VOLUME 3 No. 17 - 2006 ISJFORUM.

COM

INVESTOR
S ERVICES

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UP SWING?
ARE THE NEW ASIA-PACIFIC
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MIDDLE EAST - ARABIAN HEIGHTS
IBERIAN CUSTODY - ANALYSIS
PANEL - CORPORATE ACTIONS
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 Hard Copy

INVESTOR BITING THE BULLET...

S ERVICES The wheels have touched down on the tarmac and hopefully we have all recovered from
our jetlag lethargy.
With SIBOS now over for this year, we can put our slippers on, sit back and cogitate
JOURNAL some of the issues that came out of the conference and will potentially impact on the
financial world in the coming years.
VOL 3 No. 17 - Nov 2006 The issue repeatedly raised in discussions at SiBOS was front-to-back office automation
and STP. Whilst the inefficiencies of the manual, often antiquated systems with real in
herent risk, that run in all sectors of the financial industry can be duly identified, and
software systems have been designed to eradicate the problems, the main challenge for
the industry lies in biting the bullet and adopting these systems.
Indeed, for greater efficiency, accuracy and risk mitigation to be achieved some of the
stigma towards changing technology systems, especially in the middle and back office,
needs to be overcome.
Around this theme, Giles Turner looks at the increasing importance of reference data
regarding company efficiency, in our FIMA pre-conference address. Analyzing the growth
and structural development of data management, illustrated through the FIMA
conference, he looks at how the middle and back office data management processes are
expected to perform on par with the front office and the business ethics behind this.
Straddling the technology and securities lending space, our company profile this month
addresses STP and automation in reconciliations and fee billing. We speaks to
Pirum Systems, an Application Services Provider (ASP) software vendor, about the
waves they are making in securities lending and why they feel being an ASP sets them
apart from other vendors.
Also in securities lending, Brian Bollen looks at the Asia Pacific region. With the
emergence of India and China as growing players in securities lending, he analyzes
the potential trickle-down effect of their success on other markets in the region and how
securities lending will develop.
The securities services industry has bloomed in the Middle East recently and
Vanessa Nicholson analyses where international players in securities services should
place themselves.
Our panel discussion in this edition focuses on the harmonization of corporate actions
processing and whether continued investment in regulation is still key behind the quality
of data and the mitigation of the risks associated with corporate actions processing.
I think you’ll agree that this issue of ISJ promises to be a great one. So, all that’s left
for me to do is bid you welcome, and enjoy the read. Alan Duerden
ISJ EDITORIAL TEAM...

from left to right:

Alan Duerden,
Vanessa Nicholson,
Giles Turner.

Managing Editor: Mark Latham ([email protected])

Deputy Editor: Alan Duerden ([email protected])
2006 PPA MAGAZINE AWARDS Contributing Editor: Brian Bollen. Contributors: Keith Ford
PUBLISHER OF THE YEAR Reporters: Giles Turner ([email protected]), Vanessa Nicholson ([email protected])
HIGHLY COMMENDED
Account Managers: Kenny Thomas ([email protected])
MEMBER - PERIODICAL PUBLISHERS ASSOCIATION
Account Managers: Ben Katzler ([email protected])
Directory Sales: Monique Theart ([email protected])

General Manager: Kevin Lawrence ([email protected])

Operations Manager: Katerina Dimitrova ([email protected])

TOTAL NET CIRCULATION 11,188 Publisher: Justin Lawson ([email protected])

investor
Analysis for the Audit Issue Vol 3, No 14 distributed June 2006. Chairman: Mark Latham ([email protected])
intelligence partners
Source: AUDIT BUREAU OF CIRCULATIONS, www.abc.org.uk
INVESTOR SERVICES JOURNAL
37-38 Margaret Street, London W1G 0JF
T: +44 (0) 20 7493 9966 F: +44 (0) 20 7493 3366 W: www.ISJforum.com
TO RENEW YOUR SUBSCRIPTION PLEASE © 2006 Investor Intelligence Partners. All rights reserved.
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OR VISIT... WWW.ISJFORUM.COM ISSN 1744-151X. Printed in the UK by Pensord Press
 Contents

VOL 3 No. 17 - Nov 2006

Pensions Technology
20 Pensions Profile 48 FIMA and Data
- Warwickshire CC: an Reference
alternative achieve- -It’s hip to be square
ment 22 Transition Management
- Dashed on the Rocks
54 Panel Discussion
22 Transition - Lights, Corporate
Management Action
Swinging funds seek
expertise
Covered Regulars
42 With India and China 62 Rising Stars
emerging as new players in
the securities lending Custody - Oprah’s influence
space, we look the trickle 28 Middle East
down effect in the region
and ask the question: ‘Is - Arabian Heights 63 Disaster Recovery
Asia Pacific racing ahead?’ Persian race for the - Daddy, Daddy cool?
rush / Courting the big
28 Middle East
boys 64 Mandates & Letters - Arabian Heights
1 Hard Copy
Biting the Bullet 32 SIBOS Summary 65 Dating
Diary Down Under
4 Letters 66 People Moves
Sir, 34 Spain & Portugal
- Raining in Spain? A 68 Recruitment
News surprising Iberian cli-
6 Global Roundup mate
70 ISJ Directory
The Directory of
Funds Securities Lending Securities
12 Domicile Reports 40 Data Explorers Services Providers 34 Spain & Portugal
- Jersey, Bahamas and The game’s bonds, - The Iberian climate
Luxembourg, give us equities and bonds.
the lowdown. - Sec Lending 80 Hindsight/Foresight
Alterama’s president
14 Fund Structures 42 Asia Pacific on living fowards
- Choice Funds - A Regional Focus on whilst looking
securities lending backwards.
18 Analyze This
- Fund Centres 48 Company Profile
- PIRUM, Securities
Lending Software

2 INVESTOR SERVICES JOURNAL 48 FIMA/Reference Data

- It’s Hip to be Square
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Letters to the Editor
sion of the highly manual processes that grams by the larger capitalized markets
currently exist contributing to industry in Asia Pacific over the past few months,
If you are affected by, wide cost and risk. that has caused this.
or have an opinion on, any This story begins with the preparation In reviewing discussion papers on pro-
aspect of investor services of the fee invoice by agent / custodian posed programs regionally, there appears
write to us... using whatever system is in use, be that to be a common characteristic of pro-
a Microsoft Excel, Microsoft Word or a grams being built around a ‘centralized
[email protected] dedicated fee billing system. The agency’ (usually the local exchange or
AIMING HIGH method of delivery to the client is the clearing corporation). Programs in Korea
Of the 194 new initial public offerings post or in some cases a scanned equiva- and Taiwan both began with a central-
on the London Stock Exchange (LSE) in lent by email. ized agency as their core concept, and
the first half of 2006, 151 were on The other half of the story is the both have evolved to allow ‘negotiated’ or
AIM. Increasingly, companies choose to amount of processing that needs to be bi-lateral transactions to be accepted in
list in London to avoid the high costs carried out by the client so that the agent their own markets, although these trans-
and more onerous regulatory regimes / custodian can receive what we all want actions, both onshore and offshore, must
elsewhere. The result is a surge in off- to receive, payment for services provided. be processed (‘recorded’) through the
shore registered companies being admit- In a usual client investment bank or central exchange or depository.
ted for trading whose investment focus dealer/broker scenario the processing of Proposed programs by the Malaysia
Bursa as well as the Securities and
includes the emerging markets in Asia “Delays in paying for Exchange Board of India (SEBI) are also
and particularly, the People's Republic
of China, a market which has been services can result from the built around the fundamental concept of
a centralized agency. How these programs
actively promoted by the LSE for growth. method of internal will evolve remain to be seen, but market
The attractions of trading on AIM processing and slow
include; no minimum number of shares perception is that the driver for this cen-
to be in public hands, no trading record resolution of anomalies.” tralized agency model is one of market
requirements, no prior shareholder monitoring and control, especially during
approval for transactions, admission doc- invoices received can be extensive the initial period when programs are first
uments are not pre-vetted by the LSE depending on requirements. Delays in introduced to the market. While ‘control’
and no minimum market capitalisation. paying for services can result from the is not intended to be intrusive or active,
method of internal processing used and in the event of any severe market imbal-
“Companies list in London the slow resolution of anomalies. For any ance or disruption, the regulators highly
sizeable client, this process requires the value the ability to intervene in the short
to avoid high costs and time of dedicated staff from the network selling and securities lending markets as
onerous regulatory regimes” management and/or finance depart- needed, hence the need for a ‘lever’ point
British Virgin Islands (BVI) structures ments. Surely this is an area crying out (centralized agency) in the system.
fit well with these advantages with the for the well used acronym STP? We believe market participants both
additional local attraction of tax neutrali- We at Fingertip Developments are understand and support the need for this
ty, no exchange controls and a non- working with a consortium of client type of market tool for the regulators in
intrusive regulatory system. banks and their agents to use an elec- the event of severe market disruption.
For companies investing in emerging tronic fee invoicing (EFI) system dubbed As it has yet to be tested, it is not yet
Asian countries, the AIM admission doc- as eFee. eFee is a simple text based clear under which circumstances a mar-
ument would typically state that invest- method of electronically transferring an ket regulator would attempt to influence
ment in the shares involves a high invoice from agent to client via the their securities financing and short sell-
degree of valuation risk including; politi- globally adopted XML format. Using a ing. This is one of the areas where
cal, social, legal and economic risk, high commercially mature XML specification PASLA has been playing an active role in
inflation, price volatility, limited liquidi- achieves the long awaited goal of reduc- working closely with regulators to provide
ty, less transparent and vigorous regula- ing costs for both sides. input on regulations that will benefit all
tory disclosures and financial reporting We feel that is important that any such participants and ensure a vibrant securi-
requirements, and restrictions on repa- system, to be truly globally adopted must ties lending market.
triation of capital and income. be accessible from the smallest to the Given the potential impact of foreign
BVI companies are increasingly used very largest of agents and their clients. investment inflows into each of these
as entities to raise capital and effect Key objectives of low cost of entry and markets, and the memories of the 1997-
acquisitions in Asian emerging markets, implementation, together with wide and 98 Asian crisis, these ‘central agency’
as these open up to foreign investment. active participation by the industry con- market structures seem to be pre-requi-
The AIM regime and the BVI offshore tribute to the success of this initiative. sites for the regulatory approval of author-
structure make an attractive platform for Adrian Gumbley, Director, ized securities lending regimes across the
doing business. Fingertip Developments. Asian markets. For organizations seeking
Barry Mitchell, Partner, to participate in Asia Pacific, acceptance
Maples and Calder. THE ASIA FLAVOUR of the preferences and sensitivities of the
Over the last twelve months, there has local market regulators will go a long way
THE STP STORY CONTINUES... been a veritable explosion of develop- in building a successful Asian securities
Following on from your interesting article ments in securities lending and short lending platform.
regarding Fee Billing (Vol. 3 No.16), selling programs across various markets Lawrence Komo, Asia Pacific Region
there is yet another piece that can be in Asia Pacific. Head of Securities Finance,
put in place to address what is an exten- It is the participation, and anticipated Citigroup Corporate and
participation in securities lending pro- Investment Banking.

