavor achieve excellence in the financial solutions professionalism in all that it offers,to Markaz has proudly gained the trust of its clients and international experts, who remain a key priority at Markaz. investment banking and asset who management fields. the trust of its clients and international experts, remain a key priority at Markaz. T INVES BES

ARD 2021 AW

ENT BANK TM

With commitment towards wealth creation for its clients, dedication in offering innovative financial solutions and professionalism in | all that it 8000 offers, Markaz has proudly gained markaz.com +965 2224 the trust of its clients and international experts, who remain a key priority at Markaz. markaz.com | +965 2224 8000 markaz.com | +965 2224 8000

markaz.com | +965 2224 8000

MENA AWARDS 2021

MENA AWARDS WINNERS 2021 22

Asset Manager and Sharia Manager of the Year: Al Rajhi Capital

Equities Manager, Sukuk Manager, Bahrain Asset Manager, Bahrain Broker of the Year: SICO

Broker of the Year: ADSS

Clearing House of the Year: DGCX

Cash Manager of the Year: MISR

Consultant of the Year: Insight Discovery

Custodian and Fund Administrator of the Year: Northern Trust

Egypt Manager of the Year: Azimut

ETF Manager and Qatar Manager of the Year: Al Rayan

Exchange of the Year: DGCX

Jordan Broker and Jordan Manager of the Year: Al Arabi Investment Group

International Exchange of the Year: CME

Real Estate Manager of the Year: Markaz

Qatar Broker of the Year: QNB FS

Oman Manager of the Year: Bank Muscat

Transition Manager of the Year: Citi

Wealth Manager and Kuwait Manager of the Year: Boubyan Capital

UAE Broker of the Year: Mubasher Financial Services (DIFC) Limited

Sub-Custodian of the Year: HSBC

Winter 2021/22

www.globalinvestorgroup.com

MENA AWARDS 2021

ASSET MANAGER AND SHARIA MANAGER OF THE YEAR

AL RAJHI CAPITAL Al Rajhi Capital (ARC) went one better than last year’s equities manager of the year prize by taking the Global Investor MENA Asset Manager of the year prize for 2021. The Saudi Arabia-based fund manager also claimed the Sharia manager of the year prize in 2021. This success builds on years of work, as a leading financial services company and one of the largest fund managers in Saudi Arabia. ARC provides its clients with high quality Islamic Shariah compliant investment products, customised portfolios and services by offering solutions that are suitable for the investment needs of all investors. The firm supports a wide range of innovative products such as equity funds “local, regional and international”, sukuk funds, multi asset, money market funds as well as the ability to tailor products for clients based on their investment objectives. ARC provides comprehensive investment solutions and advisory

services to institutional and retail investors through a wide network of dedicated investment centres and experienced investment team. The company’s investment decision process follows solid governance combined with a well-structured and defined analytical approach, which includes quantitative and qualitative filters to select investments, coupled with a good analysis based on valuation models and supported by internal research. The approach is based on both bottom-up and a top-down approach. The investment and asset allocation decisions are discussed and agreed by a committee on a consensus basis reducing the key-man risk. The committee

meets regularly to discuss investment ideas that are initially sourced by the research analysts. The investment process encompasses a mix of quantitative and qualitative factors which lead to a solid track record and strong performance. In equities, potential investments are initially analysed by looking at the absolute and relative earnings attractiveness of companies, their size and competitive positioning within the industry. Qualitative factors are also incorporated in the initial screening process including the strategy of a company and its suitability within the broader business environment, the quality of the management, and the quality of its financial reporting and disclosure.

EQUITIES MANAGER, SUKUK MANAGER, BAHRAIN ASSET MANAGER, BAHRAIN BROKER

SICO The Bahrain-based manager followed its Fixed Income manager of the year award in 2020 by demonstrating its breadth with the Equities manager of the year prize in 2021. SICO also won in 2021 the Sukuk manager of the year, Bahrain manager of the year and Bahrain broker of the year awards. The firm, which had over $4bn under management at the end of September 2021, is one of the few managers in the Gulf region that is GIPS compliant and verified, showing its commitment to the highest standards within the asset manager industry. GIPS covers key factors with respect to ethics, performance evaluation, transparency and disclosure. The Khaleej Equity Fund (KEF), which invests primarily in the MENA equity stock markets, was launched

Winter 2021/22

in March 2004 and has significantly outperformed the benchmark in this period. Regional peer comparison studies show the KEF has consistently remained at the top ranking for one, three and five year periods and is well positioned to continue this trend. SICO’s main clients are sovereign wealth funds, pension funds, endowments, insurance companies, commercial banks and funds, based in five of the six GCC states. The firm operates under a proper regulatory framework set up by the Central Bank of Bahrain, which is internationally reputed and provides full customer confidence.

SICO benefits from its sophisticated in-house research team which covers hundreds of companies from the GCC and feed the investment managers with daily ideas. While other managers rely on external or delayed research to base their investment decisions, SICO aims to be one step ahead with timely information from direct access to the inhouse research team. This special combination of quick customised research access with the technical expertise of traders, all supervised by the risk management department offers clients the best chance to generate consistent alpha and positive returns.

www.globalinvestorgroup.com

MENA AWARDS 2021

BROKER OF THE YEAR

ADSS ADSS improved on last year’s return when it won UAE broker of the year by winning in 2021 the MENA broker of the year award from Global Investor. ADSS is a leading global brokerage, providing institutional, corporate and retail clients with access to the most liquid asset classes, including over 60 foreign exchange pairs, stocks, commodities and contracts for differences. Founded in Abu Dhabi over 11 years ago, ADSS has built one of the largest trading platforms by volume in the Middle East and is now an internationally recognised business. As a responsible company that inspires confidence among clients and partners, ADSS holds itself accountable to the strictest industry regulations in its key markets. ADSS is currently undergoing the largest investment phase in the firm’s history, developing best-in-class trad-

ing platforms that offer greater access to liquidity and a broader range of financial instruments. The firm is also harnessing the power of artificial intelligence to deliver an exceptional and personalised service to each individual client, catering their service to their individual needs rather than adopting the sector’s current generic approach – a first for the industry. ADSS is also investing heavily in digital technologies to ensure that clients stay ahead of the curve and achieve their financial goals. Customer-centricity is at the core of everything that ADSS does. ADSS’ online trading platform, a bespoke version of MT4, allows both new and experienced traders to ac-

cess global markets from the comfort of their home or out on the move, empowering people to action their convictions no matter where they are. ADSS continues to make further investments in its talent and is driven by people with top industry experience. ADSS’ institutional teams support a range of leading financial institutions, from banks and hedge funds to brokers and asset managers, delivering bespoke solutions to meet the exact requirements of each individual client. For retail investors, ADSS’ retail teams work tirelessly to democratise access to a range of asset classes including precious metals, spot FX and CFDs on indices, commodities, treasuries and stocks.

CLEARING HOUSE OF THE YEAR

DGCX Dubai Commodities Clearing Corporation (DCCC) provides clearing, settlement, and risk management services to the largest and most diversified derivatives exchange in the Middle East, the Dubai Gold & Commodities Exchange (DGCX). DCCC is the only Central Counter Party in the Middle East that offers clearing services across multiple asset classes: Currencies, Base and Precious Metals, Hydrocarbons and Equity derivatives, both index and single stock. Since 2005, DCCC has been committed to ensuring its clearing members and their clients trade on the DGCX platform with confidence. With a continued focus to meet the growing needs of the clearing member community, DCCC promotes transparency, capital efficiency, robust risk management and trust. DCCC has over 60 clearing members around the world and is capable of clearing other exchanges’ trades, in-

Winter 2021/22

cluding OTC derivatives. DCCC offers Clearing Members the option of settlement in multiple currencies along with accepting a wide range of collaterals against margins. DCCC remains the only clearing house globally with a proven track record in clearing and delivering a physical, exchange traded Shari’ah compliant product, the DGCX Spot Gold contract. DCCC is regulated by the Securities & Commodities Authority and has been authorised as a Third-Country central counterparty by the European Securities and Markets Authority. In addition, DCCC is a member of CCP12, a global organisation of CCPs which

work together to minimise global systemic risk and enhance the efficiency and effectiveness of international markets. DCCC is also a member of Euroclear Bank and Clearstream for collateral solutions. Key highlights in the last twelve months: DCCC cleared nearly 16 million contracts with cleared value exceeding $370 billion, cementing its leading position within key markets. DCCC received authorisation as a ‘Recognized Clearing House’ by the Monetary Authority of Singapore (MAS), the country’s Central Bank and financial regulatory authority.

www.globalinvestorgroup.com

MENA AWARDS 2021

CASH MANAGER OF THE YEAR

MISR Misr Capital manages the biggest money market fund in Egypt with assets under management reaching almost EGP 24.4 billion, based on thorough and diligent analysis to implement the investment strategy and achieve superior returns. Furthermore, Misr Capital is the only asset manager in Egypt that launched three money market funds last year, all reaching their maximum size as per the FRA’s regulations. In January 2021, Misr Capital launched the Sarwa Life Insurance Money Market Fund (currently standing at EGP 500 million). In June, the company also launched Misr Life Insurance Money Market Fund, and recently launched two other funds (CIAF MMF and Misr Capital’s Fixed Income Fund) all of them reaching their maximum size as per the FRA’s regulations. Implementing an investment strategy for massive funds and Egypt’s

largest pool of money market and debt instrument funds is not simple. However, Misr’s success in predicting interest rate movements, through a disciplined investment process, enabled the firm to achieve a superior rank compared to other money market funds in the Egyptian market, and other fund managers that provide cash management solutions. Misr is also the only fund manager in Egypt that manages FX-denominated money market funds in USD and EUR, which gives the firm the edge to serve a wider client base in need for different cash management solutions. The philosophy is to utilise the

growth in Egypt’s debt capital markets in a 360-degree manner. Misr provides clients with an opportunity to invest their liquidity in short term and highly liquid instruments like treasury bills, time deposits and others without the need to invest large sums. Products provide liquidity through daily subscription or redemption while the funds (Banque Misr MMF 1, MMF2, MMF3 and Misr Capital’s Fixed Income Fund) are also directly linked to the customers’ bank accounts to provide the flexibility needed to manage their cash, a concept that applies to companies and individuals alike.

CONSULTANT OF THE YEAR

INSIGHT DISCOVERY Insight Discovery is a multiple award-winning consultancy that specialises in strategic communications, market intelligence and event optimisation. The firm offers bespoke innovative solutions and a personalised service to companies operating in Emerging Markets, these include many of the world’s largest and best-known financial institutions. Insight Discovery also manages projects for professional services companies, such as law firms and government agencies The company focuses on providing communications, research and events advice to financial services, professional services and government agencies in the emerging markets, including the Middle East, Asia and South Africa. The firm prides itself on being a leading authority on all matters related to asset management trends in the Middle East. Insight Discovery founder and chief

Winter 2021/22

executive Nigel Sillitoe has over 25 years’ experience in marketing, press relations and sales management. The firm managed to increase its client base by 22% in 2021 despite the COVID-19 pandemic. Highlights for the year include: Middle East Investment Panorama - the firm’s flagship report and has been produced every year for the past 11 years. This provides a summary of the latest research, numbers and on-the-ground insights from businesses and personalities at the cutting edge of the region’s re-bound from Covid-19. The report is a must for every investment management company and service provider seeking to understand the trends redefining opportunity in the region’s investment, workplace savings, private

banking and family office landscapes. Lifting the lid on Third Party Marketing - The work identifies no less than 172 Third Party Marketing firms in EMEA alone. Key takeaways from the report include: More than two-thirds (70%) of Third Party Marketing (TPM) firms work with between three and nine investment management companies – with 46% of them working with three to five clients Some 14% of TPM firms raise over $500m in investor capital in a typical year Equity managers represent by far the largest percentage of investment managers for TPM firms, followed by alternative managers and then fixed income managers.

www.globalinvestorgroup.com

MISR CAPITAL,

THE LA RGE ST ASSE T MA NAGER IN EGYPT

MENA Cash Manager O F

T H E

F I N D

O U T

Y E A R

M O R E :

347-792-847

MENA AWARDS 2021

CUSTODIAN AND FUND ADMINISTRATOR OF THE YEAR

NORTHERN TRUST Northern Trust provides global custody and related solutions for institutions, asset managers and family offices across the region in Abu Dhabi, United Arab Emirates and Riyadh, Saudi Arabia, as well as via a network of 28 global locations. The bank provides a comprehensive range of global custody solutions to a broad base of clients that include many of the largest sovereign wealth funds, central banks, inter-governmental/ governmental organisations, asset managers and family offices in the region. As investment opportunities emerge and markets grow more complex, the firm’s custody capabilities support clients in various ways: • Providing market coverage six days a week from Sunday to Friday, including during regional and international public holidays. • Enhancing the custody operating model in the Middle East to support both market development and client demands, by becoming a direct custodian in Saudi Arabia in 2019. • Bolstering regional leadership team with the senior appointments of

Areej Al-Mokbel as chief operating officer for the Middle East and Africa, and Effat Badeeb as deputy country manager at the Northern Trust Company of Saudi Arabia, showing a commitment to recruiting local talent to support the growth of the business. The firm also works to provide clients with the transparency, technological efficiency and insights they require to support their investments and decisionmaking. Examples include: • Collaborating with regulators and market participants to support initiatives aimed at increasing choice for investors, for example, working with Edaa2 to assist its introduction of securities lending. • Launching new ESG analytics capa-

bilities, building on the ESG Insights suite of analytical reporting, to help clients gain greater insights into the environmental impact of their investment portfolio. Northern Trust also helps administer clients’ global investments ranging from traditional to the most complex asset classes. • The Middle East and Africa fund administration clients are supported via servicing teams at offices in Abu Dhabi, United Arab Emirates (UAE) and Riyadh, Saudi Arabia, as well as by teams across Global Fund Services asset servicing hubs in Asia-Pacific, Europe and the US. • The firm supports more than 31.8 billion SAR in assets under administration for clients in the Middle East and saw asset growth of more than 8% in the past twelve months.

