November 2017

Sibos marked a pivotal point in securities services’ transformation. Janet Du Chenne reports on how far the industry has come on its digital journey

Sibos 2017 highlighted three key themes for securities services: the transformation of the industry from one of traditional custody and settlement services to one that is largely data-driven and client-centric; a better use of data through new technologies and seeing those new technologies as opportunities to be even more impactful to the client instead of disruptive and the impact of regulatory and infrastructure change on the solutions required by the client.

Data driving industry transformation

This year’s Sibos looked at the role of data in client empowerment: how it creates value and how it is used to form predictive patterns and other insights. This includes using new technological concepts such as artificial intelligence (AI), robotic process automation (RPA) and machine learning to improve back office processes where there is still much inefficiency. And, with the increasing regulatory challenges and ever-increasing client-push for providers to supply data and better ROI, the burning question was whether scale is always the key solution to all such pressures or whether custodians should just be smarter about providing data.

New technologies create opportunity, not disruption

At Sibos, it was noted how securities services providers are becoming more agnostic to other custody players in the market as they look to aggregate and integrate data across the whole industry. In its Fall issue, Global Custodian magazine notes that now more than ever, custodians have the ability to digitise their products and create an environment to not only provide data but overlay that client data from more and more sources. The possibilities are endless, with robotics and AI being increasingly applied in the service chain. Custodians are looking to automate wherever they can to generate efficiencies through technology.

However, the impact that breakthrough technologies are having on financial services and the challenges of cybersecurity should not be ignored. The role of custodians not just as holders of client assets but of their data was widely discussed from a risk perspective.

The impact of regulatory and infrastructure change on the solutions

Central Securities Depository Regulation (CSDR), infrastructure change such as TARGET2-Securities (T2S) and central clearing regulation continue to impact how clients do business in Europe. These drivers of change have prompted a review of how they are internally configured and how they make better use of their liquidity and collateral to meet the requirements of such change. For example, the European Markets Infrastructure Regulation (EMIR) and the Dodd-Frank Act in the US require more collateral to be posted for activities in the capital markets, by sourcing, mobilising and optimising collateral across borders and time zones for clients’ use.

How did Deutsche Bank contribute to these themes?

In a video interview with Finextra about how data can be used to empower clients to solve for their own challenges, Satvinder Singh, Global Head of Securities Services at Deutsche Bank, noted how securities market will evolve through the use of digital services and the beneficial impact and value this creates for clients.

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Through a digital lens. Satvinder Singh, Global Head of Securities Services explores a different way of looking at client empowerment with Finextra

Here there is an opportunity to look at the securities value chain whenever there is infrastructure and regulatory change and engender a cultural change and an openness to collaborate with industry partners to deliver component solutions that add value.

The value will not come from giving clients a lot of data but the right data: it’s about giving them the analytics they want and the right data so that they can make the right decisions and transform it into actionable points and insights for their underlying clients.

Ensuring client data is also safely stored and a strict adherence to cyber risk was also highlighted.

In a separate video interview, Graham Ray, Global Head of Product Management, Securities Services at Deutsche Bank went further to explain how a better use of data can create value. There is a need to ensure clients get transparent data from their service providers to meet the regulatory challenges. They need to be empowered in a more interactive manner to use that data to gain a deeper insight into their processes and change them if necessary.

In keeping with the Sibos theme of visualising data to make it more impactful for the decisions and directions that are required, Deutsche Bank showcased the Autobhan tool as a connectivity point to clients.  It allows clients to use the data to view different components of the lifecycle from a settlement lens to an asset servicing lens, empowering them to make decisions on fail management, and asset servicing.

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Life is an Autobahn. Graham Ray, Global Head of Product Management, Securities Services at Deutsche Bank explains how Deutsche Bank Autobahn works as a connectivity point for clients, helping them understand how a better use of data can create value  

Also prevalent was how securities services was helping market infrastructures’ ambitions of protecting and expanding capital markets. These infrastructures have analysed how regulatory change such as CSDR and infrastructure change such as T2S would impact them. For example, T2S gave Euroclear an opportunity to review its business model and offer clients pan-European settlement services, while outsourcing its asset servicing to Deutsche Bank for all securities settled in Europe.

In addition to commenting on the above themes, Satvinder Singh shared his observations with Sibos TV on the sustainability of the securities services industry, with a specific focus on clients, “investing to thrive” and people. The entire piece can be see here (from 00:00 to 11:39).

What was the result of this contribution?

The most notable contribution was the insights provided into the changing post-trade landscape, which has increased the focused on component-based asset servicing, account operator and connectivity solutions to navigate the changing landscape. Here Deutsche Bank announced a strategically important T2S mandate, awarded by State Street, on the first day of Sibos. The changing landscape prompted the global custodian to review its custody models in order to better connect to Europe for securities settlement. This latest mandate follows a similar mandate awarded to Deutsche Bank by Northern Trust and RBC in the last two years. This timely mandate was noted by other market participants including broker-dealers at Sibos, prompting them to move forward and look at which partners that they should outsource non-core custody and settlement functions to.

In reviewing their existing set-up, market participants were keen to hear more about how the models used for State Street could help them in their own business. A general theme of consolidating their services with fewer providers emerged. One broker dealer client recalled that they needed fewer partners with the belief that that there is a certain amount of leverage in doing more than if they could consolidate non-core functions with one provider.

There was also interest in how data generated from such component-based solutions might help clients to comply with regulatory change in addition to what Securities Services is doing in the digital space to further unlock the potential of data.

Lastly, Global Custodian magazine noted how securities services firms and regulators in Asia are looking to adopt similar asset servicing and connectivity solutions to those deployed by Deutsche Bank for TARGET2 Securities (T2S) in Europe.

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