4 INVESTOR SERVICES JOURNAL

>> 5P ¾OE PVU NPSF MPH PO UP KQNPSHBODPNXTT PS DPOUBDU

-POEPO %JDL 'FFIBO BU EJDLKGFFIBO!KQNPSHBODPN
/FX :PSL $ISJTUPQIFS -ZODI BU DISJTFMZODI!KQNPSHBODPN
)POH ,POH -BVSFODF #BJMFZ BU MBVSFODFCBJMFZ!KQNPSHBODPN
News - Europe Middle East Africa

financial instruments. the client, intermediary and fund

provider. The module also provides a
Technology cost effective solution which effectively
London – Data Explorers Limited has reduces costs and improves both per-
announced the release of their latest formance and efficiency.
service offering to the securities lending
market, with the launch of Transaction Legal and Compliance
Explorer, “a pre- trade” and “at trade” London - Hermes, USS and the LPFA,
application; providing an insight into have joined forces to urge companies
securities lending trading levels. and governments to cut global carbon
Transaction Explorer offers the emissions. Institutional Investors Group
Securities Lending market for the first on Climate Change's (IIGCC) sponsored
time, a trading application which pro- a statement on global warming, adher-
vides a comprehensive analysis of price ing to the United Nations Principles for
and liquidity, and changes in available Responsible Investment which was
lendable quantity through to tracking signed by some of Europe's largest pen-
moving averages in utilisation and fee. sion funds and asset managers. BNP
Analysis is performed at ISIN level and Paribas, Insight Investment, Morley
information is displayed in chart and Fund Management and Prudential
table format. Data is viewable by term Property Investment Managers were
Market Infrastructure or open trades, by fees and rebates and among them.
Kiev - The State Securities and Stock in quantity or value. The statement includes an emphasis
Market Commission of Ukraine has pre- on governments responding to climate
pared a draft Resolution in accordance London - FXMarketSpace, the first cen- change and providing incentives like
with which securities brokers will have a trally-cleared, global foreign exchange emission targets and legislation; asset
right to manage securities. The brokers (FX) platform for the cash market, has managers and investment consultants
will have a possibility to work with secu- announced the second group of finan- are to incorporate climate change risks
rities owned by legal entities as well as cial institutions that intend to partici- and opportunities in analysis and selec-
individuals. In fact, the brokers will lead pate in FXMarketSpace’s Early Adopter tion, while pension funds agreed to
the same activity as assets management Program (EAP). Combined with the weigh environmental issues when
companies, but in this case the broker leading financial institutions announced choosing asset managers. The London
will manage securities and not assets in July, the EAP now numbers more than Pension Fund Authority, the
and they will not be obliged to obtain a 40 participants, demonstrating the Environment Agency and the
special license. widespread acceptance of Universities Superannuation Scheme
FXMarketSpace among cash market par- have already built these requirements
Stockholm - Orc Software, a provider of ticipants. into their investment management
technology for advanced trading, market strategies.
making and brokerage, has announced London - Rhyme Systems, a provider of
completion of the acquisition of the asset management solutions, has London - A study on the European
Financial Information Exchange (FIX) announces the launch of its new Self- Union’s Single Euro Payments Area
messaging platform provider, Cameron Invested Personal Pensions (SIPPs) (Sepa) by CapGemini, ABN Amro and
Systems. Following continued growth module, rhymeSIGHT SIPPs. The new The European Financial Management &
and strong revenue performance by module will enable firms to provide an Marketing Association (EFMA) has stat-
Cameron Systems, the final purchase integrated investment platform which ed that European banks stand to lose up
payment was calculated at USD 9.8M, links funds supermarkets, stockbrokers to 62 per cent of payments-related rev-
making the total purchase for Cameron and pension administration platforms. enues following the introduction of Sepa
Systems USD 30.8M. The SIPPs module will also allow pen- Banks may stand to lose 38-62 per cent
sion providers to meet forthcoming in payments-related revenues (a
London - DST International (DSTi), has SIPPs regulation, due to come into effect decrease of EUR18 billion to EUR29 bil-
announced that it has entered into an in April 2007, requiring firms to demon- lion by 2010) according to the report. As
alliance with Reuters. DSTi will now strate effective and transparent manage- a result, banks face the challenge of
offer an integrated interface to Reuters ment of data and decision making minimizing internal costs, upgrading
DataScope Select as part of their processes. Rhyme’s new module is an their pricing strategies, and creating
Investment Accounting, Performance expansion to its existing rhymeSIGHT incentives (in particular for consumers)
Measurement, Risk Management and solution which incorporates trade entry, to move to more cost-effective electronic
Data Management Solutions. Reuters decision support, settlement and cash payment solutions to preserve profitabil-
DataScope Select, a hosted data extrac- management and double-entry book ity.
tion platform, provides access to global keeping functionality. The SIPPs module
pricing, validated terms and conditions, will provide a single database which cen-
historical data content and cross-refer- tralises investment data and enables
FREE NEWS DAILY AT
ence data for a comprehensive range of swift and accurate decision making for WWW.ISJFORUM.COM

6 INVESTOR SERVICES JOURNAL

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News - Americas

block trader and the need to find legiti- announced that it will begin offering cus-
mate trading counterparties without tomer firms the opportunity to connect
prematurely revealing trading inten- their collocated trading servers to the
tions. Information about trading CME over high-speed fibre optic connec-
intentions is only revealed when tions in the fourth quarter of 2006.
both parties present a legitimate These redundant server connections are
opportunity to trade with each expected to decrease network latency
other. Furthermore, orders and times for order entry to CME Globex to
executions remain anonymous; less than one millisecond. The new con-
the identity of one counterparty nection option is called CME Local
is never revealed to the other Network.
counterparty.
New York - NYFIX has announced a part-
Technology nership with Paladyne Systems, a
Salt Lake City - Sungard has provider of integrated and hosted front-
announced that it has released a to- back-office technology suite to the
new version of PlanningStation, a hedge fund industry, to provide FIX con-
financial modelling and planning nectivity to Hedge Funds under its
solution for financial advisors. Among "Powered by NYFIX" hosted solutions
the new features of PlanningStation is a platform. As a result of the agreement,
new Cash Flow Consultant module, Paladyne will extend its offering by pro-
which helps to provide experienced viding its ASP clients with access to FIX
financial advisors with the flexibility and connectivity for electronic trading and
control of cash flow-driven planning. order routing over the NYFIX Network, a
Market Infrastructure Other major features of the new release network with over 450 trading counter-
New York - SunGard has announced that include enhancements to parties. In addition, as part of the agree-
Third Point Partners (Third Point), a PlanningStation‚ workflow for client ment, Paladyne clients will also have
USD4bn hedge fund trading long/short financial plan reviews, updates to its At fully integrated access to NYFIX
equity, has selected FRONT ARENA, a Retirement module, and additional for- Millennium, a leading provider of dark
real-time, integrated cross-asset trading matting options for client reports. pool liquidity, and NEXASTM, a suite of
platform. Third Point, based in New algorithmic trading solutions offered by
York, will deploy FRONT ARENA to man- New York – Xcitek, a global provider of NYFIX Transaction Services.
age trading, P&L, risk management and market data, Corporate Actions software
operations. Third Point will use FRONT and consulting services, has announced New York - IntercontinentalExchange,
ARENA to help centralize risk and opera- that it has deployed a customized ver- the electronic energy marketplace, has
tional control and manage its trading sion of its Cost Basis service on behalf announced that it has entered into a
activity. FRONT ARENA will help Third of one of the nation’s top brokerage and definitive merger agreement to acquire
Point to increase operating efficiency. investment banking firms. Over 10,000 the New York Board of Trade, the soft
The mutli-strategy solution connects Financial Advisors and other personnel commodity exchange, for consideration
industry participants including prime throughout the major brokerage and of approximately USD1 bn. The transac-
brokers, fund administrators and third investment bank, now have the ability to tion consideration will comprise 10.297
party systems. FRONT ARENA also con- calculate the Cost Basis of clients’ equity million shares of ICE common stock and
tains extension tools for adding propri- and mutual fund positions back to the USD400 million in cash.
etary models, modifying analytics and original trade date, as well as gain direct
enhancing the application. access to daily and historical Cost Basis Legal and Compliance
information. Access is initiated via a New Jersey - BISYS, a provider of out-
New York - Six brokerage firms have secured session on the firm’s internal sourcing solutions for the financial serv-
announced that they have agreed to network with the application hosted via ices sector, has announced that it has
form Block Interest Discovery Service Xcitek’s network. The service features reached an agreement with the
(“BIDS”), an Alternative Trading System the proprietary Xcitek Cost Basis Securities and Exchange Commission
(“ATS”) designed to increase competi- Calculator, which enables the automated (SEC) to settle an investigation into past
tion and provide clients with a unique derivation of a security’s Cost Basis, fac- marketing arrangements with mutual
alternative liquidity source in the block toring-in all splits, spin-offs, distribu- fund advisers. The investigation, which
trading market. Terms are not being dis- tions, mergers and other Cost Basis- began in 2004, examined arrangements
closed. BIDS allows qualified market affecting events. The Calculator also between BISYS Fund Services (BFS) and
participants to complete sizable block adjusts for the Cost Basis impact of mutual fund advisers in which portions
trades through continuous order match- Reinvested Dividends. of BFS’ administration fees were used to
ing as well as trade negotiation. Because pay for marketing and distribution of the
of its innovative approach to market Funds & Administration mutual funds. BISYS was charged with
structure and information disclosure, Chicago - CME, the world's largest and aiding and abetting, and not with com-
BIDS resolves the classic paradox of the most diverse financial exchange, has mission of a direct fraud.

8 INVESTOR SERVICES JOURNAL

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www.securities.bnpparibas.com
News - Asia Pacific