EGYPT MANAGER OF THE YEAR

AZIMUT Azimut Egypt (previously Rasmala Egypt) has more than 21 years of local experience, EGP8.9 billion assets under management and a reputation as one of the fastest growing Egyptian asset managers. Azimut, in its first year in the Egyptian market after acquiring Rasmala, was closely involved in advocacy efforts with the FRA to develop the whole regulatory framework for mutual funds. This successfully concluded by finally allowing asset managers with special requirements and licenses to launch their own funds with multiple distributers. Accordingly, Azimut was the first Egyptian asset management firm to be granted the mutual funds issuance license, followed closely by the launch of the first mutual fund launched by an asset manager “Azimut Fixed Income Fund” on Oc-

Winter 2021/22

tober 27 2020, which successfully closed the initial subscription phase in 10 days, gathering EGP295 million. In one year, the fund size grew six times to reach EGP1.8 billion despite being a private placement rather than a public offering. The fund now has 10 distributers after allowing multiple distributers with four banks, five brokerage companies in addition to Azimut itself. As for equities, Azimut achieved a remarkable return in one of the most troubling years in modern history. The team has recorded the highest returns in Egypt Equities Market in 2020, with

its locally domiciled fund, “ABC Equity Fund” and its Luxembourg domiciled UCITS fund “AZ Equity Egypt” that was launched in February 2020. The locally managed Equity Fund (ABC Bank) is the lead performer among all equity funds in the market over the past six years, crowning the market with an Alpha of 25% over the index for the full year of 2020. The fund is also the top performer YTD in 2021 with 27.92% until the end of August 2021 Vs 4.2% for the market and 6.19% the average return of all equity funds (26 Funds).

www.globalinvestorgroup.com

MENA AWARDS 2021

ETF MANAGER AND QATAR MANAGER OF THE YEAR

AL RAYAN Al Rayan Investment (ARI) invests in Gulf listed equities and sukuk, backed by a unified research team. Investors benefit from the wider perspective gained from researching and investing on both the sides of the capital structure. ARI is therefore able to arbitrage the considerable valuation and information anomalies. All of ARI’s investments are Shariah compliant. ARI manages the Al Rayan GCC Fund. Launched in May 2010, this is the second largest Shariah-compliant GCC Fund with $80 million of AuM. This absolute return fund’s +32% return over 12 months was achieved with relatively low risks being taken as reflected in a very high Sharpe ratio of 2.90. Since inception, the fund is up 120.1%. Since its launch in March 2018, Al Rayan Investment’s QATR ETF has become one of the most successful new products in the region. The fund currently has a market cap of over $148m, making it the

largest Qatari ETF. Important for an ETF investor, QATR has the greatest daily liquidity among ETFs in the region, in sharp contrast to some of its peers that don’t trade for days or weeks at a time. ARI has worked closely with the QSE and four Qatari regulators over recent years to help create the most advanced and comprehensive ETF regulatory rule book in the Gulf. Among other aspects, this allowed the regulatory recognition and licensing of ETF liquidity providers. In 2021, ARI has carefully built a six-

person investment team with rich expertise, boasting more than 82 years of experience. Members have previously worked across the region and globally. ARI has established quality in-house research to identify big picture trends and drill down to individual opportunities. Primary research is the backbone of ARI’s decision making process. Apart from management of a target company, ARI seeks to meet suppliers, customers, competitors, and where relevant, regulators and ministries.

EXCHANGE OF THE YEAR

DGCX Established 16 years ago, Dubai Gold & Commodities Exchange (DGCX) is the largest and most diversified derivatives exchange in the Middle East, providing guaranteed settlement and reduced counterparty risk through the Dubai Commodities Clearing Corporation (DCCC), a subsidiary 100% owned by DGCX. DGCX trades up to $4 billion per day of underlying notional value in four asset classes: FX, Equities, Hydrocarbons and Metals. Against the backdrop of the Covid-led pandemic, DGCX continued to operate and kept the market open throughout 2020. Over the course of the past twelve months, DGCX maintained momentum despite difficult market conditions. The Exchange traded close to 8 million contracts, with notional value exceeding $186 billion. While the exchange already offers 17 hours of uninterrupted trading, it extended trading hours for the Indian Budget and US Elections in response to demand from members and market participants. Moreover, during this volatile period

Winter 2021/22

DGCX successfully introduced new products, cemented new partnerships, and strengthened overall capabilities. DGCX kept its focus on continuing to provide market users with the tools and hedging mechanisms to manage risk effectively, and drive liquidity in the market while remaining the largest global liquidity pool for Indian Rupee futures trading. The MAS approved DCCC as a Recognised Clearing House, enabling it to offer clearing services to banks and financial institutions in Singapore, making DGCX more accessible to Asia-based investors. DGCX received a permit from the Israel Securities Authority, enabling DGCX to service Israel-based market participants and investors with its products and ser-

vices. With this permit, DGCX continues to expand its role as the leading Middle East exchange for derivatives trading. At the forefront of developing and shaping the Islamic finance sector, DGCX is involved in further structuring the sector through partnerships with leading institutions to introduce more Islamic products to the Exchange, including its recent partnership with Global Islamic Financial Services. DGCX continues to focus on and raise the bar for trading and settlement capabilities and entered into a new major market technology agreement with Nasdaq to use its full suite of integrated marketplace solutions, providing DGCX members with increased levels of performance.

www.globalinvestorgroup.com

MENA AWARDS 2021

JORDAN BROKER AND JORDAN MANAGER OF THE YEAR

AL ARABI INVESTMENT GROUP Al Arabi Investment Group Co. “AB Invest” is the investment-banking arm of the Arab Bank, one of the oldest privately held financial institutions in the region and one of the region’s largest banks. Established in 1996 as the first fullyfledged investment-banking firm in Jordan, and after its acquisition by Arab Bank in 2004, AB Invest accelerated the roll‐out of its regional coverage, funds, and products. AB Invest’s business lines include Brokerage, supported by Research, Asset Management, Corporate Finance, and Private Equity. AB Invest is the leading private asset manager in Jordan in terms of thirdparty assets under management. In addition to offering discretionary customised portfolio management investment solutions, asset management launched

a series of MENA‐focused funds, both conventional and Shariah-compliant, investing across the available asset classes. The flagship Arab Bank MENA Fund, launched in 2005, is one of the oldest funds in the region, with a consistent outperformance track record in absolute terms and on risk-adjusted bases. Between September 1 2020 and August 31 2021, the Fund gained 18.23% to mark one of the best performances on record. Meanwhile, the IIAB Islamic MENA Fund (established in 2008), recorded a return of 10.76%, also marking one of its

best performances. On an inception to date basis (as of 31 August 2021), both funds have yielded an alpha of 11.6% and -9.8%, compared to the Dow Jones MENA Index and the Dow Jones Islamic Markets MENA Index, respectively. AB Invest is a market leader in terms of the brokerage business on the Amman Stock Exchange (ASE), where the company’s turnover reached over $144 million between September 1 2020 and August 31 2021 to account for 2.7% of the ASE trading. Historically, AB Invest was the broker of choice for the ASE’s mega deals.

INTERNATIONAL EXCHANGE OF THE YEAR

CME CME Group continued to be the leading and most diverse financial marketplace allowing participants to manage their risk in unprecedented period of uncertainty and volatility. CME is the only exchange where customers can trade every investible asset class across cash, futures, options and OTC products, all on one platform. Highlights for the group’s growing client base in the MENA region include: Digital Engagement In times where offices closed and social distancing became the norm, CME employees were able to move closer to clients more than ever before, providing them with support and guidance to navigate markets dominated by uncertainty. The exchange had an impressive 112% customer engagement (calls, virtual meetings, online workshops, campaign outreach) increase from the previous year. Furthermore, CME continued to educate and inform clients from all segments on new products and services. Liquidity Growth CME achieved record International

Winter 2021/22

ADV of 5.2M contracts, up 8% from previous year and the MENA region has remained prevalent to its market’s liquidity. This was driven by strong growth in volumes across most client segments and CME’s flagship front-end platform ‘CME Direct’ played a vital role. CME Direct for MENA clients has become the platform of choice and to highlight: Volume growth has been impressive over four years. Last year, overall volume witnessed 50% growth while options year-on-year growth was 54% Volume growth year-on-year includes Metals (14%), Equities (62%), FX (116%), Rates (40%) and Energy (15%) Number of active trading companies and users had a marked increase (22%, 16% respectively)

Product Innovation CME also continued to launch new products, widening risk management capabilities, especially to clients in MENA. The group focused on developing products to help clients with their ESG goals by launching Water Index, Used Cooking Oil and Cobalt Electric Batteries futures. Bitcoin Options (Crypto), Micro Emini S&P & Nasdaq-100 options (Equities), Enhanced 3-Year U.S. Treasury Note Futures (Interest Rates), Gold Enhanced Delivery & European Steel (Metals), Block Cheese & South America Soybeans (Agriculture) and LNG futures, Japanese Electricity Futures (Energy) were some the new additions to further diversify the product suite.

www.globalinvestorgroup.com

MENA AWARDS 2021 REAL ESTATE MANAGER OF THE YEAR

MARKAZ The Markaz Real Estate Fund (MREF) is a $220m Sharia compliant income generating open-ended real estate fund investing in Kuwait since 2003 distributing monthly cash dividends. At 0% leverage, MREF generated total returns of 149% since inception in 2003 equivalent to an IRR of 7.6% p.a between 2003 and August 2021, and distributes monthly cash dividends of c.5% Unique Investment offering: Bringing Real Estate to Small investors with as little as $230 Controlled Risk: MREF owns a portfolio of properties in diverse sectors and geographies, selecting sectors based on supply/demand, location, market trends and appeal to end-users targeting the widest sectors reducing sector risks, and diversifying investments into a large number of properties Monthly cash distribution: Properties generate rent income that is routed and managed efficiently paying off expenses

and provisioning for development works on a monthly basis in an efficient and tightly managed process allowing the fund to make monthly distributions to investors. MREF has been paying monthly dividends non-stop since 2003. Open-ended fund: allowing investors to redeem the investment every six months, creating liquidity for a low liquidity asset class MREF also offers unmatched operational excellence: Managing acquisition risk by carrying thorough legal, technical, operational and commercial due diligence on target properties to reduce the risk of value destruction at acquisition. MREF team works hand-in-hand with major property managers adding further value by:

Optimising rent levels Improving collection rates through systematic follow-up on rents and usage of efficient collections, settlements and eviction processes Improving tenant retention Improving occupancy and rent levels by reviewing rent biannually comparing it to market rents through surveys while taking into account differentiating factors between properties Managing Expenses: In November of each year MREF builds property by property budget based on statistics and expense breakdown optimisation. This budget provides a target as well as a plan to improve efficiency and generate better returns. A quarterly actual vs budget review of each line item provides insight on the expenses management effort.

QATAR BROKER OF THE YEAR

QNB FS QNBFS had a successful year, and continued to strengthen its position and increase its offerings in 2021, all the while providing full business continuity to customers throughout the volatile conditions of pandemic related measures. Here are a few highlights: • QNBFS continues to be the leading institutional Qatari brokerage with a market share of 55% of all domestic and foreign corporate volumes, and nearly 25% of total QSE market share. • Number one broker in Listed Qatari Bonds. • Hosted 120 quarterly earnings calls for major listed Qatari companies (the only local broker to offer this service to corporates), and this has helped the Qatar Stock Exchange lead the region in adoption rate of Earnings Calls and their Transcripts • Further developed new initiative, Liquidity Provision (LP), to further

Winter 2021/22

support locally listed companies and overall market liquidity • Went live with Margin Trading • Deployed new online trading system for retail investors (“QNBFS Trade”) • Adapted to WFH measures to ensure continuity, and continued to offer corporate access virtually by hosting online “roadshows” for international investors. Key differentiators: • Dedicated support- The institutional equity sales and execution traders have many years of industry experience in local, regional and global markets. • Conflict free agency only brokerQNBFS is an agency only broker and

only trades on behalf of its client. • Block trading- With broad relationships, QNB FS provides efficient execution for large blocks of stock or thinly traded securities. • Trading execution – Volume and price-based trading strategies are in place to achieve best execution. • Omnibus Accounts - Foreign and domestic entities can trade via an omnibus account structure. • Multi-market execution- Ability to trade multiple markets in multiple currencies is an important valueadded service for our clients. • Liquidity Provider and MarketMaking services which went live in March 2020.

www.globalinvestorgroup.com

MENA AWARDS 2021

OMAN MANAGER OF THE YEAR

BANK MUSCAT The Bank Muscat Oryx Fund is a flagship fund offering for retail and institutional investors. The MENA-focused fund has a solid track record, having delivered 35.4% YTD returns by September 30 2021 against 30.1% in regional benchmark index over the same period. The Fund takes the pole position for the best performing MENA-focused fund amongst its peers comprising 17 funds; it has outperformed the average competitor performance by 1.7x over the 10 year period. This consistent track record of outperformance has been built upon a disciplined, yet dynamic, long-term approach to value-oriented investing in the regional markets that enables the fund manager to look beyond short-term gains. The fund has won numerous accolades from leading award platforms of repute owing to its trail-blazing performance; the Fund earned for the fourth time the Refinitiv Lipper Fund award

for being the best performing MENA fund over three and five year periods in 2020. Bank Muscat’s Asset Management division is a leading asset manager in the MENA region with AUM of $2.2 billion as of September 30 2021. It has an excellent track record of managing funds and portfolios since 1993. This strong position in the local and regional markets has been achieved due to the solid performance registered by funds managed by a professional and experienced team of fund managers. The bank offers a wide range of investment solutions covering equities, fixed income and alternate investment assets.

