PostTrade 360°: The future of securities services
09 September 2024 Sweden
Image: Daniel_Tison
The central gravity of the securities services industry is moving east, according to the panellists at PostTrade 360° Nordic 2024 in Stockholm.
In a panel discussion called ‘The future of securities services’, representatives from the International Securities Services Association (ISSA) reviewed the evolving landscape of the industry and global trends.
Discussion began with the ISSA report from 2020, which outlined key themes expected to impact the securities services industry over the coming 5 to 10 years.
The white paper mentioned the shift in investor behaviour towards passive and ESG-driven investments, as well as new technology-driven competition.
Philip Brown, CEO of Clearstream Banking S.A. and executive board member at ISSA, highlighted that the world has changed dramatically since 2020, including the impact of the coronavirus pandemic and the war in Ukraine.
William Hodash, working group coordinator at ISSA, noted that the association is currently updating its paper to reflect these changes and a new document should be published in the coming weeks.
Reflecting on the past years, Colin Parry, ISSA CEO, said: “The biggest move we missed
was the move to accelerated settlement. I feel slightly embarrassed about that.”
He mentioned the US and Argentina among countries that successfully adopted T+1 in May
2024.
On that note, Brown argued: “We have only recently, in many markets, moved to T+2, and that had taken a long time, so the idea that we would then move again so soon afterwards was probably not on the cards.”
The majority of Europe moved to T+2 in late 2014, following the EU adoption of the shorter settlement on 6 October that year.
Brown added: “T+1 came about in part because of the pressure on the US Congress and Senate due to the meme stock issues, where the settlement period was partly blamed for the market disruption. I don’t think anyone could have foreseen that financial market infrastructure would be seen as the principal solution to this issue.”
Another change that the panellists observed over the past four years was the increasing interest in ESG.
The panellists also addressed geopolitical factors, such as sanctions and trade tensions.
“Our industry can be used as a tool for geopolitical leverage,” said Brown. “We all need to recognise that geopolitical movements will have a profound impact on our industry.”
Regarding that topic, a member of the audience asked if geopolitics can result in clients losing trust in securities services.
The panellists agreed that this is not the case if there is clear communication from the industry.
“I think that we as an industry have got to step outside of that problem and just be very candid, explaining to our clients that we are obliged to act within the sanction if they apply to our business,” said Brown. “Our obligation is to execute on things that governments decide.”
The second half of the debate was about future predictions, especially talking about new technologies.
According to Parry, distributed ledger technology (DLT) is not yet a solution for cash equities, but there are “some very good use cases”.
He said: “Taking a use case where there is no automation and making that into a DLT platform which is open to anybody who wants to use it, I think is a good use case, as is the collateral management and the reducing the amount of physical transfers you’re making because you can exchange tokens for collateralisation.”
“One thing we start to see now is the marriage of digital and retail investing with tokenisation and ETFs,” said Brown. “Digital, married with retail platforms, will change the nature of our industry because it will enable an issuer to connect directly to an investor through an app-based structure.”
The panellists agreed that although Asian countries are seen as “the winners” now, the firms that are going to win are those who offer the best customer experience because that is “absolutely critical”.
The discussion closed emphasising the importance of attracting young people into securities services.
Brown commented: “The big challenge that you will face is: how can we attract talent to a business which looks a little bit sleepy from the outside, moving ones and zeros, left and right, as opposed to the seemingly more exciting world of trading.
“The industry needs to ask itself if we are doing enough to pass the knowledge down to the next generation.”
In a panel discussion called ‘The future of securities services’, representatives from the International Securities Services Association (ISSA) reviewed the evolving landscape of the industry and global trends.
Discussion began with the ISSA report from 2020, which outlined key themes expected to impact the securities services industry over the coming 5 to 10 years.
The white paper mentioned the shift in investor behaviour towards passive and ESG-driven investments, as well as new technology-driven competition.
Philip Brown, CEO of Clearstream Banking S.A. and executive board member at ISSA, highlighted that the world has changed dramatically since 2020, including the impact of the coronavirus pandemic and the war in Ukraine.
William Hodash, working group coordinator at ISSA, noted that the association is currently updating its paper to reflect these changes and a new document should be published in the coming weeks.
Reflecting on the past years, Colin Parry, ISSA CEO, said: “The biggest move we missed
was the move to accelerated settlement. I feel slightly embarrassed about that.”
He mentioned the US and Argentina among countries that successfully adopted T+1 in May
2024.
On that note, Brown argued: “We have only recently, in many markets, moved to T+2, and that had taken a long time, so the idea that we would then move again so soon afterwards was probably not on the cards.”
The majority of Europe moved to T+2 in late 2014, following the EU adoption of the shorter settlement on 6 October that year.
Brown added: “T+1 came about in part because of the pressure on the US Congress and Senate due to the meme stock issues, where the settlement period was partly blamed for the market disruption. I don’t think anyone could have foreseen that financial market infrastructure would be seen as the principal solution to this issue.”
Another change that the panellists observed over the past four years was the increasing interest in ESG.
The panellists also addressed geopolitical factors, such as sanctions and trade tensions.
“Our industry can be used as a tool for geopolitical leverage,” said Brown. “We all need to recognise that geopolitical movements will have a profound impact on our industry.”
Regarding that topic, a member of the audience asked if geopolitics can result in clients losing trust in securities services.
The panellists agreed that this is not the case if there is clear communication from the industry.
“I think that we as an industry have got to step outside of that problem and just be very candid, explaining to our clients that we are obliged to act within the sanction if they apply to our business,” said Brown. “Our obligation is to execute on things that governments decide.”
The second half of the debate was about future predictions, especially talking about new technologies.
According to Parry, distributed ledger technology (DLT) is not yet a solution for cash equities, but there are “some very good use cases”.
He said: “Taking a use case where there is no automation and making that into a DLT platform which is open to anybody who wants to use it, I think is a good use case, as is the collateral management and the reducing the amount of physical transfers you’re making because you can exchange tokens for collateralisation.”
“One thing we start to see now is the marriage of digital and retail investing with tokenisation and ETFs,” said Brown. “Digital, married with retail platforms, will change the nature of our industry because it will enable an issuer to connect directly to an investor through an app-based structure.”
The panellists agreed that although Asian countries are seen as “the winners” now, the firms that are going to win are those who offer the best customer experience because that is “absolutely critical”.
The discussion closed emphasising the importance of attracting young people into securities services.
Brown commented: “The big challenge that you will face is: how can we attract talent to a business which looks a little bit sleepy from the outside, moving ones and zeros, left and right, as opposed to the seemingly more exciting world of trading.
“The industry needs to ask itself if we are doing enough to pass the knowledge down to the next generation.”
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