risk of failed manage transactions across their entire

trades and lifecycle, with no resort to coding. Once
operational costs modelled, processes can be re-used
and improving across the organisation providing a
market efficiency. flexible and adaptable enterprise wide
The link has been infrastructure.
successfully
tested by a Sydney - JPMorgan Chase, a full-service
number of early provider of cash management, trade
adopter clients finance, and treasury solutions, has
and is ready to announced the successful completion of
process live the second phase of the Society for
trades. Worldwide Interbank Financial
Telecommunication (SWIFT) global
Singapore - The payments network’s Exception and
Singapore Investigations (E&I) pilot initiative.
Exchange and JPMorgan Chase has now adopted the
Chicago Board of new XML based protocol as the standard
Trade (CBOT) for automating the processing of E&I
has commenced messages pertaining to funds transfers.
the trading for
Market Infrastructure
the Joint Asian Derivatives Exchange Legal and Compliance
Sydney - SWIFT has announced that
(JADE). JADE, a market division of SGX Singapore - Calyon Financial and Trading
customers will receive a rebate for the
Derivatives Trading Ltd, launches its Technologies International will offer
fifth year running in addition to
debut in commodities futures trading trading access to futures on seven key
previously announced price reductions.
with TSR 20 Rubber Futures Contract. Asian exchanges via the Trading
The 2006 rebate will be at least 5 per
Commodities have increasingly become a Technologie's (TT) X_TRADER platform.
cent amounting to EUR 20 million in
key growth area for Asia. The formation Calyon Financial has used TT's FIX
total and, for the first time, will apply to
of JADE was in response to demand from Gateway to connect TT's full suite of
all messaging services: FIN, FileAct and
international customers for a more X_TRADER trading tools to Frontiers, the
InterAct. SWIFT will have rebated EUR
accessible and transparent platform to brokerage firm's proprietary Asian
116 million in total and reduced overall
participate in Asia’s booming but frag- futures trading system. Calyon Financial
messaging prices by 50 per cent for the
mented commodity markets. The superi- clients can now use TT's X_TRADER to
2002-2006 period.
or functionality of the CBOT’s e-cbo elec- trade futures on the Tokyo Stock
tronic trading platform, coupled with Exchange, Osaka Stock Exchange, Tokyo
Tokyo - Omgeo, the provider of trade
SGX’s globally recognized clearing sys- Financial Exchange, TOCOM, Hong Kong
management solutions, and JASDEC, the
tem, enables JADE to offer customers Exchange, Korea Exchange, and the
Japanese Central Securities Depository
access to a fair and transparent trading Singapore Exchange. Leslie Sutphen,
(CSD), has announced a link between
platform for price discovery. JADE is sup- Global Head of E-Brokerage
their respective services that will
ported by a network of global clearing Strategy/Implementation for Calyon
streamline trade processing and
members, and its markets participants Financial said, "It's important for us to
drastically increase Japanese market
can also use SGX derivatives clearing offer fully functional trading access to
efficiency. The interface between Omgeo
house to clear their trade efficiently and these Asian markets for our customers."
and JASDEC will provide the first, and so
cost-effectively.
far only, single point of access to both
Beijing - The Chinese Government has
domestic and cross-border trades.
Technology passed new legislation regarding bank-
Historically, for investment managers
Sydney - SmartStream Technologies, a ruptcy that will address both state and
(IMs) that process trades manually in
provider of Transaction Lifecycle private firms for the first time. The new
Japan, once a trade had been confirmed
Management solutions, has announced a law will apply to other domestic and
between broker and investment manager,
ground breaking approach to the foreign firms, give creditors greater
the IM was required to send trade
automation of STP process. TLM Control protection and allow firms to request
instructions to each trust bank in order
is a core, strategic initiative from reorganization if they are under financial
to affirm with the broker. The trust bank
SmartStream and delivers Cash & strain. The law is a marked changed from
would then send instructions to JASDEC
Collateral Management, Exception the previous regulatory framework where
to settle. The direct link between Omgeo
Management, Trade Process there was no clear-cut way for either
and JASDEC eliminates these unneces-
Management and Regulatory Compliance liquidating a firm or sharing the assets
sary and cumbersome steps, as trade
solutions for clients to rapidly construct between creditors or workers.
instructions of matched, institutional
their composite STP applications. Users
trades will now automatically be sent to FREE NEWS DAILY AT
are able to graphically model, automate,
JASDEC and then passed through JAS- WWW.ISJFORUM.COM
execute and monitor complex human
DEC to the trust bank, thus reducing the
and systems workflows to confidently

10 INVESTOR SERVICES JOURNAL

 Aging.
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Securities Inc., responsiveness is a quality that sets our international brokerage and
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business; we intend to develop a relationship for the long run. To learn more visit us at
www.sasiny.com

[email protected] l Tel +1.212.612.8700 l Fax +1.212.612.8885 l 12 East 49th Street, New York, NY 10017
Member NEW YORK STOCK EXCHANGE, NASDAQ, NASD, PRINCIPAL REGIONAL EXCHANGES, and SIPC
Domiciles Report

Jersey Luxembourg Bahamas

Jersey’s funds sector’s efforts to maintain The bill of law on Specialized Investment When the Bahamas introduced its
strong and lasting business relationships Funds (SIF) that has just been innovative SMART Funds concept, the name
with London were illustrated in October submitted by the Luxembourg meant more than the introduction of an
as the Island was able to stage two Government to Parliament has elicited a attractive risk based fund regime. It was an
events for London-based Fund Managers high level of interest in the Luxembourg important step in differentiating itself from
and their advisers. investment fund community. The bill has other jurisdictions by creating a mechanism
The first event, in London, focused on a number of interesting features, includ- to establish different types of funds with
Jersey Property Funds and included a ing a broader definition of “eligible more flexibility for innovation with the sup-
debate featuring both onshore and investors” to include both professional port of its highly developed wealth manage-
offshore property experts on the and private “well-informed” investors, ment industry and a respected regulator.
continuing relevance of such structures greater flexibility in terms of investment The Securities Commission of the
with the arrival of UK REITs. The abolition policy, lighter disclosure requirements, Bahamas, a member of the International
of stamp duty seeding relief exemption simplified rules of functioning and no Organisation of Securities Commission, has
was also discussed, along with the requirement for a promoter. delivered efficient response through various
reasons why Jersey Property Funds SIF is designed to replace the law of fast-track processes for industry partici-
remain an attractive proposition for 1991 on institutional funds that comple- pants. Accordingly the Bahamian securities
specific investors. mented the Law of 1988 (which deals industry is growing steadily with more and
The second event focused on exclusively with funds intended for mar- more investor-friendly products and com-
developments in Jersey’s alternative keting to the public). The latter will be prising both international and domestic bro-
funds sector. In particular, expert repealed by February 2007. ker dealers, investment fund advisors and
panelists with experience of Jersey and It is anticipated that the new law will investment fund administrators.
the Caribbean, and based in the UK and allow vehicles created under its regime to The fund administration sector like other
the Channel Islands, examined Jersey invest in all types of assets. This flexibility areas of the Bahamian financial services
funds regulation, the tax advantages that allows for the creation of, inter alia, industry is staffed and managed by a large
Jersey holds as a European Alternative transferable security funds, money mar- pool of experienced professionals in both
Funds jurisdiction and the growing ket funds, real estate funds, hedge funds large international firms and niche
attraction for establishing a physical and private equity funds. organizations.
presence in the Island. The debate In contrast to the law of 1991, the con- The range of global fund administrators
concluded that Jersey is a credible cept of eligible investors should not be providing services from the Bahamas
location and has real traction in the restricted to institutional investors, but includes Citco Fund Services (Bahamas)
hedge fund sphere. extended to professional investors and Limited Butterfield Fund Services (Bahamas)
The most recent regulatory sophisticated retail or private investors Ltd., DPM Mellon (Bahamas) Ltd., SG
development follows on from the success who invest a minimum of EUR 125,000. Hambros Bank and Trust Bahamas Ltd.
of the Expert Fund regime, which was The principle of risk spreading will be (member of the Societe General group) and
launched in 2004. Both local and maintained, but there should be no Swiss Financial Services (Bahamas) Ltd.
international demand has prompted the quantitative investment restrictions, In addition, there are respected niche play-
Jersey Financial Services Commission given that such vehicles would be ers including Genesis Fund Services
(JFSC) to propose the adoption of a new reserved to sophisticated investors. Limited, Oceanic Bank and Trust Limited
streamlined procedure for the approval of In contrast to the 1991 and 2002 laws, and The Winterbotham Trust Company.
closed-ended investment funds listed on the new law does not require SIFs to have The country’s asset managers have the
European and other leading stock a CSSF approved promoter. Directors experience and global connections to
exchanges, including the Channel Islands ("dirigeants") of the fund and directors of provide the advice and planning to meet
Stock Exchange. the depositary bank and the auditor will, investment objectives. Templeton Global
This new lighter-touch regime is based however, be subject to approval by the Advisors Limited is perhaps the most high
on the premise that, as the funds will be CSSF. profile and best known of the local asset
listed on a recognised exchange and Last, but not least, no prior approval is managers, but as the funds industry
promoted by an established sponsor, required for the launch of an SIF. continues to develop others such as Green
sufficient investor protection is already in Application for approval may be filed with Cay Asset Management, an independent
place and no selling restrictions need to the CSSF within the month following the Nassau-based firm and Pearl Investment
be applied to them. creation of the SIF. Management, also based in Nassau but
This new Jersey Listed Fund Guide is The industry expects the new law to be wholly owned by Credit Suisse are gaining
expected to be introduced before the year enacted by the end of the year or, at the recognition and underscore the diversity of
end following a consultation period with latest, early in 2007. fund management capabilities in the
the industry. Bahamas.

Graeme McArthur, representative of the Jean-Jacques Picard, Director Wendy Warren

Jersey Funds Association and Managing Communication, Association of the CEO & Executive Director
Director of Northern Trust in Jersey. Luxembourg Fund Industry - ALFI. Bahamas Financial Services Board.

12 INVESTOR SERVICES JOURNAL

MARHedge Cayman
Hedge Fund Best Practices:
Operations and Regulatory Compliance
What Every Hedge Fund Needs to Know

The Ritz-Carlton • The Cayman Islands • December 3–5, 2006

In association with REGULATORY COMPLIANCE ASSOCIATION

KEYNOTE SPEAKERS: MEMBER SPONSOR

Westley D. Chapman, Vice President, Goldman, Sachs Hedge Fund Strategies LLC
Bernard Bachmann, Head of Risk Management - Operational Due Diligence, RMF Investment Management
Joel Press, Senior Partner and Founder of the Ernst & Young Hedge Fund Practice

SPEAKERS INCLUDE: PLATINUM SPONSOR

Barnard Adams, ARX Investment Management, LP Ananda Radhakrishnan, Commodity Futures
Kip Allardt, Discovery Capital Management Trading Commission
Scott Berman, Friedman Kaplan Seiler & Adelman LLP Martin Schwartz, Millennium Partners
David Brown, Eliot Spitzer Tim Selby, Alston & Bird LLP
GOLD SPONSORS
James P. (Bucky) Canales, Octane Research Inc James Shannon, Private Advisors
Maury Cartine, Bisys-RK Alternative Andrew Shrimpton, Financial Services Authority (FSA)
Investment Services Inc Christy Stagemeyer, Bank of America
Drew Chapman, Sonnenschein, Nath & Rosenthal LLP Edward Stavetski, CMG Investment, Advisors, LLC
Harry Davis, Schulte, Roth & Zabel Andrew Stewart, FRM Americas LLC
Maria DeFalco, Lowenstein Sandler PC Bibb Strench, Sutherland Asbill & Brennan LLP
Dan Driscoll, National Futures Association (NFA) Alan Swersky, Olympia Capital Management
Nathan Green, Shearman Sterling Paul Tiranno, Pioneer Alternative Investments SILVER SPONSORS
Douglas Hirsch, Sadis & Goldberg LLC Regina Thoele, National Futures Association (NFA)
Roseanne Kelly, The Irish Stock Exchange Patricia Watters, Pacific Alternative Asset
Fabrizio Ladi, Systematic Absolute Ruturn AG Management Company LLC
Leslie Lake, Durus Funds Christine Woodhouse, Taylor Investment Advisors LP
Gary Lindford, CIMA Walter Zebrowski, Regulatory Compliance Association
Simon Lorne, Millennium Partners Jill Zelenko, EnTrust Capital Inc EXHIBITORS
George Mazin, Dechert
Yolanda McCoy, CIMA
David Momborquette, Schulte Roth & Zabel
Rajni Narasi, DKR Capital Partners
Thao Ngo, ReedSmith LLP
Mitchell Nichter, Paul, Hastings,
Janofsky & Walker LLP
Jim O’Hara, Lighthouse Investment Partners, LLC
Alexandra Poe, WilmerHale