Additionally, the bank also manages various private equity strategies focused on income generating real estate assets. The Izdihar Real Estate Fund is the flagship real estate fund for investing into income generating real estate assets established in December 2015 and has invested in assets worth $187m. The bank also manages other private equity funds with regional investments of over $325m. Bank Muscat’s clients include reputed Omani as well as regional institutional investors such as pension funds, sovereign wealth funds, corporations and high net worth individuals/ family offices.

TRANSITION MANAGER OF THE YEAR

CITI Citi is committed to providing a first class transition management service to MENA clients by delivering full and direct access to its extensive top-tier trading, settlement and advisory capabilities. Citi has over 30 years of experience in the industry, covering a broad range of asset classes and strategies in various market conditions; making the bank one of the industries’ most experienced TM providers. Citi partners with the world’s largest sovereign & pension funds, asset managers and insurance companies. Over the past year Citi has been helping MENA clients with asset reallocations to ensure they are well positioned to benefit from recovery in global markets post COVID. These projects were time sensitive and required local market knowledge. Citi completed these projects promptly and successfully, having preserved value of client assets whilst minimising costs. This strong performance is highlighted by an 80% win rate

Winter 2021/22

for new business opportunities. Citi’s strengths include: Commitment to the MENA region, TM industry & innovation: Citi has been in the transition management business for over 30 years, with broader banking relationships in the region for over 50 years. Citi continues to increase its presence within the region, and thus developed into a trusted partner for key sovereign & pension funds. Year to date, CitiTM has transitioned over $12bn of assets for the MENA based clients whilst continuing to build new relationships across the region. Solutions based approach: The philosophy is to provide tailored solutionsbased approach to each transition to ensure all client requirements are met

and risks are managed. As clients grow in sophistication and more demanding of trade transparency, CitiTM is able to offer a variety of execution strategies which permits us to offer customised approach to each transition. Global execution platform: The Citi business model offers advantages vs. other TM providers, primarily around costs and liquidity. In Equities, Citi has local trading desks in over 70 countries so almost all trading takes place through Citi’s own infrastructure. In Fixed Income, Citi is able to minimise the transition costs by utilising other brokerdealers and Citi’s own bond inventory, and engaging with Citi’s global client network in compliance with MIFID II Regulation.

www.globalinvestorgroup.com

MENA AWARDS 2021

WEALTH MANAGER AND KUWAIT MANAGER THE YEAR

BOUBYAN CAPITAL Boubyan Capital (Investment Arm of Boubyan Bank) takes pride in ensuring that it provides its clients with an extensive and proven range of wealth management solutions, primarily in the form of investment funds. Asset Management is considered a core service provided by Boubyan Capital, boasting a dedicated team of 40 professionals with expertise in asset management and brokerage. This is proven with the company holding over $1.5bn in assets under management across diverse asset classes (equity, sukuk, real estate and so on), marking 35% growth in AUMs in 2020. The funds under management are: Boubyan KD Money Market Fund II This fund aims to generate competitive shariah-compliant returns on the money invested. It invests in short- and medium-term money market instruments, wakalah and mudaraba deposits as well as an allocation for high quality government and corporate sukuk. Boubyan USD Liquidity Fund The fund aims to generate competitive shariah-compliant returns by increas-

ing its net asset value, while maintaining a high level of liquidity. It invests in short- and medium-term money instruments including bank deposits, investment grade sukuk, deposit certificates and repurchase agreements. Boubyan Multi Asset Holding Fund The fund aims to achieve shariah compliant returns by investing in various local and international Islamic investment funds. The fund aims to diversify its holdings by investing in different asset classes and investment sectors including fixed income funds as well as global equity exchange-traded funds. Islamic Global Sukuk Fund The fund seeks to generate positive re-

turns on the long term with a balanced risk level. Its strategy is to invest in local, GCC and global sukuk denominated in USD. The fund’s holding consist of mainly investment grade sovereign, quasi-sovereign as well as corporate. Some 58% of the fund’s holdings were rated A- and above (as of 30 August 2021). Local and GCC Equity Fund The fund is a regional equity fund that seeks to generate competitive returns with an acceptable risk level by investing in the securities of companies listed on Boursa Kuwait and other GCC stock markets, with a strategic preference for blue-chip companies.

Subscribe to Global Investor Online

Stay ahead of the curve with the latest insights on securities finance, derivatives, custody, fund services, and asset management.

Winter 2021/22

www.globalinvestorgroup.com

MENA AWARDS 2021

UAE BROKER OF THE YEAR

MUBASHER FINANCIAL SERVICES (DIFC) LIMITED Mubasher Financial Services (DIFC) Limited (‘MFS’ or ‘Company’) was established in 2017. The company is a fully owned subsidiary of Global Market Access Network (DIFC) Limited (‘GMA’) and is regulated by the Dubai Financial Services Authority (‘DFSA’). MFS employs over 45 employees and operates in the DIFC, Dubai. The company is built on strong FinTech financial services foundation which has evolved over the past two decades in the MENA region. The company serves as a broker to the brokers and has a unique B2B and B2B2C offering called Global Trading Network (GTN), an ecosystem that connects and empowers brokers and asset managers across the globe to set-up and operate best-in-class trading capabilities. Coupled with fully fledged financial services, MFS offers a one-stop shop value proposition to customers offering

execution in over 60 countries (63% of the MSCI classified markets) and covers 10 different asset classes. MFS currently has over 180 regional and international clients including some of the largest brokerage houses in the MENA region. The single counterparty offering by MFS connecting the global markets has been beneficial in the recent past especially during the period hit by the pandemic. Being a one-stop shop for trading and settlement for multi-market and multi-asset classes, powered by award winning technology, MFS has been able to facilitate efficient and cost-effective investment solutions to clients, helping

them to add more variety to their product portfolio and empowering them with avant-garde trading tools. The digital wealth management platform launched this year is set to revolutionise the investment sphere in the region similar to the one-stop trade execution platform. MFS has also been adding new markets to its network with special emphasis on emerging & frontier markets. Technology has been a key driver of the MFS offering. The trading ecosystem is built on state-of-the-art multi-channel front-end and back-end applications that ensures seamless trade flow in between the end clients and the brokers.

SUB-CUSTODIAN OF THE YEAR

HSBC HSBC won the sub-custodian of the year award for its continued commitment to the region, as detailed here: • Direct Custody since 1990s and only international custodian bank present in all GCC markets • Leading securities service provider in MENA, with significant market share of local securities held by cross border clients • Deep regional footprint with far-reaching international network and experienced local teams with in-depth understanding of the local markets • Significant and diverse client base comprising global custodians, broker dealers, asset managers • Leading market advocacy and regulatory engagement - contributed significantly towards the development of the region’s markets, many of which were upgraded to Emerging Market status by global index providers such as MSCI and FTSE Russell

Winter 2021/22

• Settled the first ever Stock Loan transactions in Saudi Arabia • Strong business continuity plans ensured the bank operated in a businessas-usual capacity from home/ split-site following COVID-19 outbreak Continuous Growth and Investment HSBC witnessed strong business growth in MENA during the period September 2020 to August 2021, with transaction volumes increasing over 53% in while AUC increased 131% Following inclusion of Kuwait in MSCI Emerging Markets Index, HSBC Kuwait witnessed 95% increase in transaction volumes and 72% growth in AUC during the period September 2020 to August 2021. During the MSCI inclusion event in HSBC processed multiple times the usual trade volumes and achieved a high trade matching rate of 99.7%

Post MSCI inclusion in 2019, HSBC Saudi Arabia continues to maintain its strong market leading position with significant AUC and transaction volume growth Thought Leadership and Client focus Only custodian in the region to host a dedicated event for Securities Services Regulators and market authorities are prominent participants, alongside key institutions from across the region - a virtual event in March 2021 saw record number of participants across regional/ international clients, regional regulators, Stock Exchanges and Depositories Actively engaged with the Kuwait authorities to support their objectives and successfully achieve MSCI Emerging Markets reclassification and suggested various initiatives to facilitate client access to the Kuwait market through a smooth inclusion event.

www.globalinvestorgroup.com

SECURITIES FINANCE

ANDREW DYSON, INTERNATIONAL SECURITIES LENDING ASSOCIATION

‘Most looking forward to a normalised year’, says ISLA’s Dyson The International Securities Lending Association’s chief executive Andy Dyson talks to Ramla Soni about the state of the industry it represents.

Winter 2021/22

As we delve into the new year and look back on 2021, the securities lending industry’s main trade body said one of the things it is “most looking forward to is a more normalised year”. Speaking to Global Investor, Andrew Dyson, CEO of the International Securities Lending Association (ISLA), said everyone will “welcome a more normalised year and working environment” after working remotely for most of last year. “Although, we adapted well to working from home and reflecting the needs of our members, this is an industry that thrives on engagement,” Dyson said. “Unlike some markets where it’s quite remote and anonymised, this is a sector that functions around those personal relationships that people have”. However, although the last year was “challenging”, Dyson said he is happy that most of the major things the organisation wanted to accomplish were achieved. Firstly, there were two big elements to the Central Securities Depository Regulation (CSDR), which was a “big area of focus from an advocacy perspective”, Dyson said. One element was the mandatory buying regime, which “after a considerable joint association and market efforts to get the mandatory buy-ins deferred, we successfully achieved that, in December which was a big element of 2021,” Dyson explained. Since the clarification of buy-ins, the association has been working “extensively” with members around

www.globalinvestorgroup.com

Due to ESG, which is the biggest single change to the way we think about lending in the front office, and which is driving and changing fund manager behaviour, the way people think about lending in this context is changing, and as an industry that needs responding. how they rethink their business to minimise fails. ISLA said this is a “very positive outcome for the industry, the association, and our members”, he added. The other element to CSDR is fines for failing settlements which are to come into effect from February 1. Dyson said: “We expect February and March to be pretty turbulent months when it comes to understanding what’s going on”, adding that “some of the fines are going to be much bigger than people expect”. Another accomplishment from last year is in the digital space which is a “strategic focus for ISLA”, Dyson said. In the middle of last year, the association delivered a minimum viable product within the Common Domain Model (CDM) for securities lending, which was a “big milestone delivery”. From a technical perspective, this means “the code is being made available in open source, which allows market participants, vendors and other stakeholders when they’re looking to develop and build platforms or products, to now build those in the confidence and to an industry standard”, Dyson explained. “Over time, that means even simple things about how you describe a transaction will become standardised, so when you have things like reporting, and in due course, digital reporting coming through from regulators, it

makes that process much easier.” Alongside that, ISLA also developed the ISLA Clause Library & Taxonomy, centring around the legal business, which Dyson described as “a big step along the way to building the standard terms of a contract into the CDM”. He continued: “ISLA began and completed the process of standardising the terms and business outcomes in those agreements, which meant that we recognised early in the process that there were many variances to terms that people use to get a standard outcome. Now when people are negotiating contracts, they just look at the outcomes they want to get to and pull the term that relates to it, making the legal process much quicker and more streamlined.” Another highlight for ISLA in 2021 was becoming a founding member of the Global Alliance of Security Lending Association (GASLA). In doing so, the association “was able to respond to a desire from its members to speak with one voice globally on certain issues, many of which related to Environmental, Social, and Governance (ESG)”. Dyson said: “Due to ESG, which is the biggest single change to the way we think about lending in the front office, and which is driving and changing fund manager behaviour, the way people think about lending in this context is changing, and as an industry that needs responding.” Therefore, the first thing that ISLA

When you have a persistently high settlement fail rate at 10%, you need to understand what the root causes for that are, and not create something else that just allows you to deal with it in a more efficient way.