Please contact Jeannie Lee at

+646.274.6213 or [email protected]
Funds - Domicile

Director of Fund Administration,

The lines between fund Standard Bank.
jurisdictions are blurring. To keep ahead of the opposition, the
investment communities in each jurisdic-
tion have had to work with the regulators
to try and provide attractive and flexible
Alan Duerden looks at how environments in which funds can operate.
“It is important that any given jurisdic-
competition for capital is tion is able to offer as complete a portfo-
widening the sphere of fund lio of structures as possible, that are suit-
able for it’s chosen marketplace,” contin-
products and sturctures that ues Mr Hart. “Any jurisdiction has to lis-
ten carefully to the requirements of
domiciles now have on offer. investors in the marketplace in order to
develop structures that are appropriate to
their needs.”
Mark Mannion, Managing Director,
PFPC International, supports this, saying:
“Investment managers want maximum
flexibility. The Cayman’s have long been a
popular choice for this reason, however,

A Matter of Choice
Ireland, Luxembourg and Jersey have all
moved recently to provide greater flexibil-
ity in fund structures aimed at high-net
worth investors and this has made them
competitive as a domicile of choice.”
One reason why greater flexibility has
been accomplished so competently in
many jurisdictions is because of the skills
Looking at the merits of different fund Consultant, Etheios. “A fund manager is and experience of the fund managers and
structures in the various domiciles more likely to choose a location because fund administrators, coupled with the
around the world, strikes me as being a of taxation arrangements, with the quali- willingness of regulators to work with the
little like stumbling through the wine list ty of the local workforce coming second.” investment community to diversify the
in your favorite ‘posh-nosh’ restaurant. Mr Seaman goes on to use the examples products available.
The intrinsic ingredient behind each of Luxembourg and Ireland, which both Gavin Farrell, Ozannes, explains this for
overpriced bottle is either red or white are domiciles offering favorable tax envi- the case of Guernsey, saying; “There is a
grapes, and no wine expert, in spite of my ronments. Luxembourg has a strong very open plane between the industry
alarming ignorance towards all things though rather expensive multi-cultural and the regulator, and most of the
vino, could persuade me otherwise. So workforce, where Ireland has a well-edu- changes have been prompted by the
why is it that we choose one of these lov- cated, English speaking workforce. There industry raising their desired changes to
ingly nurtured bottles of grape juice over are merits for each. the regulatory system with the regulator,
the other, when fundamentally they are With the funds industry growing at and the regulator has listened to, and
all made out of the same stuff? implemented changes to
I use this as an example To remain ahead of the game in terms reflect what the industry
desires, to make Guernsey an
because, like the wine list,
choosing the merits of one of capital, jurisdictions need to offer attractive jurisdiction, whilst
ensuring that the probity of
fund domicile over another
because of the fund structures
as many types of funds as possible Guernsey as a regulated
or products that are offered has become such a quick rate, the lines are blurring jurisdiction is not tainted.”
somewhat questionable. between different fund domiciles as While domiciles are now branching
It is true that every investor has individ- they fight it out for business. It is a out to provide a wider range of fund
ual needs and requirements, an investors’ competitive world and to remain ahead structures to remain competitive and to
attitude towards risk can vary and there of the game in terms of capital, jurisdic- accommodate different types of investors
are changing strategies behind each tions need to offer as many types of there are specific areas in which domi-
investment as time passes, however, many funds as possible. cile’s will specialise.
domiciles now offer similar types of fund “Given that many offshore jurisdictions “In the investment world, there is no
structures and products as each other. have developed their fund products by such thing as a one size fits all strategy,”
“The fund structures themselves have keeping an eye on the opposition, the believes Mr Mannion, who goes on to
very little impact on where the fund differences between each jurisdiction explain how different investors have dif-
manager chooses to invest the fund,” have, on the face of it, become less ferent needs which can be met through
believes Mark Seaman, Principal apparent,” believes Peter Hart, Managing targeted investment strategies. Someone

14 INVESTOR SERVICES JOURNAL

 Structured support.
Standard Bank Offshore is at the forefront in the provision of administration and
custodian services to all fund types, including hedge, property, private equity and other
alternative investment funds. Our quality service will be structured for your needs and
delivered through our highly experienced staff and sophisticated systems.
Our administration and custodian services comprise:
Advice on structuring, valuation and accounting, shareholder dealing, transfer agency,
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For further information please contact us today.

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Fund Administration • Custodian Services • Offshore Banking • Trust Administration

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Standard Bank House, PO Box 583, 47 - 49 La Motte Street, St Helier, Jersey JE3 8XR, Channel Islands
Direct telephone: +44 (0) 1534 881400, Facsimile: +44 (0) 1534 881119
E-Mail: [email protected]

www.sboff.com

This document should not be construed as an offer, or as the solicitation of an offer to buy, any product in any jurisdiction where such an offer or solicitation would be illegal. Standard Bank Fund Administration Jersey Limited is registered with the Jersey Financial Services
Commission under permit as a functionary of collective investment schemes and to conduct trust company business. Standard Bank Fund Administration Jersey Limited is a wholly owned subsidiary of Standard Bank Offshore Group Limited. This document has been
approved for the purposes of section 21 of the Financial Services and Markets Act 2000 by Standard Bank Plc, which is authorised and regulated by the Financial Services Authority. Prospective investors in the United Kingdom should be aware that, as Standard Bank
Offshore Group Limited is established outside of the United Kingdom, the protections provided to investors by the United Kingdom regulatory system established under the Financial Services and Markets Act 2000 do not apply to any investment services or products
provided by Standard Bank Offshore Group Limited. In particular, investors will not be entitled to compensation from the Financial Services Compensation Scheme established by the Financial Services Authority, nor will they be entitled to the benefits provided by the
Financial Ombudsman Service or other protections afforded to Private Customers under the Financial Services and Markets Act 2000. Telephone calls may be recorded.
KM2006.211
Funds - Domicile

selling to institutional investors, for ment restrictions associated with UCITS. seen in the difference between retail and
example, is not going to want to organize Under specific fund structures the regu- professional investors. At the retail end,
a UCITS fund, which is oriented towards lators and financial services authorities the emphasis is on protecting the
retail investors. Instead, if investor, while on the institu-
domiciled in Ireland, for
example, a Qualified Investor
Choosing a fund domicile really tional side, funds that are offered
to sophisticated investors who
Fund (QIF) would be better comes down to personal preference understand the risks involved
as they are limited to individ- with investing.
uals with a net worth of greater than EUR have to be sure that ultimately the end We have established that the similar fund
1.25 million or corporate investors of a investor is protected to ensure that structures and products are offered in
certain size. This will allow the investor investors have confidence in the region many of the jurisdictions around the
greater latitude to avoid debt and invest- and to enforce a solid reputation. This is world, but that domiciles may specialize in
a specific type of product; so why do peo-
ple choose a domicile? Mr. Mannion
Domiciles Checklist had been between four and six weeks). believes that factors such as location, repu-
tation and workforce quality do not matter
Ireland: very much in domiciling decisions, howev-
- Irish domiciled funds are mostly divided Bermuda: er, when deciding where the fund should
into UCITS and Non-UCITS funds, allowing - Tough standards are applied to funds be administered these are very important.
for the distribution of UCITS funds into which target the general public, while the “More funds are domiciled in the Caymans
other European countries. Bermuda Monetary Authority (BMA) relies on than anywhere else,” he states. “But many
- The Irish financial services industry is full transparency and disclosure for sophis- of these funds are serviced elsewhere with
regulated by the Irish Financial Services ticated investors who understand the risks skilled fund administration workforces and
Regulatory Authority, under section 10 of involved. associated support services.”
the Investment Intermediaries Act of 1995. - All investment schemes must apply to be Mark Seaman, Ethios agrees with this to
- A flexible system of regulation exists, classified under The Bermuda Monetary some degree, saying; “The skills of the
assuming that sophisticated investors who Authority (Collective Investment Scheme indigenous workforce seem to carry little
invest a certain amount of money accept the Classification) Regulations 1998. weight. The UK has an excellent reputa-
risks that go along with that investment. - The BMA will normally grant a full tion as a centre for fund administration,
exemption from the CIS regulations in two with an experienced, and compared to
Cayman: instances: some locations, cheap and flexible work-
- Three main types of fund structures are 1. Where a fund is non-public and force. The UK, however, is losing out as a
offered in Cayman; marketed to fewer than twenty persons. fund domicile. About 20 per cent of
1. Registered Funds, which must have a 2. Where a fund has received full funds have gone already, with another 50
minimum aggregate equity interest of exemption from the Bermuda Monetary per cent forecast over the next five years,
USD USD50,000 purchasable by a Authority Amendment Regulations 2005. and the reason is taxation.”
prospective investor of the equity inter- The reasons for choosing a domicile are
ests must be listed on a stock exchange Bahamas: wide and varied, ranging from tax-saving
approved by the Cayman Islands - SMART fund concept, allows for a initiatives, skills and experience of the local
Monetary Authority. regulated environment with a degree of risk workforce, location and the type of fund
2. Administered Funds, which must have and higher returns with the confidence of products that are on offer. Around these
a licensed mutual fund administrator regulatory backing. however lie many different opinions as to
providing a its principal office in the - Since 1995, the Bahamas has provided a which elements are the most important.
Cayman Islands, and fast-track approach to licensing funds “Differences in structure are important if
3. Licensed funds, which are operated by offered to professional investors via an they give you a recognizable advantage that
large institutions. They are not required to Unrestricted Fund Administrator (UFA). would be difficult to find or replicate else-
appoint Cayman services providers but - The Investment Funds Act, 2003, aimed where. Gaps do however, narrow quickly in
must have either a registered office in the to introduce enough flexibility to cater to the both the onshore and offshore markets and
Cayman Islands or, if a unit trust, a trust evolving needs of the global marketplace. little stays sacred for long,” says Brett Allen,
company licensed under the Banks and Director Business Development Offshore
Trust Companies Law as its trustee. Luxembourg: Fund Services, RBS International. “Unique
- Funds are governed by the Mutual Funds Law - Luxembourg's decision in July 2004 to selling points demonstrate your credentials
1993. allow the listing of offshore hedge funds and promote your jurisdiction but the total
has made it possible for the jurisdiction to package is perhaps the key selling point for
Jersey & Guernsey: attract offshore funds and to compete on a any jurisdiction.”
- Expert Fund regime in Jersey and QIF level basis with Dublin With most domiciles offering a similar
(Qualified Investor Scheme) in Guernsey. QIF’s - In 2004, the Luxembourg authorities passed range of products and structures for
were set up in February 2005 by the Guernsey legislation creating the Societe funds, it is hard to distinguish between
Financial Services Commission (GFSC) – d’Investissement en Capital A Risque (SICAR). them. Like choosing a good wine, choos-
aimed to reduce the authorization timescale This is intended to offer an alternative to the ing a fund domicile seems to really come
to less than three working days (before QIF it traditional limited partnership structure. down to personal preference. ISJ

16 INVESTOR SERVICES JOURNAL

Analyze this... Fund Centres/Administration

Alex Erskine Mark Huntley

HOW HAS BERMUDA ADVANCED AS A DOMICILE? HOW PROACTIVE IS THE RESPONSE TO REGUL-
Alex Erskine, Partner, Appleby Hunter Bailhache ATORY CHANGES IN THE CHANNEL ISLANDS?
Mark Huntley, Managing Director, Heritage
Maintaining an attractive jurisdiction for funds means International Fund Managers
successfully developing a sound framework for regula-
tory supervision that gives confidence to investors. A close dialogue between the industry and regulator
The Bermuda Monetary Authority (BMA) and the remains essential for a straightforward regulatory
Minister of Finance, in consultation with local financial approval process and an enhanced regulatory reputation
and legal service providers, are currently undertaking a to be established.
review of the current Collective Investment Scheme In Guernsey, the recently published Harwood Report
(CIS) legislation in Bermuda with a view to introducing provides a wide ranging set of recommendations which,
a new regulatory framework. if adopted, will see a wholesale review of the fund regu-
The draft legislation, if enacted, will introduce a num- latory environments. Of particular interest to the alterna-
ber of major changes to the pre-existing legislations: tive industry will be the introduction of a registered fund.
1. Persons carrying on the business of a fund admin- This fund will simply require registration but, in contrast
istrator in or from Bermuda must be licensed as a to other jurisdictions which have a light touch regulatory
fund administrator. approach, there will be the requirement for a regulated
2. Licensed fund administrators will be required to administrator to be appointed in each case.
maintain minimum net assets, adequate accounting In Jersey, the equivalent expert fund led to a significant
and systems of control of its business and records increase in fund growth. Jersey is now exploring ways to
and insurance coverage. maintain its competitive edge with the potential for a
3. The legal definition of Collective Investment ‘super expert fund’ with a one day turnaround. Such
Schemes (CIS) will be made wider which means that funds would have to meet stringent criteria which would
partnerships and closed-ended investment vehicles typically be applied to private equity funds and investors
will fall within the definition of a CIS for the first time. of considerable experience.
Another example of Bermuda’s proactive approach to Within the fund administration scene, we have seen
the evolution of the global fund industry is the creation an increasing number of service providers stepping into
of ‘Launch and List Funds’. private equity, property and hedge fund administration.
This option creates the opportunity to establish a There are three broad categories of service provider; the
Fund and simultaneously list on the BSX. The Bermuda large global players, the law firms who continue to serv-
International Business Association (BIBA) reached an ice the funds that they advise on through the initial
understanding with the BMA and Bermuda Stock launch phase, and the independent firms who focus
Exchange (BSX) that such vehicles would be approved either solely on private equity or particular asset classes.
on a fast track basis. The independent sector is the area where greater
This is another positive fund option for clients who choice has been offered in recent years as a result of
might derive benefits from listing on the BSX. new firms being established and the broadening of exist-
Historically, Bermuda partnership law has largely fol- ing operations. Indeed, a feature of the Harwood pro-
lowed general English partnership law principles and posals in Guernsey is the encouragement of locally
were not legal entities separate from their partners, owned business.
although, for all practical purposes, the partnership Moreover, in the majority of cases, fund administra-
may function as an “entity” and may sue and be sued tors in the independent sector are staffed by experienced
and carry on business in its own name. teams of people. Such firms are removed from the scle-
The Partnership Amendment Act 2006 (the rotic bureaucracy of large institutions whilst their found-
“Amendment”), came into effect on 28 August 2006 ing directors seek the freedom which comes from servic-
and provides that a partnership shall have legal person- ing a more intellectually stimulating asset class with a
ality if it so elects. In effect, in the event that such an service style that matches the entrepreneurial nature of
election is made, the partnership shall continue regard- the promoters they seek to partner with.
less of whether all the partners die or are declared Promoters continue to have a variety of experienced
bankrupt or there is a change in its constitution. service providers and styles of operation to choose from.
A partnership on the 28th August 2006 may elect to Guernsey and Jersey, jurisdictions of the highest reputa-
have legal personality provided the election to do so is tions and quality, are supported by strong and capable
made within 12 months of this date. infrastructures and sensible regulators. The alternative
This election is irrevocable and the failure to make- class continues to develop, justifying the ongoing invest-
such an election is final however, the election option is ment by both islands and the service providers who are
not open to Bermuda’s overseas partnerships. committed to this class.

18 INVESTOR SERVICES JOURNAL

 Analyze this... Fund Centres/Administration

Maxine Rawlins Gavin Farrell

WHAT ARE THE REASONS BEHIND THE INCREASED WHAT HAPPENS IF A GUERNSEY DOMICILED FUND
INTEREST IN DUBLIN AS A JURISDICTION FOR FALLS OUTSIDE THE QIF REGIME’S CRITERIA?
EUROPEAN FUNDS?
Gavin Farrell, Ozannes
Maxine Rawlins, Chief Executive Officer for Maples Guernsey is a European offshore jurisdiction where funds
Finance, Maples & Calder can be established, administered and, at times, managed
Ireland has a long-standing and respected reputation as a outside the traditional Caribbean structure. Guernsey plays
fund location. Its membership of the OECD and EU pro- host to a range of third party service providers including
vides not only accessibility to continental and international forty different entities that provide fund management,
investors, but also to the benefits of the harmonisation of administration and custodial services, as well as lawyers and
EU financial services regulation and European Monetary accountants who specialize in the financial services.
Union. It is in the London time zone and is geographically Guernsey funds can either be open or close-ended. Recent
close to Europe but also has extensive direct transport reforms in Guernsey have reduced regulatory oversight for
those funds that are classed as Qualifying Investor Funds
links to the US. It has sophisticated infrastructure and pro- (QIF). Such funds will benefit from a ‘self-certificated’ and
fessional expertise including extensive choice of experi- expedited process. In such cases, the Guernsey Financial
enced, quality service providers. Services Commission (GFSC) issues appropriate authorisa-
The Irish Financial Services Regulatory Authority (the tion, if the application is successful, within three working
“Financial Regulator”) regulates the operation of, and pro- days of receiving the relevant application documents. If the
vision of services to funds. The Financial Regulator works fund falls outside the scope of the QIF regime’s criteria, the
closely with industry bodies such as the Irish Funds normal fund oversight procedure will involve a three-step
Industry Association to maintain Ireland’s competitive- outline, interim and final stage procedure.
ness, attractiveness as a funds jurisdiction and to facilitate The outline stage requires the completion of a form that
business innovation. This is evidenced through the refine- sets out the basic details of the fund’s structure and objec-
ment of existing structures and rules and the development tives together with information of all parties involved. Funds
of new fund regimes and structures such as the relatively need to be administered by a Guernsey fund administrator,
new common contractual and segregated portfolio funds. and the principals should have already chosen their local
The Financial Regulator, in keeping with the prevailing administrator. The Guernsey administrator can, however,
pro-business climate, is very willing to discuss new prod- delegate to administrators based outside the jurisdiction if
ucts with fund promoters and where possible to accom- required by the commercial terms of the structure.
modate such products in the legal and regulatory struc- The interim stage involves filing the near final draft
tures. prospectus with a form containing a checklist of the
As at July 2006 there were some ¤650 bn in net assets required disclosures. The prospectus will then be reviewed
managed in 3,800 Irish funds (including sub-funds). In by the GFSC which aims to grant interim approval within 10
excess of 290 promoters have established funds in Ireland business days. The GFSC however maintains a policy of fast-
and while the origins of these funds cross multiple juris- tracking applications by combining the interim and outline
dictions, the top 5 jurisdictions of origin for Irish fund pro- stages, provided that both forms and relevant documents
moters as a percentage of assets are: USA – 42.5 percent; are filed. This fast-track procedure would be advantageous
UK – 35.3percent; Germany – 6.1 percent; Italy 4.5 percent for funds that do not qualify as QIFs.
and Ireland 2.5 percent. In the final stage, the final prospectus, certified copies of
While a significant portion of assets of Irish Funds are of constitutive documents and material contracts will be filed
the UCITS model Ireland has increasingly become synony- and GFSC will grant full approval or consent within 48
mous with alternative investments. It is estimated that a hours.
third of global hedge funds are serviced in Ireland making If the entity responsible for the fund is not already known
it the largest hedge fund administration centre in the to the GFSC, additional documentation and time to conduct
world and placing Ireland in a strong position to become due diligence will be required at the time of, or before, the
the leading European domicile of choice for alternative outline stage.
investment vehicles. Recent proposals have also included a parallel approval
structure which will provide sponsors with a choice of either
having a fund approved by GFSC in the manner described
above or going through a registration process which will not
require any GFSC input in the approval process.

INVESTOR SERVICES JOURNAL 19

Pension Profile - The Warwickshire Pension Fund

What was the reason for your decision to that this can contribute to business
As pension funds move allocate a proportion of your pension prosperity by encouraging accountability
towards alternative fund towards alternative investment
instruments?
between boards, shareholders and other
stakeholders. Good corporate governance
investments ISJ talks to also plays a major role in encouraging
The primary reasons are diversification corporate responsibility to shareholders,
Warwickshire County and reduction of portfolio risk employees and wider society.
Council about its Are there any specific alternative invest-
Responsibility for voting has been dele-
gated to the investment managers under
Managed Fund. ment instruments that you will be the following remit:
focussing your investment on? Why have “When exercising or procuring the
these been chosen? exercise of any voting rights attaching to
the investments of the Fund,
Hedge funds and property (both fund of the manager shall at all time vote in line
funds managers). with their internal guidelines. The
Authority has reviewed and is happy
What is the investment strategy? with the managers’ internal guidelines.
The manager shall submit a
The Authority sets a long-term quarterly report containing details and
investment strategy (the mix of asset reasons for any decision by the Manager
types) to have regard for the Fund’s to exercise any voting rights against the
liability structure and the investment management or consciously abstain
objectives above. This is reviewed at least from exercising any voting rights
What are the trustee arrangements? every 3 years, after each actuarial attached to any investments of
The Pension Fund Investment Board valuation. See ‘Investment Strategy’ the Fund.”
consists of five County Councillors who below.
are advised by two independent advisors, The Investment Board will receive a
the Council’s investment consultant How important is corporate governance report on the use of a Corporate
(Mercer Investment Consulting) and and socially responsible investment? Governance Service for analysis of gover-
officers of the County Council. The nance issues and executing its proxy vot-
Board is responsible for: setting The Authority recognises its ing rights, and a future decision is to be
investment policy; appointing suitable responsibility as an institutional investor taken. The Fund is also a member of the
investment managers to implement the to support and encourage good corporate National Association of Pension Funds.
investment policy; reviewing and governance practices in the companies in The Authority also supports the incor-
monitoring investment performance. which it invests. The Authority considers poration of the principles of the US
The day-to-day monitoring of
investment managers is delegated to the Investment Strategy
County Treasurer. The County Treasurer
also has a statutory duty to ensure that
proper financial arrangements are in
place to manage the fund. The Pension
Board Investment Board meets four times
a year at the conclusion of each quarter.
The four active investment managers will
attend alternate meetings.
The Pension Fund Investment Board is
also supported in its role by the
Consultative Panel consisting of elected
members and officer representatives from
the district/borough councils, unions and
a pensioner representative. The Asset Allocation
Consultative Panel meets with the
Pension Fund Investment Board at the
start of the spring and autumn meetings.

What about securities lending?

Yes, we participate in a securities lend-

ing programme.