Winter 2021/22

published under the GASLA banner was a best practice guide to voting in the context of security lending. “There is more to come this year in that space around things like collateral”, Dyson added. In terms of ISLA’s agenda around collaboration, they also worked with the Pan-Asian Securities Lending Association (PASLA), which Dyson said led to a “slightly different approach” in how the association now handles its master agreement and how it has been used, particularly in Asia. Dyson explained that previously if people wanted a particular annex that covered a specific country in Asia, it was developed away from the association. So, in collaborating with PASLA, the association decided it was a “good idea to bring that process primarily back into the world where the Global Master Securities Lending Agreements sit”. Although there is more work to do as ISLA “broadens out the reach” of its master agreements, Dyson said the association has “already seen a huge level of interest” from member firms, both in Asia and Europe. “Over time we think that is going to deliver huge incremental benefits in terms of efficiencies to our over 170 members”, Dyson added. Another area ISLA would like to continue to focus on this year is recognising and understanding settlement fail rates. Dyson said: “When you have a persistently high settlement fail rate at 10%, you need to understand what the root causes for that are, and not create something else that just allows you to deal with it in a more efficient way.” He added, in a world pre-CSDR, the 10% rate “may be interesting, but not more than what CSDR will bring with it, such as real monetary penalties”.

www.globalinvestorgroup.com

SECURITIES FINANCE

ANDREW DYSON, INTERNATIONAL SECURITIES LENDING ASSOCIATION

SECURITIES FINANCE

ANDREW DYSON, INTERNATIONAL SECURITIES LENDING ASSOCIATION

One way ISLA minimises the impact of failures is by working with its member firms to develop best practice, which is a “big push this year”. Dyson said: “It’s simply the way we do business with each other that is deemed to be the most efficient way of getting things done. We’re not a regulator, so cannot compel people to do things but what we can say to people is, if you do things this way, then you are probably doing it as well as you can.” As the industry sees the adoption of best practice, “it will in itself begin to pay dividends to members, because they will see efficiencies come through, such as settlement rates improving”, he added. Inevitably, sustainability is another area that “plenty more work” is needed in, both as an industry and with wider stakeholders, according to Dyson. Dyson, who has been CEO at ISLA since June 2016, said: “We are finding a lack of clarity from the regulatory community around things like definitions. The idea of ESG ratings is now at the forefront of everybody’s thinking and we need regulators to help define that landscape. Without that, it is very hard to move forward, as you then get a myriad of different people with different views on things like ratings.” To help change these perceptions, Dyson said, ISLA have been working with a UN mandated investment group that provides advice to people with common interests. ISLA have also been working with Socially Responsible Investing (SRI) labels that cluster around investment communities in different countries. “For example, if you have a fund and you want to get it a gold star of acceptability from an ESG perspective, you’ll want to get one of their

If people are going to make a decision about lending, then what is really important is they are making decisions based upon informed facts, which is what ISLA is all about. certificates”, Dyson explained. This year ISLA will be doing more work in the sustainability space not only with their members, and with the regulatory community, but also with such interest groups too, Dyson said. “If people are going to make a decision about lending, then what is really important is they are making decisions based upon informed facts, which is what ISLA is all about.” Furthermore, ISLA also recognises diversity and inclusivity going into 2022, which “plays out into areas such as how one views the workplace”. ISLA, which has a workforce of 14, implemented flexible working before the pandemic. Dyson noted the reason behind this was because it “recognises that there are a number of people in our group, who have other commitments they have to prioritise in their lives, whether it be elderly parents they’re caring for, or children at school”. Therefore, if organisations want to “attract true talent, but also embrace true inclusivity you have to have that flexibility in place to support people through their individual journeys”, Dyson stated. As well as “setting the conduct or the tone” around themes like diversity and inclusion, Dyson said, one aspect that is “changing and has changed over time is how ISLA has become a recognised place where people come from the industry to collaborate on important topics, such as the regulatory agenda”.

“The Securities Financing Transactions Regulation (SFTR) taught us that if you have to solve a very complex, and at times challenging cross market issues, you can only really do that through someone like ourselves, which has led to huge support from our members.” he added. As well as the big regulatory agenda that ISLA has in store this year, Dyson said that the ISLA 29th Annual Securities Finance & Collateral Management Conference, taking place from 6-8th June at the Marriott Hotel in Vienna, is one he is looking forward to the most this year as the industry gradually returns to normality. He said: “We have had 700+ people previously come together for our annual conference. Although we may not see the same amount in person this year, if we were to see half of that in person, combined with the addition of streaming this event to an online audience for the first time, it will be a massive step forward for the reengagement of the industry.” ISLA also plans to host small regional events this year too. Overall, despite the challenges in 2021, Dyson concluded: “As an association we always keep in mind to do the things our members want from us and that is reflected in our 2022 agenda. So, that idea of the association as a custodian of standards, whether they be best practice, digital, sustainability or master agreements, is the big theme for this year.”

The Securities Financing Transactions Regulation (SFTR) taught us that if you have to solve a very complex, and at times challenging cross market issues, you can only really do that through someone like ourselves, which has led to huge support from our members.

Winter 2021/22

www.globalinvestorgroup.com

Securities Finance 2021 Year in Review

In pre-market trading the security rose as high as $260, an increase of 76% from its last close of $147.98. The company’s shares soared for a fourth straight day and are now worth $10 billion, according to figures from MarketWatch.

FEBRUARY

2021 casts short-selling into the spotlight Last year was the year that short-selling and securities lending made front pages globally, leading to increased scrutiny from regulators. JANUARY Final phase of Europe’s SFTR goes live The fourth and final phase of Europe’s stock loan and repo reporting rules went live on Monday January 11. The latest wave sees non-financial counterparties (NFCs) come into scope of the Securities Financing Transactions Regulation (SFTR), which requires firms to report details of their securities finance transactions to a trade repository. Short sellers lose more than $5 billion on GameStop GameStop shares continue to rally and are now up more than 370% in 2021, as shorts in the stock drop more than $5 billion (£3.6 billion).

Winter 2020/21

US regulator to release report into GameStop affair The US Securities and Exchange Commission (SEC) intends to release a “timely study” of the events that unfolded in the US equity market. The decision comes after highranking individuals within the country’s financial system met to discuss the recent market volatility, during which GameStop shares soared more than 1,600%.

MARCH Regulators must remain ‘impartial’ on short activism Regulators must take an “impartial” view of short activism, according to sustainable securities lending body Global PSSL. The organisation underlined that short selling supports a wellfunctioning market, while providing an opportunity for market participants to discover poor governance and environmental and social mismanagement.

APRIL Credit Suisse reshuffles board after Archegos incident Credit Suisse has announced a number of changes to the group’s executive board following the incident that unfolded just over a week ago involving family office Archegos Capital Management. Credit Suisse and Nomura said in late March they would incur significant losses after Archegos was forced into a fire sale of assets and

defaulted on its market calls on March 26. US regulator welcomes new chair Gary Gensler US regulator the Securities and Exchange Commission (SEC) has welcomed Gary Gensler as chair of the body, after the Senate voted 53-45 in his favour on Wednesday. Gensler, who was nominated for the role by US president Joe Biden, will play a crucial role in enforcing and drafting the rules that govern Wall Street and other investors.

MAY US plans to boost transparency in short-selling The US is considering new rules to force firms to disclose more information about their short-selling activities in what could be a significant development for the world’s largest securities finance market. Gary Gensler, the new chairman of the Securities and Exchange Commission, said he has instructed staff to propose new guidelines around transparency in the stock loan market.

JUNE US regulator looks to increase short sale transparency The US Securities and Exchange Commission (SEC) has announced its plan to increase market transparency with the introduction of new regime surrounding short sale disclosure. The move comes as part of the SEC’s annual regulatory agenda and following a period of heightened volatility in the US equity market, partly due to an increase in retail market participation.

JULY Trade association calls on EU to delay CSDR The European Fund and Asset

www.globalinvestorgroup.com

SECURITIES FINANCE

2021 YEAR IN REVIEW | SECURITIES FINANCE

SECURITIES FINANCE

2021 YEAR IN REVIEW | SECURITIES FINANCE

Management Association (EFAMA) has called for a further delay to the EU’s Central Securities Depositories Regulation (CSDR) after it was announced that a review was underway. The trade association expressed its concerns earlier in the month on the implementation schedule of the regulation following a review that was still unclear.

AUGUST Clearstream complies with European settlement regulation Clearstream, the Deutsche Boerseowned post-trade services provider, has achieved full compliance with Europe’s Central Securities Depositories Regulation (CSDR). The announcement from the group comes after its German central securities depository Clearstream Banking AG was awarded its CSDR license.

SEPTEMBER Wematch, Pirum partner on European settlement regulation Securities finance fintech Wematch has partnered with connectivity specialist Pirum to develop a service to enable clients to avoid fines under European settlement regulation. The two London-based firms, that launched jointly last year a front-toback securities lending platform, said this latest delivery enables firms using Pirum’s Trade Risk Manager to cover failing trades using the Wematch platform.

OCTOBER Short-selling is compatible with ESG principles - think-tank Short-selling is compatible with environmental, social and governance (ESG) investment principles, a thinktank has claimed. Financial think-tank Planet Tracker

Winter 2020/21

said shorting an unsustainable listed firm is an acceptable strategy for ESG investors and is an important part of the responsible investor’s toolkit. Half of firms see US equities on T+1 by 2026 - Citi Almost half of the respondents to a survey by Citigroup believe that the US equity settlement cycle will be reduced to T+1 in the next five years, reflecting growing pressure for a cut in the US. The US bank published the results of a global study that polled over 400 banks, brokers and asset managers on some of the key issues around custody and settlement. EquiLend hits record trading day in a busy September EquiLend said it had its busiest trading day at the end of September, reflecting a strong month of trading driven by heightened demand in Europe and North America. The London-based securities lending platform had its busiest single day of trading on September 21 when it executed over 126,000 transactions with a combined value of $173 billion (£127bn), the firm said in a statement. State Street completes first trade on buy-side repo platform US banking giant State Street said it has completed the first trade on its new buy-side peer-to-peer repo platform, marking another key step in the gradual adoption of peer-to-peer solutions. State Street said the first trade on the innovative new platform was executed by a large asset owner and an investment manager but did not disclose their names.

NOVEMBER Credit Suisse to close prime services business Credit Suisse plans to close its prime services business as the Swiss banking giant moves to a new strategy in the

wake of the Archegos default and the Covid pandemic. Credit Suisse said its board has agreed “a long-term strategic direction for the Group and approved the introduction of a global business and regional matrix structure”. Euronext to maintain repo clearing link with LCH Euronext has said it does not plan to expand its Italian repo clearing service into other European markets after announcing a decision to develop its Italian clearing house to support its various European equities and derivatives exchanges. Anthony Attia, Euronext’s global head of primary markets and posttrade, said the exchange group will maintain its current repo clearing relationship with LCH SA, the French arm of the LSE Group clearing house. Euroclear eyes settlements using central bank digital currencies Euroclear Group is looking to move next year from experimentation to production on the use of central bank digital currencies (CBDCs) for settlements. Having successfully tested the use of CBDC for the settlement of French government bonds, Euroclear told Global Investor that the next stage would be to deploy the offering.

DECEMBER UK loses e33bn of repo trading due to Brexit - report The UK has lost €33bn of repo trading to Europe due to Brexit, according to the latest European repo survey from the main fixed income trade body. The International Capital Market Association published its latest European Repo Survey that tracked repo trading activity in the first six months of 2021. For Securities Finance daily news go to: www.globalinvestorgroup.com

www.globalinvestorgroup.com

Société Générale Securities Services to focus on digitisation, ESG Societe Generale Securities Services (SGSS) has identified further digitisation and the development of its environmental, social and governance (ESG) offering as key themes for 2022. By Perle Battistella Speaking to Global Investor, David Abitbol, head of SGSS, says: “2021 was a very good year for Societe Generale as a whole and SGSS specifically. Markets were very active, so we benefited, amongst others, from the volumes and market valuations. While we are still in the pandemic, what I see when I discuss with our clients is really an acceleration in their expectation on digitisation and ESG.” At the end of the third quarter last year, SGSS reported a revenue increase of 6.9% to €155 million (£129 million) compared to the same period in 2020. The bank’s assets under custody in the third quarter stood at €4.475 trillion, compared to €4.328 trillion in the third quarter of 2020. SGSS’s assets under administration increased by 2.9% in the third quarter compared to the third quarter of 2020 to €680 billion. “We built our strategy roughly at the end of 2019 and we have not changed the views that we have on the market or on our objectives,” adds Abitbol. SGSS is also looking to serve the growing appetite for private markets in 2022, according to Abitbol. He states that, for private markets, the French banking giant is seeing a strong demand

Winter 2021/22

2021 was a very good year for Société Générale as a whole and SGSS specifically. Markets were very active, so we benefited, amongst others, from the volumes and market valuations.

www.globalinvestorgroup.com

CUSTODY

DAVID ABITBOL, SOCIÉTÉ GÉNÉRALE

CUSTODY

DAVID ABITBOL, SOCIÉTÉ GÉNÉRALE

for ESG products. As such, SGSS is developing strategies that are ESG by design. “We are trying to make sure that our services and products, especially when it comes to data and analytics, can help these players make better decisions. “One challenge with the private market is that if you want to have a complete set of ESG data, there are many data points that you need to gather. At SGSS, we are developing very concrete solutions for some of our clients and the aim is to continue to develop more datadriven solutions,” says Abitbol. SGSS enhanced its partnership with MFEX, the fund firm, in July of last year. Through this, the bank’s clients have access to a single point of entry for managing real-time updates on transactions, transfers, cash flow and securities operations. The extension also offers SGSS’s clients solutions for disseminating customised data and documents to distributors, and their digital compliance services. These developments align themselves with SGSS’s ambition to have ESG entrenched across all its products and services. Abitbol says this comes from a stronger emphasis on the ESG requirements across all assets because of investor appetite and regulations that are becoming more and more demanding. The European Union’s Sustainable Finance Disclosure Regulation (SFDR) is a regulatory example that impacts

asset managers and seeks to increase transparency to help investors better analyse the sustainability of products. SFDR came into force in March 2021 and requires asset managers to provide more sustainability related information to prevent greenwashing. For example, funds must be labelled as Article 6, 8 or 9 products. An Article 6 product does not integrate sustainability at all within the investment process; Article 8 products promote environmental or social characteristics; and Article 9 products have sustainability as their investment objective. In April 2021, Societe Generale joined the UNEP-FI Net Zero Banking Alliance as a founding member. This means that it will aim to align its portfolios to be carbon neutral by 2050 and also with the ambition of limiting global warming to 1.5 degrees Celsius. Abitbol says there is also a clear demand from retail investors for investments in private equity markets. “When it comes to retail, we cannot use the same processes that we have for institutional investors, so we are developing retail processes that can help our clients to manage these kinds of investments that are very different from the ones that we have been servicing,” adds Abitbol. Two and-a-half years ago, SGSS made the decision to focus most of its investments on the asset management and asset owner segment. “While we