20 INVESTOR SERVICES JOURNAL

 Pension Profile - The Warwickshire Pension Fund

Department of Labor Interpretive WCC Managed Fund Investment Managers

Bulleting and includes this requirement
in the investment manager agreements.
The PFIB has on a number of occasions
considered the issue of socially responsi-
ble investment. On each occasion, the
PFIB has concluded not to pursue an
active socially responsible investment
strategy. The main areas of consideration
in arriving at this decision are as follows:
- The requirement to act in the best
interests of the Fund’s members is, to
a large extent, interpreted as being
their best financial interest;
- A socially responsible approach to
investments does not have to mean
disinvesting in a company.
Shareholder voting can be used to
influence a company towards socially a socially responsible approach to this, and how is this trend affecting your
responsible behaviour; their operations will not be viable. pension fund?
- It is almost impossible to draw up a Equities is the best returning long-term
set of ethical criteria that would satisfy UK and Irish pension funds continue to investment. Prior to our venture into
all members of the Fund; have significantly higher exposure to equi- alternative investment, the Warwickshire
- The belief that in the medium to ties (62% and 60%) than other European fund was split 75:25 between equities
long term companies that fail to adopt pension funds (33% on average). Why is and fixed income. ISJ

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Transition Management
Smooth transaction or
dashed upon the rocks?
Vanessa Nicholson
reports on the state of
Transition Management.

Change
All

Under-performing pension funds are gin. "Saving 30 or 40 basis points during have different settlement periods, rules
endemic and the hunt for elusive alpha is an asset restructuring can make a signifi- and regulatory environments and it has to
on. Traditional routes are becoming cant difference to where your Fund be done simultaneously with controlling
exhausted and are insufficient or out- appears in the performance tables," says the accounts and currencies. It's a new
dated for funds needing to perform on Timothy Wilkinson Global Head and type of operational risk requiring specialist
tighter margins. Bent under an increasing- Managing Director of Citigroup skills.” Transition managers are responsible
ly rigid regulatory environment and a sus- Transition Management. "We believe for managing the risks of getting a portfo-
tained period of low nominal returns, Clients should essentially view transition lio from A to B as quickly, safely and eco-
trustees are looking to streamline costs management as an insurance policy nomically as possible. “In between,” says
and move assets to higher performing against performance slippage. Historically Mr Dwyer, “you have a portfolio that has
fund managers or those able to cope with this hasn't always been managed effectively not been selected by anybody."
the alternative portfolios and the increas- - if at all in some situations." The transition community is undergoing
ingly complex Naughties' market. The service is becoming essential to change within its own ranks. Its profile is
The no-man's land between legacy and cost-saving as the search for new yield growing as the wider industry familiarises
target managers or portfolios is where increases the pressure on funds to be more itself with the service. Though client
funds are at their most vulnerable and imaginative in asset classes and investment demand is high, competition is increasing,
exposed to risk: sector risk, currency risk,
liquidity risk. There is, however, a growing The transition community is
legion of transition managers offering a
service to investment funds out-sourcing
undergoing change within its own ranks.
their restructuring activities to reduce cost, structure, creating complex asset alloca- with dozens of providers where there was
manage risk and to project manage effi- tion. "Complexity increases risk and cost, only a handful. According to Shoghig
ciently. and increases the value the transition Kulidjian of RBC Dexia, “the market has
As the pension fund community seeks to manager is going to create," says Mark become saturated, with providers coming
ensure they do not remain caught in a rel- Dwyer, Vice President of Mellon out of the woodwork because of the rev-
ative return game, where performance Transition Management Services. enue potential; transition management is
looks ok relative to benchmark, but is “There are thousands of moving parts in part of the investment cycle of every
down on a real basis, they are also working a transition,” he says, “thousands of securi- fund.” State Street, for example, transi-
to save performance slippage at the mar- ties being bought and sold globally. They tioned over 500 portfolios last year with

22 INVESTOR SERVICES JOURNAL

 Transition Management

immediately understand what the provider implementation shortfall, from which the
is abiding by. If someone says no, the sec- T-Standard (included in the T-Charter) is
ond question is: what part won't you com- derived, to guage a success of a transition,
ply with?” measuring the actual transition account
Transition managers have drawn on the against a theoretically costless swap out of
general regulation relevant to their fields, the legacy portfolio into the target one.
and the lack of tailored regulation has led Necessary, but deficient, it compares the
to disparate views on practises like remu- actual value of assets at the end of a transi-
neration and pre-hedging; as well as pre- tion with the theoretical value of the
senting cost estimates, fee quotations and assets, assuming the transition had been
performance results. both instantaneous and cost free from the
“Some providers engage in pre-hedging, start. Mr Lundqvist, who works for
now it won't go under the radar; and Russell, the company that pioneered the
receiving any financial remuneration for common industry T-Standard yardstick,
giving business to a certain provider will concedes it is not “the be all and end all,
also have to be disclosed,” says Mr Dixon. but is a good start; solid and consistent.”
He continues; “At the moment people can The Standard deals with responsibility,
work out a cost-estimate in any weird or fiduciary, errors and compliance, and two
wonderful way. Using the T- Charter, each of the most pressing issues the charter

Unfortunately integrity is not generic and few give no cause for concern.
estimate will be on a common basis. All addresses are conflicts of interest and dis-
the assumptions will be stated and all the closure of fundamental strategy. If the
information laid out the same way, so transition is being undertaken by a firm
clients can compare the costs of with other financial activities the charter
providers.” Sam Lundqvist Head of EMEA insists on a full admission of what con-
Transition Management, at Russell flicts may arise, and what measures have
Investment Group expands on the need been taken to safeguard the fund's inter-
for transparency, saying; “Each transition ests.
is so unique and there is no magic formu- “We're in a Chinese walled area which is
la. Whether the end result was down to physically separate,” says Mr Dixon. “It is
assets totalling more than USD150 bn; luck or skill of the provider the client lockable from the firm and all systems are
Russell undertook 534 transitions in 2005; needs to understand why they ended up separate. We don't get remunerated on
handling USD264 bn worth of assets. where they did.” amount asset managers or traders win,
The variety of firms seeking mandates The charter is yet to find a professional there are no incentives along those lines.”
encompasses fund managers, investment body to take it under its wing, to elevate Unfortunately integrity is not generic
banks, custodians and investment consult- above a mere gentleman's agreement, but and few give no cause for concern.
ants. The volume and range of providers Mr Dixon is confident of its reception. It “There are relatively small number of
has led to a plethora of business models seems to have the unanimous backing of transition specialists,” says Mr Dwyer, “a
and practise discrepancies, which some clients, consultants and providers; consult- group that I like to think of as premier
believe will ultimately undermine client ants may even struggle to find insurance league transition managers, who have
confidence, and certainly leaves some mys- unless they use compliant providers. With independent departments with independ-
tified. New standardisation measures are the FSA always keen to welcome well- ent specialists and systems integrated and
being proposed for the UK by leading drafted industry-based codes of practise, built for transitioning.”
voices to clean up maverick transitioning. the conditions seem perfect for a resound- Russell does not have any incompatible
The T-Charter is a code of conduct ing endorsement of the initiative. affiliated operations and Mr Lundqvist
instigated and drafted by the industry to Mr Lundqvist, however, believes all the sees this as an advantage. “Our competi-
be launched by the end of this year, to end industry-led reforms will only truly be tors must have good answers for clients
dubious practises, and simplify the com- effective with client pressure; “The indus- about how they will protect the confiden-
parability of practises to help trustees dis- try, not just Russell, is trying its best, but at tiality of the client’s event. We have visited
criminate between providers and eliminate the end of the day, it will come down to many trading floors where the proprietary
misconceptions. Credit-Suisse has led the clients demanding higher standards. It has trading desk is literally only seats away
initiative with the support of other top to be wanted.” from the agency trading desk. You just
providers. “The T-Charter is all about dis- Previous common standards and codes wonder, where is that Chinese wall?”
closure and transparency,” says Graham have had limited powers and, for example, A second issue the T-Charter tackles is
Dixon, Managing Director and Head of timing costs remain difficult to compare. the sell-side, buy-side debate. Providers
their European Transition Management. Transaction cost analysis measures the have emerged from all corners of the
“Now consultants and clients can ask a effectiveness of trading strategies used in wider industry (and beyond) and are
simple question: do you comply with the the transition. Relative performance armed with different strengths and skill
T-Charter? A pension fund trustee can between the portfolios is defined as the gaps. The asset management school may

INVESTOR SERVICES JOURNAL 23

Transition Management

Citigroup Global Transition Management, a division Northern Trust’s transition management team
of Citigroup Global Markets Limited, has been pro- provide innovative, customised transition
viding comprehensive transition management servic- management solutions for institutional clients that
es to clients for over 10 years and is firmly estab- maximise client satisfaction. Through the
lished and ranked as a leading provider of best-in- multi-disciplinary, highly skilled expertise of our team
class transition solutions. CGTM has executed over we strive to develop precise and measurable
320 transitions comprising USD230 bn of assets implementation plans to reduce execution costs,
since 2003. The CGTM operating model is complete- minimise market impact, and avoid unnecessary risk
ly impartial, evidenced by its ability to contract under and operational error. By aligning our interests with
a transition IMA. The team comprises 13 dedicated those of our clients we embrace our fiduciary
and highly experienced personnel with a diverse skill-
set across asset management, execution and opera- responsibilities to avoid potential conflicts.
tional risk management. Our platform incorporates
unrivalled access to immediate liquidity, alongside
premier multi-asset class analytics, and comprehen-
sive real-time transition systems to ensure complete
control throughout. Extensive project management
experience and an established track record is evi-
denced by an array of client references upon request.
Contact: Simon Hutchinson, Head of European
Contact: Timothy Wilkinson Transition Management
T: 020 7986 4533 [email protected] T: +44 (0) 20 7982 3419

The Trade Management Services group is an inde- Russell Investment Group provides investment prod-
pendent functional entity within RBC Dexia Investor ucts and services in more than 44 countries. Russell
Services. Utilizing a consultative approach, we lead manages nearly USD155 bn in assets, of which $58bn
all transitions and work closely with our clients to is managed from Europe, and advises clients world-
identify, implement and evaluate the optimal transi- wide representing more than USD2.4 trillion. Founded
tion solution. We do not have any trading or asset in 1936, Russell is a subsidiary of Northwestern Mutual
management functions, freeing us of any conflicts and is headquartered in Tacoma, Wash., with addition-
of interest stemming from other functional units al offices in New York, Toronto, London, Paris,
with proprietary interests. Amsterdam, Singapore, Sydney, Auckland and Tokyo.
Our model’s advantage is complete independence Using innovative tools and techniques, Russell's
Implementation Services offering provides customized
from the trading function. We select and manage solutions that help improve funds’ performance, while
the most appropriate brokers to execute a given simultaneously reducing exposure to unintended risks.
portfolio. Partnering with a network of best-in-class These techniques, such as transition management,
execution providers that can transition assets into commission recapture, currency implementation, and
(or out of ) virtually any market in the world. customized rebalancing are considered best practice in
the industry.
Contact: Sam Lundqvist, Head of Transition
Contact: Shoghig Kulidjian Management EMEA
T: +1 416-842-5589 T: +44 (0) 20-7024-6000

24 INVESTOR SERVICES JOURNAL

 www.erstebank.at

Doris Marx-Schrammel
+43 (0)5 0100 - 16342
[email protected]

Birgit Povolny
+43 (0)5 0100 - 13487
[email protected]

Franz Josef Beidl

+43 (0)5 0100 - 16343
[email protected]

Gertrud Hadrany
+43 (0)5 0100 - 17212
[email protected]

Strategies for changing times.

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Transition Management

not have their own pool of liquidity and crossing opportunities during transitions
may have to sub-broke (despite direct and the snapshot timeframes they occur
market access), jeopardising control, confi- in, and companies are pouring investment
dentiality and efficiency, but they have into R&D to compete in the transition
access to many pools of liquidity and can management technological space race.
choose the best providers for a particular The broker-dealer business models
part of a portfolio. Broker-dealers have are particularly using sophisticated
huge principal trading capability, a variety trading platforms, ensuring best
of skill sets, liquid capital but also have execution and flexibility, confidentiality
direct conflicts of interest with their own and cost-save, also accommodating the
clients. There is widespread opportunity alternative classes currently attracting the
for misunderstandings, not least among market's attention. Many are using
the actual practitioners. electronic updates to keep their
“I get baffled by it, because which am I? I customers informed minute by minute.
work for Credit Suisse. Yesterday we did a These technology developments mean that
transition where Credit Suisse Asset the short transition window of hours, days
Management traded everything. Next and weeks may be shaved down even fur-
week we are the custodian in a
transition. Does that make me buy side or Reseach and development investment is high to
sell side?” says Mr Dixon. He suggests the
fluidity and flexibility of providers and compete in the technological space race.
employees and technology are rendering
the distinction a 'caricature long past its ther and ultimately reduce market impact
sell-by date.' Mr Wilkinson also believes and risk. It may even encourage more fre-
“there is increasing convergence upon a quent transitions.
single all-embracing transition model, Mr Lundqvist believes growth will slow
capable of managing all aspects of risk down in developed transition manage-
within a transition,” an ongoing evolution, ment markets, and says: “The market
as hitherto different models, begin to look place is becoming more mature, and
increasingly alike, but within which there though saturated with providers, there are
are still essential qualitative differences. still opportunities.
Others firmly believe the distinction will “They are also being used for some of
remain; with all the scope for confusion. the more esoteric market places, like fixed
Some seem to herald the dawn of amalga- income,” he says, for which there seems a
mation, lawyers are certainly baying for demand for difficult, illiquid names.
contractual similarities in the providers' Plans will be looking for more edge to
legal obligations, but can transition man- their transitioners, requiring more than an
agers truly offer a fully integrated service? ability to execute equities, bond,
Whether strategy hegemony across the foreign exchange and cross securities, and
board becomes the case or not, the T- access to more markets and regions. They
Charter will demand the necessary trans- may also be used in switches to unconven-
parency in business models. tional investments within custodians; as
The process of transitioning will providers have become adept at deft alter-
continue to be a rare occurrence in a native underlays while biding their time
funds' normal lifespan, but the use of for target portfolio assets.
transition managers seems to be becoming Mr Dwyer still believes there to be
ubiquitous. Mr Dixon believes the untapped mandates: “The issue is not, I
market is still growing. “We see a lot more suspect, that transition managers are
business coming from outside the UK as taking on mandates and not adding value;
the UK was on of the first to really it is that there are still transitions taking
embrace transition management,” he says. place where a transition manager could
“Also, consultants can see the savings large add value to the fund.”
funds have enjoyed and are keen on As the disadvantages of using transition
making the same available for medium- specialists are eradicated by competitive
sized and smaller funds.” He wonders evolution and standardization, any
whether it can maintain the 20 odd unwillingness to use transition managers
providers. “My guess,” he says, “is that we'll will only forfeit value of precious funds in
some consolidation occurring.” their most exposed moments. The use of
There are no off-the-shelf transition transition managers, of a higher qualitative
systems, but the rise of algorithmic trading level, will be adopted as both critical and
technology seems tailored to the large established custom domestically. ISJ

26 INVESTOR SERVICES JOURNAL

 Regional Profile - Middle East

ISJ takes a
topical
look at the
Middle East.

“Everyone is sitting up and looking at

the Middle East,” according to Robert
Tablet, Clearstream’s head of the Dubao
regional office.
The question increasingly for firms is no
longer; ‘Should we go to the Middle East?’
The region is no longer an economic
backwater, with under-developed and
restricted financial structures, it is flush
with liquidity and oil-induced national
budget surpluses which are being invested
in financial structures. The value of liquid
financial assets in Gulf Cooperation
Council (GCC) countries has been esti-
mated at USD750 bn and rising.
On a lower level, perhaps the market is
less interesting than other emerging
regions, but for custodians, there are insti-
tutions that justify a regional presence.
Namely, the Abu Dhabi Investment
Authority, Kuwaiti Investment Authority,
Saudi Arabia Monetary Agency, the
Pensions Institution for Social Security (in
Kuwait) and the State General Reserve
Fund of Oman. They cautiously employ
several custodians to deflect any real pic-

Arabian ture of their value, but their gargantuan

funds amount to hundreds of billions of
dollars. Though the only established play-
er offering local custody services across all

Heights
of the GCC countries is HSBC, all the
large Global custodians are starting to
promote their services in the region.
There is a continuous stream of finan-
cial news about the region. It has recently
seen the launch of more private equities
than anywhere in the world; the six mem-
ber-groups of the GCC plan a monetary

INVESTOR SERVICES JOURNAL 27

Regional Profile - Middle East

union in 2010 and the Saudi Dirham has cial centres,” says Mr Tabet. “Among them live like you live in England - it’s just hot-
become settlement currency. There is also is Dubai’s DIFC, actively positioning itself ter. Tourist facilities make it easier and
a repatriation of petro-dollars into the to bridge the gap between Asia and there are good schools; these things are
region for investing where money may be Europe. Bahrain is trying to retain its important when you are trying to build
unjustifiably frozen. The post 9/11 Patriot share of the market and its former glory. up an international workforce.”
Act can freeze any asset in America, and Qatar have their QIFC and even Saudi An international workforce seems
the random seizures of Arab money and Arabia recently announced the creation of imperative, or at most, unavoidable.
increasing polarisation felt by many Arabs a financial and economic city.” Societe Generale’s Mr Danloy stresses that
globally has contributed to a disinclina- “Despite what people say about having staffing from within the region is difficult.
tion to invest where they feel unwelcome. located different markets,” says Tahir “Because resources are so tight people
With services at home looking more Jawed, managing partner of Maples and tend to move to front office roles. It’s easy
attractive, there is even a flow of regional Calder’s, Dubai office. “I’m not confident to send over an ex-pat from London, but
money coming back from Luxemburg and that’s the case. They compete heavily for a citizen of the GCC to be in charge of
London. all players domiciling financial structures relationship management is impossible to
It is a necessary cliché, but the region’s to tap into liquidity. Historically Bahrain find,” he said.
customers prioritize personal relation- has been very attractive, and Qatar is Dubai also leads in terms of modern
ships and are less prepared to accommo- emerging, but Dubai takes the lead.” As regulation, but it may be more restrictive
date suitcase professionals servicing the competitiveness increases, so does the bid- than some of its European counterparts;
region from partially in an
London and New
York. Firms them-
As competitiveness increases, so does the bidding attempt to rectify
a dubious reputa-
selves are seeing a war of incentives to entice the big players. tion etched out
need to strategical- after some spo-
ly muscle into the middle time zones ding war of incentives to entice the big radic murky practices. It is FATFA com-
between East and West, to bridge the gap players. pliant and has all the Western money-
between Asia and Europe. Goldman Dubai may not be as naturally well- laundering and licensing requirements.
Sachs, Merrill Lynch and Lehman endowed as its mineral, oil and gas rich Jurisdictions like the Cayman Islands rec-
Brothers are setting up shop for the first neighbours, and its status is complicated ognize the regulation, but it does require
time or expanding substantially in the as a free zone within an emirate federal fine tuning. “Is it applied as well as it is in
Middle East. structure, but, dependent on outside the West?” asks Mr Jawed, “Certainly the
The question the major financial players investment, it has courted the imagination structure and regulations are as good, and
and their services entourage are now hav- of investors and ex-patriates with tax pre- as regulators become more experienced it
ing to ask is; ‘Where should we go?’ rogatives and iconographic developmens, will be better applied.”
Sebastien Danloy of Societe Generale including an underwater hotel. The pres- Bahrain’s monitoring is as sound, but
sees the Middle East as a priority over tige and tourist developments benefit the can be seen as slow or restrictive.
Asia Pacific: “We are investing heavily in cosmopolitan financial service personnel Transactions do move from Bahrain to
the region across all lines in the securities and also seemed to have encouraged the Dubai, and in fact, offshore from both, to
services business.” International interest is influx of Arab and particularly Iranian speed things up.
stoking a competitive environment. money. Unlike Dubai, Qatar does not rely on
Beirut, Lebanon and Kuwait have all Dubai’s ruling family, the Maktoums, outside investment. It rivals Luxemburg as
had their short-lived moment of regional have moulded it to be a financial centre of the world’s richest per capita GDP nation
glory as financial centres. Now there are the Emirates and the region since the and its economy is forecast to double in
several countries jostling for primacy, 1960s, exploiting their position as a centre size by 2011; but its social and security
with peripheral nations also wanting to between China, India, the Middle East, terrain are less accommodating to inter-
milk a region awash with money. Kuwait Europe and the US. This year saw the national firms with a somewhat thornier
is loosening restrictions to generate finan- completion of the Dubai Gold and political structure.
cial interest; Syria is drafting the legisla- Commodities Exchange, whose new Currently the Qatar National Bank
tive framework for a securities sector and members include Fimat International holds 60 per cent of the market indicating
opening the Damascus Stock Exchange Bank SA. It is the first international com- an under-developed financial sector. The
next year; Saudi Arabia, the largest and modities derivatives market in the Middle Qatar Investment Authority, set up in
most isolated market, is opening up to Eastern region and the only one between 2005 to manage surplus revenues, will
foreign onshore operations and creating Europe and the Far East’s time zones. start to diversify, amassing foreign acqui-
the King Abdullah Financial Centre. The Although companies like BNP Paribas sitions to counter volatility and is a fron-
whole region seems poised to capitalize have centralized their investment banking trunner in bids for Thames Water.
on the opportunities which could irrigate platform for the GCC in Bahrain, where The prime focus of the Qatar Financial
their economies when natural resources half their GCC 400 employees are based, Centre is to attract financial institutions
dry up. many others, including Mr Jawed, believe to locate in Qatar and develop new
Before 2001 there was one financial cen- Dubai offers the best environment in income streams. The key areas of business
tre: Bahrain; which had assumed a mantle many respects to international firms. in the QFC will be investment banking
from Lebanon. “Since 2000 many govern- “Dubai,” he says, “separates itself because including project finance, asset manage-
ments have initiated international finan- it provides a very Western lifestyle; you ment and private banking, as well as