+6.9%

e145m

e155m

are a global player, we have strong roots in Europe and so, in order to really develop our pan-European reach, we decided to focus on this segment under transformation and further consolidate because of the constraints that they have in terms of digitisation, price, and regulation,” says Abitbol. Another point in its strategy is about helping asset management clients manage their own constraints in terms of profitability, which will lead them to outsource more processes. In the United States, asset managers have been outsourcing far more processes than European managers, according to Abitbol. Subsequently, SGSS sees room for them to develop an offering to support clients and to move its core services to additional services to diversify its sources of revenue. Societe Generale announced in April 2021 that its Board of Directors had approved the entry into exclusive negotiation with Amundi to dispose the asset management activities operated by Lyxor Asset Management, a wholly owned subsidiary of Societe Generale. The French bank said that the sale is in line with its strategy with regards to savings. This entails operating in an open architecture and to propose investment and asset management solutions to its clients through partnerships with external asset managers. Founded in 1998, Lyxor is a key player within the exchange-traded fund (ETF) market in

+10.9%

+3.4%

e4475m

e4328m

e680m e613m

Revenue end of

Assets under custody end of

Assets under administration end of

Q3 2020

Q3 2021

Q3 2020

Q3 2021

Q3 2020

Q3 2021

At the end of the third quarter last year, SGSS reported a revenue increase of 6.9% to e155 million (£129 million) compared to the same period in 2020. The bank’s assets under custody in the third quarter stood at e4.475 trillion, compared to e4.328 trillion in the third quarter of 2020. SGSS’s assets under administration increased by 2.9% in the third quarter compared to the third quarter of 2020 to e680 billion.

Winter 2021/22

www.globalinvestorgroup.com

Europe. As of September end, Lyxor’s net banking income stood at €64 million, a 21% increase compared to the same quarter the previous year. In the third quarter, asset under management were reported at €169 million, a 28% rise year-on-year. In December 2021, the two French firms announced the completion of the Amundi acquisition of Lyxor from Societe Generale. Societe Generale said that the transaction, valued at €825 million, had been completed two months sooner than previously scheduled. SGSS has been investing a great deal in technology and the bank’s securities services arm is transforming its platform to be open architecture and more cloudbased with application programming interfaces (APIs). “This will help us to achieve our objectives. The first is to improve the client experience and provide additional services around data. “The second is pricing because the new platform will help us remain competitive in terms of price and quality of service. Lastly, if we have a platform that is very open, it gives us the opportunity to partner with some players in the market that can complement our range of services and solutions,” says Abitbol. There is also rising interest in cryptocurrency assets. In order to meet this increase demand from clients, Abitbol says that SGSS has been offering its cryptocurrency solution through Forge, a subsidiary of Societe Generale, for the last three years. SGSS is also experiencing a rising demand for cryptocurrency custody from investors with their own cryptocurrency custodian but who are looking for a third-party to do their record keeping. The securities services business is also noticing that there are clients who are not only asking for record keeping, but also cryptocurrency custody. Abitbol outlines that SGSS’s priority is to develop both offerings. “The first one, which is aligned with our traditional business, is to offer the record keeping for any asset class, but we are also considering the opportunity

Winter 2021/22

to develop with the Group, a solution in terms of crypto custody. I personally believe that the crypto custody space will develop quickly, and our view is to see how we can accommodate the demand while strengthening our offering for the coming years. That is why crypto custody is an area that we are considering,” comments Abitbol.

Abitbol concludes: “Our North Star is the client experience; everything that we do in SGSS in terms of organisation, governance, product design, service design, process design, IT development and efficiency, and digitalisation, we do it with one driver, which is to deliver the best possible client experience.”

Abitbol: “I personally believe that the crypto custody space will develop quickly, and our view is to see how we can accommodate the demand while strengthening our offering for the coming years. That is why crypto custody is an area that we are considering”.

www.globalinvestorgroup.com

CUSTODY

DAVID ABITBOL, SOCIÉTÉ GÉNÉRALE

CUSTODY

THOUGHT LEADERSHIP: RBC Investor & Treasury Services

RBC Investor & Treasury Services sees technology playing greater role in transfer agency RBC Investor & Treasury Services (RBC I&TS) won at the end of last year the Global Investor Investment Excellence Award for Transfer Agency (TA) services for the second year running. Here Ronan Doyle, Global Head of Product & Profitability, Transfer Agency at RBC Investor & Treasury Services, reflects on that success, outlines the priorities for his business and discusses the role of new technologies in the delivery of transfer agency services. By Luke Jeffs Ronan Doyle has been at the cutting edge of transfer agency services for over three years. As global head of product & profitability for transfer agency at RBC I&TS, Ronan is running product innovation as the market-leader in this specialist function. Recently RBC I&TS has adapted its focus to concentrate on some of the more complex functions within the transfer agency service suite to reflect the progress that the company has made. Doyle told Global Investor: “We have a long history of innovation in our transfer agency business. Back then it may have been called automation rather than digitisation but we have always been at the leading edge in terms of being able to support different fund products and automating trade processes from different parts of the world.” He added: “More recently, we have invested significantly in our data and analytics platform, so we have effectively introduced an entirely new layer of state-of the-art technology

Winter 2021/22

to support real-time transmission of data, and the development of insights and dashboards that we can share with our clients and their investors.” Global custodians have in recent years been looking to use more intelligently the data that can be derived from the assets they hold on behalf of clients which is changing the dynamics of the relationships between these firms and their clients. Doyle said: “That has been a boost for us because it allows us to interact with clients where they want us to via APIs but it also allows us to plug-in other technology solutions in a much easier way and integrate those into our platforms via the API hubs we have in place. “The current focus is getting to the harder-to-reach parts of digitisation in the transfer agency environment, so we think a lot about investor onboarding and everything that comes with that.” Of course, client onboarding brings with it a unique set of challenges: “From an AML/ KYC perspective in Europe, we know there are significant expectations from a regulatory point of view that need to be adhered to

and that drives a complex operating environment, which is always the hardest to digitise.” But the digitisation of client onboarding is also important for another reason, said Doyle. “We are making strides in improving in that area and we are committed to that initiative because we hear it from our clients. A number of years ago, maybe our clients and probably TAs treated onboarding as a compliance activity. Now there is much more recognition that this is the first point where the investor touches the fund, so it represents the start of the relationship that the investor has with the fund manager so it’s really important to them, and, if it’s really important to them, it needs to be really important to us.” Doyle said the investments in digitisation by his team reflect changing expectations on the part of clients: “Investors now expect the kind of interaction they have in their day-to-day lives – a digital, easy-touse, positive experience – so we need to provide that. That is the focus right now but it has been progressive over time while the commitment

www.globalinvestorgroup.com

Investors now expect the kind of interaction they have in their day-to-day lives – a digital, easy-to-use, positive experience – so we need to provide that. Ronan Doyle, RBC Investor & Treasury Services

to technology and digitisation has always been there.” As well as deploying technology into new areas, Doyle and his team are also tracking emerging technologies such as distributed ledger. He said: “Our view is, if you look at the technology, what it does and what it can achieve, it lends itself very well to the transfer agency environment. You can apply it to different elements of financial services but it lends itself very well to transfer agency. “That said, there are definitely some proof points still outstanding. Has it been deployed in scale? Clearly not

as of yet. There are changes ahead no question but our view is it’s the type of technology that should be able to take transfer agency into the next generation,” Doyle said. Doyle sees distributed ledger technology possibly playing a key role in improving the timeliness of the delivery of transfer agency services. “If we look to the trade processing area within transfer agency, there’s a lot that blockchain and distributed ledger can do to support a much-more real-time experience for investors and clients. Ultimately, that’s what we are about – we are interested in solutions that are digital and future-oriented

but that provide the opportunity to deliver a better service to our clients.” Doyle said he is working hard on the deployment of distributed ledger technology but agrees there are still outstanding questions about the technique. “We are very interested in that space – we have a number of engagements under way with fintechs and other parties where we are actively building solutions around the transfer agency use-case. And we see it as something that we expect to be doing more of over the coming years. We see it as a major potential transformative opportunity for the industry. Disruptive? Potentially but one of the aspects that needs to be worked out is the business model. We talk about the technology and what it can achieve but how the business model evolves is going to be equally interesting.” RBC I&TS continues to lead the field in transfer agency services. Its commitment to technology and new approaches such as distributed ledger should ensure it maintains that position for years to come.

To contact Ronan Doyle, please email: ronan.doyle@rbc.com

Full interview available to view on digital version of Global Investor at www.globalinvestorgroup.com

Winter 2021/22

www.globalinvestorgroup.com

CUSTODY

THOUGHT LEADERSHIP: RBC Investor & Treasury Services

CUSTODY

2021 YEAR IN REVIEW | CUSTODY

Custody 2021 Year in Review

Custody reaches new heights in 2021 Last year saw the world’s largest custodians competing for mandates and with new service. JANUARY BNY Mellon’s custody assets top $41 trillion BNY Mellon’s custody business lagged State Street’s on asset growth in the fourth quarter but BNY remained the largest bank by assets under custody at $41.1 trillion (£30 trillion), up from $37.1 trillion in the same period last year. The bank said the rise reflected higher market values and client inflows, as well as the favourable impact of a weaker US dollar and net new business.

management platform dubbed thinkFolio, to streamline operations for asset managers and asset owners. The partnership will see the integration of thinkFolio and the Chicago-headquartered bank’s middle office outsourcing platform to offer mutual institutional clients access to solutions and leverage the firms’ strengths in the investment value chain. Citi names ex-State Street exec as EU custody head Citi has named Maria Cantillon as its head of sales for custody and fund services for Europe, the Middle East and Africa (Emea), where she replaces Matthew Bax. Cantillon joins from State Street where she spent more than a decade, most recently as the Emea head of sector solutions and before, as the global head of alternatives asset manager solutions.

MARCH Diginex set to launch multi-custodial solution Singapore digital assets firm Diginex is gearing up for a multi-custody offering on its institutional crypto exchange EQUOS as it launches its own utility token. “We’re… the first Nasdaq-listed company to issue its own token,” chief executive Richard Byworth told Global Investor. “The token will form collateral for derivatives on our platform. You can effectively earn the token by trading on the platform and then those earnings can be used on their own as a collateral base for your options trading.”

APRIL FEBRUARY Northern Trust, IHS Markit extend partnership Northern Trust has entered an agreement with IHS Markit, which provides a multi-asset investment

Winter 2020/21

BNY Mellon surges forward with collateral initiative BNY Mellon continues to find opportunities in the collateral management space and is pushing

forward with its ‘Future of Collateral’ initiative, as it looks to help clients utilise their high-quality assets. Brian Ruane, chief exec of clearing and collateral management for the bank, said: “The move fits directly into our larger ‘Future of Collateral’ initiative and is part of our commitment to provide our clients with the ability to connect high quality assets into our triparty platform more efficiently in order that those assets can both be used for their general collateral management needs.”

MAY Clearstream Fund Centre part of four-pronged strategy – CEO The CHF 390 million (£308 million) acquisition of the remaining 49% of a fund distributor from UBS represents one part of a four-pronged strategy at post-trade giant Clearstream, its chief executive has said. Deutsche Boerse-owned Clearstream acquired the 49% of a Zurich-based fund platform owned by Swiss bank UBS, meaning that Clearstream now has 100% of the firm after it bought 51% in September 2020.

JUNE Northern Trust names new APAC head Northern Trust has named Angelo (Ange) Calvitto as head of Asia Pacific (APAC), who takes over from William Mak who is retiring from the bank after 11 years. Peter Cherecwich, president of Corporate & Institutional Services, Northern Trust, commented: “The Asia-Pacific region is a leading centre for technology innovation, with Singapore as a key hub, particularly for our blockchain initiatives.”

www.globalinvestorgroup.com

JULY State Street strengthens ties in the Middle East US custody giant State Street has formed an alliance with First Abu Dhabi Bank (FAB) to offer enhanced securities services to clients in the Middle East and North Africa (Mena). The partnership will combine FAB’s regional securities services know-how with State Street’s global capabilities. CSDR, T+1 could impact middle offices - report The looming European settlement discipline regime and the proposed US T+1 settlement cycle could be problematic for trading firms’ middle offices, a new survey has suggested. Torstone Technology and GreySpark Partners surveyed 58 participants working in middle office roles across Emea, Asia Pacific and North America from both buy and sell-side institutions.

AUGUST BNP Paribas secures QFI license in China BNP Paribas has been given the green light to provide custody services in China under its Qualified Foreign Investor (QFI) scheme. Effective immediately, the bank can now directly support foreign institutional investors across the full scope of schemes, allowing access to China’s equity and bond markets, will also providing a full range of foreign exchange services. BNY Mellon begins securities services offering in Saudi BNY Mellon and Saudi-based SNB Capital announced institutional clients now have access to securities services capabilities in Saudi Arabia. The US custody bank announced in October of last year that it had entered into an alliance with NCB Capital, now known as SNB Capital after merging with Samba Capital.

Winter 2020/21

Citi names Southgate head of collateral in Europe Global custodian Citi has named John Southgate as its new director, head of collateral services in Europe, the Middle East and Africa (EMEA). Working in the bank’s securities services division, Southgate will lead the bank’s collateral efforts across the region. He joins the banking giant from Margin Reform, where he was a senior consultant for 12 months.

SEPTEMBER State Street to acquire Brown Brothers Harriman State Street has said it plans to acquire Brown Brothers Harriman’s Investor Services business for $3.5 billion (£2.54 billion) in cash, subject to regulatory approval. The deal refers to Brown Brothers Harriman’s (BBH) custody, accounting, fund administration, global markets and technology services. BBH will continue to own and operate its private banking and investment management businesses following the acquisition. State Street said the transaction would advance its plans on being the global leading asset servicer. Broadridge to reshuffle its asset servicing offering Broadridge has said it is looking to reshuffle its asset servicing line over the next six months to give clients a more unified product offering. Demi Derem, general manager, international investor communication solutions at Broadridge, said: “We are looking to bring together our individual asset servicing component capabilities under one product umbrella. Effectively bringing together our proxy and corporate actions, sourcing, and execution solutions.”

Northern Trust has promoted Gary Paulin to lead global strategic solutions for the US custody bank’s asset servicing unit. In the new London-based role, Paulin reports to Pete Cherecwich, president of corporate & institutional services at Northern Trust. BNY Mellon ‘winning against competition’ - CEO BNY Mellon has said it is seeing improved client retention rates and it is “definitely winning against the competition” as the US banking group reported assets under custody up 17% to more than $45 trillion (£32.6 trillion).

NOVEMBER CSDR mandatory buy-ins delayed – Commissioner The European Commission, Council and Parliament have agreed to delay the mandatory buy-ins under the settlement discipline regime of the Central Securities Depositories Regulation (CSDR). Mairead McGuinness, European Commissioner for financial services, financial stability and Capital Markets Union, said she welcomed the agreement of the European Parliament and the Council to change CSDR and allow a postponement of mandatory buy-ins.

DECEMBER Trio of banks join State Street to service BlackRock’s iShares BNY Mellon, Citi and JP Morgan have joined State Street in servicing BlackRock’s $2.3 trillion (£1.74 trillion) iShares. The banks will act as post-trade service providers for the asset manager’s US-domiciled exchange-traded funds (ETFs).

OCTOBER Northern Trust promotes Paulin to newly created role

For Custody daily news go to: www.globalinvestorgroup.com

www.globalinvestorgroup.com

CUSTODY

2021 YEAR IN REVIEW | CUSTODY

DERIVATIVES CUSTODY

ANALYSIS: MICHAEL PETERS, EUREX

Deutsche Boerse-owned Eurex continues to dominate the European derivatives trading market and, as markets recover from the pandemic, the firm is looking to nascent businesses to grow its global presence. By Radi Khasawneh

Eurex plots global growth amid product push Michael Peters, who succeeded Thomas Book as chief executive officer of Eurex Frankfurt AG in July 2020, spoke to Global Investor about the key themes for the exchange as the new year takes shape.

Winter 2021/22

“As we look at the overall market landscape and trends for 2022, there is certainly a different dynamic developing,” Peters said. “2021 was very much driven by one theme and that was recovery from the pandemic. Along with

that, we have seen a continuation of the theme of rising inflation and potentially increasing interest rates.” Consumer price measures of inflation started to rise at the end of last year across Europe and the UK, and

www.globalinvestorgroup.com

2021 was very much driven by one theme and that was recovery from the pandemic. Along with that, we have seen a continuation of the theme of rising inflation and potentially increasing interest rates. Michael Peters, chief executive officer of Eurex Frankfurt AG

that has accelerated sharply in January, prompting central bank actions and rates increases. “Those themes have remained – we are not yet at the end of the path of recovery – and inflation continues to be driven by ongoing uncertainty in supply chains,” Peters said. “What that means for us and, in particular, for our investors as I look at equities is that there will be an adjustment to dividend expectations with regard to individual companies. We have a great offering in

Winter 2021/22

that space, and we have seen quite considerable demand in the first month of the year.” In the more than 250 single dividend names listed on Eurex, there has been a 25% growth in volume as clients reflect those expectations. Last year, the exchange saw European equity derivatives trading grow 11% year-on-year to 304.8 million contracts. Despite the emergence of a new European derivatives venue (Cboe Europe Derivatives) and a strategic expansion and realignment from Euronext, Eurex has the dominant trading share in European equity derivatives (see chart). There was also growth in Eurex’s largest segment, European interest rate derivatives, which had a 14% increase in traded volume in 2021, year-on-year. As it looks forward, the exchange expects to build on that product suite to accommodate trending areas such as Environmental, Social and Governance (ESG) focussed derivatives. ESG derivatives on the exchange traded more than 2.5 million futures and 435,000 options on the exchange in 2021. “The growth rate last year in terms of ADV was 130%, and it is interesting that, in the first weeks of 2022, we have seen the growth rate climb to over 300%,” Peters said. “Looking forward, we would like to expand that product portfolio, both for STOXX and MSCI benchmarks. In the latter case, we also intend to add further options to the ESG space.” Eurex will also assume a leading role in an update of the methodologies used in the sector as the market evolves. “We are currently very strong in this area, but I think the next trend will very much be driven by the customer,” Peters said. “In terms of methodology, we started from a point of pure ESG screening; it is clear that there is a need for further development here. We are currently seeing integration and positive screening methodologies and I expect this to move forward to eventually include further environmental and climate aspects.” Those incremental changes will develop in different ways according to different client types and asset class

characteristics, but the exchange has positioned itself to benefit. “The pace of that change will very much be dictated by the investors – the level of maturity and desire to standardise that exposure with us as the exchange and clearing house. We have bolstered this with innovative offerings on the fixed income side, which complement the breadth of the offering.” A landmark moment for Eurex was the launch of Europe’s first regulated bitcoin derivative in September, part of a push to develop institutional participation in the region. The futures contract is based on the BTCetc Bitcoin Exchange Traded Note (ETN), the most liquid exchange traded crypto product on Xetra, the equity trading venue operated by Deutsche Boerse’s Frankfurt Stock Exchange. “Our Bitcoin ETN listed on the cash market was a good first step – to offer a product within the framework of the European regulated environment, supported by both an exchange and clearing counterparty,” Peters said. “We have seen moderate and regular volumes on these products from buyside clients, and the trend is certainly one of growth.” Part of that growth will be the natural development of further derivatives as liquidity develops. “We will assess whether it makes sense to offer an option on this ETN during the course of 2022, as well as a potential cash settled Bitcoin contract on an underlying index,” Peters said. “We see a clear tendency that the market is growing towards regulated frameworks, and there is a need for European and global products that service institutional flows.” Citing figures from Morningstar, Peters believes that the strong European share of the global market referencing thematic indices means client demand for more derivatives based on those indices. “Derivatives on thematic indices represent another important area for growth this year,” Peters said. “We are currently looking into particular indices such as automation and robotics, breakthrough healthcare, digitalisation

www.globalinvestorgroup.com

DERIVATIVES

ANALYSIS: MICHAEL PETERS, EUREX

DERIVATIVES CUSTODY

ANALYSIS: MICHAEL PETERS, EUREX

Peters: “In terms of technology leadership, NextGen is a new infrastructure piece that we will jointly launch with our market participants. This is a complex process but provides additional agility and flexibility for both the market and for us.”. and digital security. We believe that, as thematic European funds represent 51% of global assets, we have the opportunity to address this trend. We plan to launch a suite of derivatives based on thematic indices in the coming months as a first step to building that global presence.” Eurex is in the midst of an implementation upgrade to its derivatives platform – dubbed NextGeneration (NextGen) ETD - which allows for more flexible expirations across products in both the exchange and clearing business, creating the opportunity for new products. “In terms of technology leadership, NextGen is a new infrastructure piece that we will jointly launch with our market participants,” Peters said. “This is a complex process but provides additional agility and flexibility for both the market and for us. It is really an enabler for the creation of new products. The integration of weekly expiring instruments across different asset classes, and the opportunity to enable volatility strategies in equity options are a few of

Winter 2021/22

the opportunities that we would like to capitalise on through this process.” Peters said the benefits of the system will become clear ahead of the end of the grace period allowing trading of old-style contracts in November. “It has been challenging for some, but it has been equally a close collaboration” Peters said. “It has included

our longest simulation period ever, to address some of the complexity, which will run for five months. Fundamentally the market is convinced that this is a good addition, although we acknowledge that the technological framework in terms of impact on middle and backoffice operations is a major effort for our market participants.” The exchange also has ambitious plans in futurisation, that is the development of products aimed to replicate over the counter (OTC) derivatives in the listed space, and the exchange has incentive schemes to encourage liquidity in those contracts. “We have launched and published a new incentive concept at the end of last year,” Peters said. “Customers will benefit from capital efficiencies across TRF (Total Return Futures) products if they transfer volumes to Eurex Clearing from the OTC space. “In addition, they have the opportunity to enjoy further financial benefits in the next two years. We have seen two firms initially ready, two firms were additionally on boarded last year, and we are in the process of adding an introducing broker. When I look at the pipeline, around five to eight additional firms will be onboarded to the TRF and basket TRF this year. Having added FTSE last year to the TRF index family, the additional focus this year will be on the ETRF (Equity TRF) and BTRF (Basket TRF) sectors.”

European Equity Derivatives Market Shares

Source: FIA

Eurex 6,004,391 - 78.74% ICE Futures Europe 959,975 – 12.58% Euronext Derivatives Market 424,410 – 5.56% Borsa Italiana (IDEM) 97,008 -1.27%

MEFF 72,756 – 0.95% Cboe Europe Derivative Exchange 66,693 - 0.87%

www.globalinvestorgroup.com

Todd settles into life in charge of Trading Technologies Keith Todd became late last year the new chief executive of Chicago-based Trading Technologies. Speaking to Luke Jeffs one month into his tenure, Todd outlined his plans to consolidate the firm’s dominance in listed derivatives trading software while exploring new products, markets and client segments. There aren’t many people in derivatives who know more about building a software business than Keith Todd. Cutting his teeth in telecoms where he rose to become head of ICL before it rebranded Fujitsu Services, Todd arrived in derivatives as executive chair-

Winter 2021/22

man and chief executive of FFastFill, which he sold in 2013 to TT’s main rival ION Group. More recently, he founded and ran KRM22, a tech firm with an innovative take on risk, and then became on December 21 chief executive of Trading

Technologies, when private equity consortium 7Ridge comprising Cboe Global Markets and Singapore Exchange (SGX) completed its acquisition of TT. The value of the deal was not disclosed but SGX said when the deal broke in late October it was investing about $200m (£146m) in the closed end fund set-up to complete the acquisition. Speaking to Global Investor in late January, just one month into his new role, Todd is rising to the challenge. “If you think about everything that Trading Technologies has been through recently, such as the multi-year technology transformation to Softwareas-a-Service (SaaS), the whole COVID environment -- and to make it more interesting, a nearly two-year sales process -- it wouldn’t be surprising to find everyone debilitated, shattered and with low energy, but I am pleased to say TT is in great shape, and I have found the staff remarkably engaged,

www.globalinvestorgroup.com

DERIVATIVES

ANALYSIS: KEITH TODD, TRADING TECHNOLOGIES

DERIVATIVES CUSTODY

ANALYSIS: KEITH TODD, TRADING TECHNOLOGIES

In line with that changing relationship, our largest clients do not want to support multiple third-party vendor relationships; rather, they want to engage with a platform-based business such as ours. As far as I am concerned, TT is in the right place at the right time and with the right people.

energised and positive.” Todd is right that this is a good time for a change of management. The Chicago-based has completed the multi-year conversion of its clients to a SaaS-hosted version of its flagship TT platform. The firm also introduced on October 1 last year its first fee rise in years. The new boss said the firm’s main clients, which are most of the world’s top investment banks, are similarly bullish about the next chapter for TT. “The response from clients has been overwhelmingly positive. In short, the clients are pleased that the firm wasn’t acquired by an investment bank or an exchange. TT’s independence is very important to the marketplace, and the fact that TT remains independent has been met with relief by clients.” Todd is referring here to late 2020 talks between the tech firm and Goldman Sachs about the US investment bank acquiring TT, a deal that would have spooked all but one of TT’s investment bank clients. The world’s top derivatives exchanges also had a look. With that uncertainty behind the firm, Todd is keen to redefine the dynamic between TT and its top clients. “The relationship between technology suppliers and their largest clients has been changing. Historically, the relationship was largely tactical and short-term, and there was an element of the client beating down the supplier. But that has changed, and major banks and brokers are now looking for longer-term commitments from their technology partners. The clients are thinking about: “What do we need over the next three-to-five years to enable us to

Winter 2021/22

grow?”” Todd said he and his management team are already talking to their key customers about how TT must evolve to help support their future requirements. “The whole context of the conversation has gone from being a supplier to a more intimate, strategic relationship which will have a multi-year consequence to support their long-term growth,” said Todd. “In line with that changing relationship, our largest clients do not want to support multiple third-party vendor relationships; rather, they want to engage with a platform-based business such as ours. As far as I am concerned, TT is in the right place at the right time and with the right people.” TT was popular with traders for many reasons but one of them was that TT offered shorter-term contracts than its rivals, some of whom insist on multi-year deals. But Todd said he wants to secure longer-term commitments that better reflect the changing relationship between tech firms and their customers. “Given the importance of the front office, I’ve never understood why front office technology providers, unlike those in the middle and back office, are based on short-term contracts when it’s actually where the trading starts. Given the changing relationship with clients, this is a natural conversation and one that we will be having on a case-by-case basis.” Asked about the possibility of further fee changes, Todd said the priority for the firm is securing these longer term arrangements with clients.

“The fee change [last year] was the first in many years, and it really it should have been done many years earlier. When clients have talked about fees historically, they talk about a “screen price,” but there is so much wrapped up in that including algos, FIX connectivity, different markets and analytics. It is critical that we continue to deliver the right bundle that gives customers the best value for their money, and, by definition, that means it has to be competitive,” Todd said. He added: “I have never looked at fees from a price sensitivity point-ofview. Rather, I think about how we can add value to clients and offer them the right value proposition. The new fees took effect last year, and now we are looking ahead and building long-term relationships with clients.” Underpinning those long-term relationships is TT’s commitment to product development and continually opening up new trading markets. Todd said: “The functionality roadmap is continually evolving over time. The mantra in a SaaS business is always service quality. Ours is good - it’s as good as is out there - but we must continually invest to make it even more reliable. I’m a strong believer that if a firm has a high quality of service, the opportunity for growth is huge, but, if it is playing defence on service quality, that growth opportunity disappears very quickly.” The TT chief continued: “So we are looking to drive new functionality to enhance the Order Management System (OMS) offering or add more market access like cryptos. That said, there are, of course, limitations to resources, but we can continue to enhance our offering by partnering with third parties that have specialist functionalities and make the integration seamless to our customers. We won’t necessarily invest in every partnership, but we will invest in some, and we will acquire some assets so there is a full range of possibilities.” Trading Technologies invested in January $6.35 million in KRM22, Todd’s old firm based in London. The first investment by TT since the

www.globalinvestorgroup.com

7Ridge Acquisition, the firms also entered into a distribution agreement to make KRM22 risk tools available to TT clients, in what was anticipated to be the first stage of closer cooperation between TT and KRM22. Todd said: “KRM22 is just the first of a number of partnerships where we will make third-party products available on the TT platform. Previously, the main focus for TT was transitioning clients, but we are past that now.” An early deliverable for Todd is a new order management system, building on TT’s existing offering. “Work in an advanced state on our order management system was well underway when I joined in December. TT has had an order management system for a number of years, and the work before I arrived has substantially addressed the gaps in our existing functionality. We have a couple of ideas we expect to action into Q1 that would, I would argue, make TT the market’s leading OMS product by the end of March.” TT is also popular because it is continually opening up access to the markets the traders want to trade. Talking of which, Todd said: “There is obviously a lot of activity in crypto, but we are fully aware that there is also a lot of potential for danger. Traders naturally gravitate towards volatility so crypto is a natural place for us, and we are currently completing our evaluation of the next platforms that we will connect to.” The other big story of the past two years is the increasing use of options by retail traders. Reflecting on that trend, Todd said: “Options make up an everincreasing part of the trading world. The challenge for a technology firm such as ours is that as you move into the more sophisticated end of the options market, the number of players reduces exponentially because it’s such a niche market. Mainstream options are gradually growing and present an opportunity for us, but the more bespoke, exotic end of the options market is less important and not a priority for us.” With an experienced business leader like Todd taking the helm, it’s no sur-

Winter 2021/22

We have a fantastic array of talent around the world, and we’ll build on that, and we’re also expanding our intern and graduate recruitment programmes not just in Chicago, but also in London, India, Singapore and Sydney.

prise that continuity is important. “Our priorities at the moment are to maintain and constantly enhance service quality, consolidate our position in exchange-traded derivatives and move into multi-asset classes. The last piece is not something for us in 2022 necessarily, but we will be looking at it aggressively. I have already recruited someone to the leadership team to specifically address that so you should start to see some things happening later this year. “That said, we have a massive opportunity to consolidate our position in derivatives. But we have to be very disciplined in keeping customers happy before we race over to another market. Todd added: “We are asking our exchange-traded derivatives customer base which asset classes they would like us to move into next, and there are some that are naturally more interesting to that group of traders than others. Mainstream FX, fixed income and equities is a different multi-asset game which we will address in time. I have always said that business is a team game. We have some 282 staff, and the power and capability they have between them is incredible. It was remarkable how people aligned behind the opportunities we have and what we are going to do together.” Talking of staff, Todd sees an opportunity to diversify further outside of TT’s home market. He said: “Looking ahead, what the leadership team is aligned on is promoting from within wherever possible and rebalancing the skills base globally as we grow. Currently the staff are about two-thirds in Chicago and the remaining outside, but we are a global company with rev-

enue split 50/50, and I believe it is the natural process of a global company to be more balanced. I think we will always be slightly more US-based than the rest of the world, but there will be more balance.” Todd continued: “We have a fantastic array of talent around the world, and we’ll build on that, and we’re also expanding our intern and graduate recruitment programmes not just in Chicago, but also in London, India, Singapore and Sydney.” Todd’s strategy can be simplified into two strands: to consolidate TT’s dominance in listed derivatives trading software while exploring new opportunities that may lie outside of that market. That two-pronged approach is also evident in Todd’s thinking about clients. He said: “Traditionally the focus for TT has been on the sell-side, reaching the buy-side through the sell-side. That has been the cornerstone and that will continue, but we’re also intending to build relationships alongside the sellside to sell directly to the buy-side to expand what services the buy-side can get from TT, such as our surveillance products.” Todd added: “The third focus area is exchanges; they are realising now that we are strong enough as a partner to help them grow their businesses because we have global reach.” Keith Todd is wasting no time tackling the challenges of leading TT into its next chapter. His blend of continuity and innovation is sensible for a firm like TT whose clients can draw confidence from his pragmatic yet ambitious philosophy.

www.globalinvestorgroup.com

DERIVATIVES

ANALYSIS: KEITH TODD, TRADING TECHNOLOGIES

DERIVATIVES CUSTODY

2021 YEAR IN REVIEW | DERIVATIVES

Derivatives 2021 Year in Review

International over a possible acquisition of the Chicago-based fintech firm for an estimated $500m (£370m), according to sources. The US bank is said by sources to have dropped the takeover talks with the US tech firm in the past two weeks, less than a month after the same sources said in early December Goldman was in late-stage discussions to buy the firm though an agreement was not certain at that stage.

FEBRUARY

2021 – A year of sustained volatility The futures and options markets remained volatile as exchanges reap the rewards from high demand for hedging instruments. JANUARY LSE closes ‘transformational’ Refinitiv deal The London Stock Exchange Group (LSEG) has completed its all-share acquisition of US data and tech provider Refinitiv from Thomson Reuters and Blackstone Group, describing the deal as “transformational”. The $27bn (£19.7bn) deal will see LSEG sell off Borsa Italiana Group, including its Italian exchange and bond trading platform MTS, to meet European Commission antitrust conditions. Goldman pulls plug on Trading Technologies takeover Goldman Sachs has abandoned talks with Trading Technologies

Winter 2020/21

HKEX picks former JP Morgan banker as CEO Hong Kong Exchanges and Clearing has appointed former JP Morgan senior banker Nicolas Aguzin as its next chief executive officer. The Hong Kong-based exchange said Aguzin will become chief executive on May 24 2021 for a fixed term of three years, subject to the approval of the Securities and Futures Commission.

MARCH ICE’s first Middle East exchange opens Volumes at Intercontinental Exchange’s first exchange in the Middle East, Ice Futures Abu Dhabi (IFAD), reached 8,854 lots on the first day of trading. “This is a good start,” IFAD’s president Jamal Oulhadj told Global Investor. “The first trading day was very exciting, beyond our expectations.

the €1 billion threshold, according to chief executive Stéphane Boujnah. “On a pro forma basis we have now crossed the symbolic €1 billion revenue bar, with for 2020 total revenue a total amount of €1.4 billion approximately,” he said in a call to discuss the deal. Cboe to launch European exchange on September 6 Cboe Global Markets said the European futures and options market it will launch in September has a “critical mass” of clients after three banks and six trading firms publicly backed the new exchange. The Chicago-based group said it will launch Amsterdam-based Cboe Europe Derivatives, its first European derivatives market, on Monday September 6.

MAY HKEX to remain “China-anchored” under new chief Aguzin The new chief executive of Hong Kong Exchanges and Clearing has offered his first thoughts on the future strategy of the Asian exchange, suggesting a continuation of the group’s existing approach including its strong links to China. Nicolas Aguzin, who became head of HKEX, said: “It is still early days to comment definitively on thoughts around strategy, where we are going and where we should be but I can say in general I don’t anticipate a significant shift in our strategy around being China-anchored.”

JUNE

APRIL Euronext closes Borsa Italiana deal for €4.4 billion Euronext has completed the acquisition of Borsa Italiana Group from the London Stock Exchange Group in a €4.4 billion (£3.2bn) deal that takes the group’s revenue over

LME trading ring to reopen on September 6 The London Metal Exchange has said London’s last remaining open outcry trading floor will reopen in September, almost 18 months after it was closed due to Covid-19.

www.globalinvestorgroup.com

The LME announced the

conclusions of a consultation with its members on the future market

structure of the exchange, including the detail that the LME trading ring will reopen on September 6.

Marex cancels June listing due to ‘market conditions’ British broker Marex has cancelled its planned listing on the London Stock Exchange due to take place

this month citing “challenging IPO market conditions”.

The broker issued a statement:

“Despite broad investor interest

from high quality institutions in the Marex business and prospects, the

company has decided not to proceed

with the IPO at this time due to more challenging IPO market conditions.”

JULY ICE smashes records in US, UK carbon trading Intercontinental Exchange said it is

seeing growing demand for its carbon products with its North American complex reaching record open

interest and its UK carbon future

having its busiest trading day in the past week.

ICE, which manages carbon

auctions in the US, UK and Europe, said open interest in its North

American complex, which comprises futures and options on various

allowance schemes and certificates,

hit a record of more than 1.1 million contracts on June 25.

Euronext eyes moving assets from LCH to CC&G - chief Boujnah The chief executive of Euronext has said his group is looking to move

business away from its incumbent clearing house LCH to the Italian

clearing house CC&G that Euronext acquired as part of Borsa Italiana in April.

Winter 2020/21

AUGUST CME launches future based on BSBY index CME has launched a futures contract based on the controversial BSBY lending rate as Eurex has become the latest exchange to list mini versions of existing products aimed at retail investors. CME launched a cash-settled future based on the 3-Month USD Bloomberg Short-Term Bank Yield Index.

SEPTEMBER Cboe launches European derivatives exchange Cboe Global Markets has launched its first European futures and options market. Amsterdam-based Cboe Europe Derivatives is offering futures and options based on six Cboe European indices. The venue is headed by Ade Cordell, president of Cboe NL. LSE Group to close CurveGlobal in January The LSE Group has said its interest rate futures market CurveGlobal will close in January next year. The UK exchange group said the European interest rate futures market, that has been offering free trading to clients for almost a year, will close in January 2022.

OCTOBER Europe warns UK clearing equivalence may lapse European firms should prepare for a lapse of third party clearing equivalence for UK clearing houses, Ugo Bassi of the European Commission said. Bassi, director of financial markets at the European Commission’s DG FISMA, warned European market participants not to assume that the

UK’s temporary equivalence will be extended when the current period runs out, and that EU banks should prepare for higher capital charges for exposures to those clearing counterparties. Cboe, SGX back Trading Technologies acquisition Cboe Global Markets and Singapore Exchange (SGX) are backing a consortium acquisition of Chicagobased fintech Trading Technologies. The Chicago options market and SGX said they will be limited partners in the 7Ridge fund that is acquiring TT.

NOVEMBER CME inks Google tie-up, secures $1bn stake CME Group has secured a $1 billion (£739.6 million) equity investment from Google as the exchange group unveiled a 10 year partnership to move its operations to Google Cloud. The exchange group said it plans to start moving clearing, post-trade and market data services to Google Cloud next year, and then move its key markets to the cloud in a second phase after that.

DECEMBER GH Financials CEO Phelps heads to RJO The group chief executive officer of exchange-traded derivatives firm G.H. Financials is moving to run the European arm of Chicago-based broker RJ O’Brien. Mark Phelps will leave G.H. Financials after 10 years at the firm, having been appointed to his current role in March 2018. He will remain in post and assist with the leadership transition until his planned departure early in 2022. For Derivatives daily news go to: www.globalinvestorgroup.com

www.globalinvestorgroup.com

DERIVATIVES

2021 YEAR IN REVIEW | DERIVATIVES

DERIVATIVES CUSTODY

ANALYSIS: TREVOR NEGUS, SMARTSTREAM

Smaller firms face decisions in countdown to last round of Uncleared Margin Rules Trevor Negus, senior product manager, TLM Collateral Management at SmartStream, tells Luke Jeffs about the various options facing firms that need to comply with the last phase of the Uncleared Margin Rules. The last and most impactful phase of the Uncleared Margin Rules (UMR) takes effect in September and smaller firms coming into scope for the first time need to think now about how they are going to prepare for the regulation. Similarly, large firms that have already ensured their compliance and that of their large to mid-sized clients are faced with a new set of challenges as the next wave of regulation brings into scope hundreds of smaller firms. SmartStream has long worked with buy and sell-side firms to help them with various middle and back office functions such as reconciliations but the firm has come to the fore in recent years as UMR has swept across the industry. SmartStream and its many clients have learned key lessons from the earlier rounds of regulation but the sixth and final round in September does present some new challenges. Negus said: “There are different pressures depending on what kind of firm you are. If you are a phase six firm coming into scope, then the pressures are different to those of a large bank or broker that’s been in scope for a while but is obviously having to take on these new phase six clients. “For the phase six firms themselves, they have to prepare in terms of calculating their AANA, determining how they are going to calculate their initial margin, what their custodial arrangements are going to be, the documentation that needs to be put into place and whether they need a collateral system, and what reporting system they put

Winter 2021/22

www.globalinvestorgroup.com

in place. Now, some or all of this, they may decide to outsource or they may decide to manage that internally, so that is what phase six firms need to be thinking about.” The top banks and brokers can draw on their experiences from the preceding five rounds of regulation, including the latest wave in September 2021, but this next round represents a ratcheting up of existing requirements. Negus said: “For the larger firms, it’s mostly a question of increased volumes and costs so they will need to onboard a lot of new agreements, process more margin calls and settlements, and, with that, comes more reporting. With increased volumes, comes increased costs, so they will have more custodial overheads, they will have to source more collateral so the question is how do they solve these greater volumes and greater costs?” SmartStream thinks that automation based on standardisation is a key theme for all clients. Negus said: “From my perspective, I think firms should be automating as much as possible, and to achieve automation, they need the building blocks for that, so that is things like standardisation and digitisation as well as adopting standard industry initiatives like ISDA SIMM, the ISDA Common Domain Model and the ISDA Standard Legal Agreement Taxonomy. By adopting standards, it is far easier to automate.” He added: “The other big building block is connectivity. You need to connect internally with your up and downstream systems for reporting and settlement, for consuming or posting out to your inventory. And there’s external connectivity so connecting up externally to utilities like AcadiaSoft, tri-party custodians or recs engines.” Different firms face different challenges and are therefore looking for different solutions. Negus said: “The smaller, phase six firms are looking for a turnkey solution rather than the overhead of installing a large collateral solution and everything that comes with that. What they want is a solution where a lot of the IT over-

Winter 2021/22

There are different pressures depending on what kind of firm you are. If you are a phase six firm coming into scope, then the pressures are different to those of a large bank or broker that’s been in scope for a while but is obviously having to take on these new phase six clients. head is handled externally so, with that in mind, we have a cloud-hosted solution called TLM Collateral that offers considerably lower installed costs.” He continued: “It comes with business continuity and full production support, while your hardware costs are much reduced though you can pay for what you need when it comes to hardware. You don’t have to buy for the maximum volume you will be processing rather you can upscale and downscale as you need it so it’s much more cost effective. “As well as that you get auditing, archiving, service level agreement reporting and the test environment. All of that comes with the cloud offering, so all of that makes it much more turnkey for the clients.” Negus said the SmartStream cloud solution tackles security concerns by sitting in a private cloud which also side-steps performance bottlenecks associated with public clouds.

Negus continued: “Clients can also customise the solution which is important for them should they need to make changes to the workflow or the types of reports they require, and all of that can be done via a private cloud solution.” Negus said the cloud solution is also interesting to larger firms however. “From a larger firms’ perspective, perhaps they are happy with an on-premise but we see cloud also being important for larger firms. For the larger firms, it’s more a question of connectivity. Because the collateral system is the heart of the middle office ecosystem, it needs to be connected up and that needs to be done through APIs.” The next and last round of UMR benefits from the experience drawn from earlier rounds but it should not be underestimated. Firms need to engage with partners like SmartStream now to ensure they see no disruption to business as usual in September.

Full interview available to view on digital version of Global Investor at www.globalinvestorgroup.com

www.globalinvestorgroup.com

DERIVATIVES

ANALYSIS: TREVOR NEGUS, SMARTSTREAM

BANKS AND BROKERS Bank of the Year: BNP Paribas Client Clearing Provider of the Year: Marex Market-Maker of the Year: Citadel Securities Non-Bank FCM of the Year: Marex

EXCHANGES AND CLEARING Best Technology Innovation by an Exchange: B3 – Brazilian Exchange & OTC Clearing House of the Year: LCH Group Exchange of the Year – Europe: Eurex Exchange of the Year - The Americas & Canada: Nodal Exchange Most Innovative Contract of the Year: Eurex Global Exchange of the Year: Eurex

TECHNOLOGY Collateral Management Solution of the Year: TriOptima, Part of OSTTRA Connectivity Provider of the Year: Avelacom Derivatives Trading System of the Year: ION Group Equity Trading System of the Year: Itiviti, a Broadridge Business Market Data System of the Year: MayStreet Market Surveillance Solution of the Year: Solidus Labs Multi-Asset Trading System of the Year: Derivative Path Post-Trade System of the Year: FIS Cleared Derivatives Regulatory Reporting Solution of the Year: Kaizen Reporting Risk Management Solution of the Year: Quantile Trade Reconciliation Solution of the Year: HelloZero Trading & Execution Solution of the Year: Tradeweb

INDIVIDUAL AWARDS Lifetime Achievement: Timothy Knight Chief Executive of the Year: Ashish Chauhan, BSE India

THOUGHT LEADERSHIP: TriOptima, OSTTRA

TriOptima looks ahead to last phase of UMR TriOptima, part of OSTTRA, won the Collateral Management Solution category in the FOW International 2021 awards. Speaking in late January 2022, some seven months before the introduction of the sixth phase of the Uncleared Margin Rules in September, Neil Murphy and Gemma Bailey, both business managers at TriOptima, reflect on the challenges posed by the next wave of margin reforms. Neil Murphy, business manager, TriOptima, OSTTRA, said: “At a high level, the rules effectively introduce a requirement for firms that trade on a bilateral OTC basis to exchange initial margin, effectively moving the bilateral world closer to the cleared space. It’s quite a jump for firms. Those firms that clear today may be familiar with initial margin, albeit using a different model, but, in a deviation from the variation margin world, any collateral that is pledged to cover these new margin requirements must be segregated at either a tri-party or a third-party custodian account. “Operationally, firms will also need to establish a mechanism to manage that exposure on a daily basis, so, similar to variation margin, they will need to monitor if it is increasing or decreasing each day, and to have a process to manage the exchange of margin with their counterparties. “In a further deviation from the cleared world, initial margin requirements are calculated on a non-netted basis, so firms will post IM to their counterparty, but they will also collect it from their counterparty, which is a game-changer. “Operationally where it becomes difficult is that, today, firms have one margin call for variation margin but, going forward, they may have three margin calls - two for IM and one for VM, thus putting pressure on those firms with legacy processes who lack automation.”

Winter 2021/22

Gemma Bailey, business manager, TriOptima, OSTTRA, said the triResolve platform is an important tool for clients. She said: “triResolve is the market leader for portfolio reconciliation and helps to ensure firms are aligned with regards to their key trade economics - an essential step to validate at the start of a firm’s initial margin project. Before you even begin thinking about the calculation of IM, you need to agree both your portfolio and trade economics with each counterparty. “After calculating AANA and determining that it is highly likely that are in scope for phase six, you need to start thinking about how you are going to calculate initial margin. Whether you expect to post IM or monitor IM, you need a robust way of performing the calculation which will provide transparency on how close you are to internal thresholds, and once you begin exchanging IM, will be robust enough to withstand IM reconciliation disputes. Bailey added: “triCalculate is the first step in the calculation process. We work with clients to create or use an existing trade file, which will allow us to compute PV sensitivities - these are the input to the SIMM model. Our results file includes sensitivities in the CRIF format; we can then go on to compute IM on an agreement level or pass on those SIMM sensitivities to Acadia’s IM Exposure Manager for reconciliation.”

Murphy said OSTTRA is important to clients because it offers a full suite of margin services: “The key thing is that this is an end-to-end solution. The calculation of IM is the first step, but TriOptima also supports both the monitoring and margining of IM, IM reconciliation, and, finally, the exchange and settlement of collateral. “The platform is unique as an offering as it is a single service provided by one vendor - unlike other options where a client might take a calculation engine from one vendor, a settlement piece from another vendor and operations engine from a third. Murphy continued: “We remove any implementation requirements for clients - this is a turnkey delivery, simplifying the onboarding process and removing project risk. Due to being reliant only on a single vendor, no configuration is required.

Murphy: “Operationally where it becomes difficult is that, today, firms have one margin call for variation margin but, going forward, they may have three margin calls.”

www.globalinvestorgroup.com

THOUGHT LEADERSHIP: TriOptima, OSTTRA

“Some might say that phase six firms have it easier than those in earlier phases because they can benefit from previous lessons learned. There are also more vendors and consultants that can assist with compliance. “Unlike firms in phase one, they have a choice of vendor solutions to help them calculate and reconcile IM. Phase 6 firms have a broader range of segregation options and the market is now more familiar with the legal documentation. “They also benefit from regulatory guidance that allows them to defer some of the preparation steps should their IM exposure remain below €50m - a huge benefit to them and something that wasn’t there in phases one to four.” Murphy said: “The scope of the project might also be reduced for firms in phase 6 as they may not need to complete some of the steps of preparation ahead of the September 1 deadline. “The final point is that while regulatory relief is a welcome benefit, it also creates a bit of a quandary because firms don’t know if they are able to take advantage of it. For example, it only allows them to defer steps should their IM exposure remain below €50m. The question is: “How long do you expect to remain below €50m?” So, this requires firms to do some simulation to calculate expected IM and time to breach the threshold. This needs to be done as early as possible - there’s no point doing this in August because, by then, you should have completed the project steps.” He concluded: “We are working with clients to do those simulations now, and by estimating their IM exposure early, they are able to come up with a better project plan where they can take that fork in the road that says I need to do all the steps, or, I can pause and focus on IM calculation, which is a mandatory requirement anyway.” Bailey stressed a key difference of the next phase when compared to earlier stages: “One of the things that is different about phase six is that it is the last phase of UMR, therefore if phase

Winter 2021/22

Bailey: “triResolve is the market leader for portfolio reconciliation and helps to ensure firms are aligned with regards to their key trade economics.” six firms have started to adjust strategy and utilise services such as compression and clearing more actively, they may be able to fall under the AANA requirement and out of phase six altogether. Saying this, these clients need to remain mindful of their trade activity from this point onwards, and perform repeat AANA calculations to ensure they won’t be caught in subsequent years.” Murphy said there is, however, a capacity challenge for the industry at large: “Less of a challenge for firms, but more for the industry, is that phase six is significantly larger than those phases that have gone before. We are

talking 600+ firms trying to fit through the door on September 1 which creates potential bottlenecks for market-wide capacity. In-scope firms are all working with the same tri-parties and custodians, similarly they are all calling the same 10 or 12 dealer counterparties to establish documentation, and that is difficult for the market to simultaneously support for so many firms.” Bailey continued: “In addition, firms need to be in communication with their counterparties on the fact that they are going to be in scope for phase six, and organising timeframes for testing with those counterparties. She added: “For firms looking to remain under the phase 6 AANA threshold and avoid UMR altogether, as I mentioned before, they need to be completely in touch with their trading activity and routinely monitoring their impact on AANA.” Bailey concluded: “They will be looking to compression exercises, whether that is a multi-lateral cycle like triReduce, or making bests efforts to compress bilaterally against counterparties with large portfolios. As mentioned before, a strategic move into clearing is another option our client base has been looking into.”

For more information regarding our UMR solutions, please email info@trioptima.com. Or visit our website TriOptima is now part of OSTTRA, a leading provider of progressive post-trade solutions for the global OTC markets.

WELCOME TO THE FUTURE OF POSTTRADE Disclaimer

www.globalinvestorgroup.com

A fully featured structured product lifecycle management tool

StructrPro is a complete structured product selection, monitoring and analysis system, developed using SRP’s extensive structured products database and FVC’s cutting-edge analytics and valuation expertise. Featuring coverage of thousands of products across the US, dynamic product reports and aggregate reporting across entire portfolios. Gain valuable market intelligence on trends and future outcomes to enhance your analysis, product selection and management of structured products.

Find out more at structuredretailproducts.com/structrpro

Total Derivatives Total Analysis Deep analysis. The latest insight. Real-time market intelligence.

Be the first to know

Get the expert view

Track annual rankings

Receive daily email alerts and live reports from the markets frontline – covering swaps, bonds, MTNs, options and inflation, plus in-depth features from London, New York, Hong Kong and New Zealand.

Access analysis from our team of ex-traders and financial reporters, bringing you their take on flows, trades and strategies – and interviews with decision-makers.

Find the highest-performing market makers with the most comprehensive peer review swaps, options, inflation, basis and structured notes.

totalderivatives.com

Global Investor Winter 2021/22

Articles inside

2021 year in Review: The futures and options

Smartstream Thought Leadership: Trevor

Michael Peters, chief executive officer of Eurex

The new chief executive of Chicago-based

2021 year in Review: Global Custodians saw

RBC Thought Leadership: RBC Investor

Trading Places: Standard Chartered taps Credit Suisse’s Drew; BNY promotes Templeton to run securities finance; Citi appoints co-heads of funds business; RJO promotes Wright to run fixed income.

Maxime Carmignac talks about the unique set of opportunities facing the Anglo-French asset management boutique.

2021 Year in Review: The asset management

Societe Generale Securities Services (SGSS

The International Securities Lending Association’s chief executive Andy Dyson talks to Ramla Soni

Highlights from GlobalInvestorGroup.com: RadiantESG Global

2021 Year in Review: The securities finance

IQ-EQ’s Group Head of Funds Justin Partington