28 INVESTOR SERVICES JOURNAL

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Regional Profile - Middle East

insurance. Credit Suisse were an early current glut and the long-term gain. Mr Tabet believes it is too early to
applicant for a license having done 35 “It’s the old horse race between Dubai know who will take the overall lead, as
years of successful business with the and Bahrain,” says Mr Jawed. “Bahrain New York did over other financial cen-
country. The Qatar Financial Centre would like to believe it is the centre of tres in America. “Let’s not forget about
Regulatory Authority is independent of Islamic finance, and it probably was, but Egypt, or Lebanon, which used to have
the domestic financial system. It that is now more of a label. There are all the financial talent,” he says, “let’s not
processes the license applications and clearly many experts in Bahrain, but to forget Kuwait, which was the financial
supervises, regulates and if necessary produce Islamic products you need centre in the 80s, perhaps they will make
disciplines licensed companies. The tax- lawyers.” Sharia compliance is a continual- a comeback. The region is inspired; no-
free environment for licensed firms in the ly moving target requiring much legal one wants to miss the boat.” What is
QFC is to be replaced at the end of 2008 attention. clear is that there is a gold rush in the
at a maximum flow of money
operating rate of and financial
10 per cent. “It’s the old horse race between Dubai and Bahrain.” services to the
Barclays, Middle East,
Credit Suisse, Standard Chartered and Dubai’s legal presence dwarfs Barhrain’s, which now has the legal, physical and
Morgan Stanley have all been granted hosting the top ten London law firms, a financial infrastructure to accommodate
QFC licenses. The creation of the QFC number of the biggest Middle Eastern law the global institutions and global invest-
was primarily to support the Qatari gov- firms, with larger offices representing ment.
ernment's investment and development them than anywhere else in the region. “We always offered customers in the
programme but it also has ambitions of a Bahrain is home to many Sharia Middle East access to the US, Asia and
more regional dimension. In this context supervisory boards, but as similar organi- Europe,” continues Mr Tablet. “Now we
it is well placed to succeed. In Bahrain, zations emerge elsewhere and global are going to do the opposite. We are
and to an extent in Dubai, companies companies market the niche at non-islam- going to offer customers in Europe Asia
cannot operate onshore. Neither can they ic diversifying investors, Bahrain may lose and the Americas, the door to the
transact in local currency. Stuart Pearce, its stronghold as the central voice of Middle East.” ISJ
Chief Executive Officer & Director Islamic financial jurisprudence.
General of the QFC Authority, explains:
“If you are licensed to do business from
the QFC you operate under international
laws in English and can operate in the
State of Qatar; something you cannot do
for instance from Bahrain. We are
designed to build a deeper financial serv-
ices market for Qatar; firms coming here
can do a much wider range of business
than elsewhere in the region.” The QIFC
will also operate to an FSA-like regulatory
and legal structure, to help risk compre-
hension.
Bahrain is an appealing professional
environment, managed by the conserva-
tive Bahrain Monetary Agency, (soon to
become the Central Bank of Bahrain
(CBB) and is opening the Bahrain
Financial Harbour in 2008, with an insur-
ance centre following it in 2009. It also
holds the reputation as a centre of reli-
gious scholarship.
The Muslim fasting month of Ramadan
ended on the 24th October this year and
is a reminder of the inseparability of
Muslim wealth and religion. The political
global climate has led to renewed demand
for Islamic compliant financial services
and estimates identify the Islamic banking
industry to be increasing at 15-20 per cent
annually. The IMF believes assets of
Islamic financial institutions to exceed
USD250 bn. Countries and firms are
positioning themselves to profit from the Source: National Imagery and Mapping Agency

30 INVESTOR SERVICES JOURNAL

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• GD\VRIQHWZRUNLQJRSSRUWXQLWLHV
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HEAR 60-PLUS SPEAKERS FROM AROUND THE GLOBE INCLUDING:

DAVID LONGWORTH was appointed Deputy Governor of the Bank of “We came away feeling that not
Canada in April 2003. In this capacity, Mr. Longworth is responsible for only have we been duly educated,
GRPHVWLFDQGLQWHUQDWLRQDO¿QDQFLDOPDUNHWLVVXHVDQGWKH%DQN¶V¿VFDO but we had a
agency role for the federal government. The Financial Markets Department number of potential leads as well.”
DQGWKH'HEW$GPLQLVWUDWLRQ2I¿FHUHSRUWWRKLP$VDPHPEHURIWKH ³+DO0DVWHUV%XWWHUÀHOG)XQG6HUYLFHV
%DQN¶V*RYHUQLQJ&RXQFLODQGWKH([HFXWLYH0DQDJHPHQW&RPPLWWHHKH
shares responsibility for decisions with respect to monetary policy and the
management of the business of the Bank. “Another excellent conference
from a content, speaker,
presentation and organization
level.”
*(25*(9$1LV3UHVLGHQWDQG&(2RI*HRUJH9DQ &RPSDQ\//&+H
³0LFKDHO%HDQ&*,
founded Van Hedge Fund Advisors, LLC in 1992, was a hedge fund industry
pioneer. He has served as a Director of various national and international
organizations. George Van has written numerous articles, book chapters, “It’s the best-run conference
and white papers on hedge funds. I have participated in.”
³(ULF*URQQLQJVDWHU3:&

“Another outstanding job”

³'RQQD/DEURVVH)URQW6WUHHW&DSLWDO

3$8/00225( is a Vice-Chair of the Ontario Securities Commission

26&$VD&RPPLVVLRQHUDQGPHPEHURIWKH([HFXWLYH&RPPLWWHHKHSDU-
ticipates in setting priorities, formulating policies, and overseeing operations
of the OSC. Paul frequently chairs panels of Commissioners that adjudicate
on allegations of breaches of the Securities Act. He also chairs the commit-
WHHWKDWRYHUVHHVWKH26&¶VDGMXGLFDWLYHSROLFLHVDQGSURFHGXUHV

0$5,$11(.60<7+( served for two and a half years as the director

RIWKH'LYLVLRQRI,QYHVWPHQW0DQDJHPHQWRIWKH6HFXULWLHVDQG([FKDQJH
&RPPLVVLRQ6(&SULRUWRWDNLQJRQKHUSUHVHQWUROHDVDSDUWQHUDW
:LOPHU&XWOHU3LFNHULQJ+DOH 'RUU//3LQ0D\7KH'LYLVLRQRI,Q-
vestment Management is responsible for regulating investment companies,
investment advisers and public utility holding companies, as well as for
UHJXODWLQJFHUWDLQLQVXUDQFHSURGXFWV:KLOHVHUYLQJDVWKH'LYLVLRQ¶VGLUHF- World Hedge Funds Summit - 2006LVUHJLVWHUHG
ZLWKCFA Institute DVDQ$SSURYHG3URYLGHURI
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SURIHVVLRQDOGHYHORSPHQWSURJUDPV
Ms. Smythe previously served as 7KLVSURJUDPLVHOLJLEOHIRU13 3'FUHGLWKRXUVDV
H[HFXWLYHDVVLVWDQWWR6(&&KDLUPDQ5LFKDUG&%UHHGHQDSRVLWLRQVKH JUDQWHGE\CFA Institute.
assumed in April 1990.
SiBOS Diary ISJ stacks up in Sydney

This years SIBOS conference in number of Kylie Minogue tribute

Sydney appeared to have a slightly songs, not to mention the free flowing
lower attendance than usually experi- champers, it was the perfect round off
enced with the event. This however, by to a great week.
no mean dampened the spirits of the I don’t know about you, but my tick-
delegates that did attend and the gen- et for next year has already been
eral feeling was that the conference, booked!
as a whole, benefited from a more
focussed and higher calibre of
attendee.
This year, software and technology
vendors were out in strength, with the
usual mix of other banks and other
corporates, the conference hall buzzed The conference room with a view
with a real feeling that business was
being done.
Around ‘Raising Ambitions,’ the
thrust behind the event, was a call to
the financial world to maximise self-
regulation and minimise government
regulation through the building of
communicative and transparent rela-
tionships with both the regulators and
also the community.
Of special focus was the area of
payments, and issues to do with regu-
lation, security and technology, with a
general focus on the banking commu-
nity needing to take initiative in the
payments area.
SEPA (Single Euro Payment Area)
was hot on the agenda, and created
much debate, around whether the
pace of adoption was too slow, with its
deadline now under a year away and
whether corporates actually have all
the information they need to make the
adoption of SEPA happen.
On a European level, the payments
sphere looks set to be transformed by
the capabilities of TARGET 2, the new
European RTGS system that goes live
on 19th November 2007, and this
was a topic of much discussion. The Citigroup crier.... Moritz Ostwald, BHF Bank
With so many technology minds
under one roof it was impossible to
not cover something around automa- Mike West & Karen Shrubb, ADP
tion and front to back office STP, and
issues around OTC derivatives were
flavour of the week.
All work and no play definitely does
make Jack a dull boy, and the balmy
Sydney evenings were spent ‘network-
ing’ (as we call it in the industry) until
the wee hours.
A number of functions do standout,
albeit hazily, in my mind, however the
SIBOS party on the Thursday evening
by far pipped them all to the post.
What with fancy dress dancers on
stilts, original Australian ‘tucker’ and a

32 INVESTOR SERVICES JOURNAL

 SiBOS Diary

Kenny Thomas, ISJ, Paul Skeldon, Dan Campion, Interactive Data & Melissa
SIBOS Daily News, Thea George, Rowling, GJR Communications
A-Team Group, Alan Duerden, ISJ

Julie Kyte, Smartstream Kenny Thomas & Justin Lawson

The Checkfree Party

The SIBOS Party

Alan Duerden

The boys of ADP Ken Price, Avox

INVESTOR SERVICES JOURNAL 33

Regional Focus - Spain & Portugal

The Iberian Paradox

Giles Turner takes a look at the
complexities of the Spanish &
Portuguese markets.

A hair can always be split more than the creation of 60 per cent of all new jobs doing the opposite and having a local
once. At first glance the Iberian region in the Euro area and declining unemploy- influence in the UK.
might be examined as a whole, then logi- ment. We have seen the EUR13 billion The foreign assets of Spanish banks
cally split down into Portugal and Spain. take over of Abbey National by Banco have risen dramatically with a 77.38 per-
But what about Gibraltar, should it really Santander and the British Airports cent increase from 1996 to 2005. This
be included in the Iberian region? Authority taken from the giant Goldman seems to convey a positive outlook and
Then you have to take into account the Sachs by Ferrovial. Spanish companies buoyant revenue drove the 2005 general
nature of Spanish finance, for government budget into a
example the exchanges; first there surplus of 1.1 percent of GD,
were four, then there was one, but
on closer examination, there are
“The share registration system for the first time since the
1970’s. According to the
still four, or are there? Then you in Spain is complex.” International Monetary Fund
however, Spanish financial
discover the difficulties of share
registration, so I poured myself institutions intermediated
another coffee and settled in for the long seem to be on the warpath. Most of the external savings in 2005 in order to meet
haul. big Spanish banks have indulged in cross- the increasing financing need of the non-
Things always get tricky when you start sharing and many global custodians have financial private sector, mainly through
asking questions. On the face of things, increased their local market influence, the issuance of mortgage-backed securi-
Spain seems to be doing rather well; an offering global services to local investors. ties in euro-area markets.
economic growth of 3.4 per cent in 2005, It is therefore interesting to see Santander It is all well and good to look to look at

34 INVESTOR SERVICES JOURNAL

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Regional Focus - Spain & Portugal

the pro’s and cons, yet what of the trends? sorted out and according to Nisbet, the exchanges efficient and competitive. But
According to Sally Maddick, Head of problem wont be sorted out until MiFID can we apply this model to the Spanish
International Sales at RDC Dexia, “in because the share registration process situation? Unlike their American counter-
Europe and also Iberia, there is a definite won’t be compatible with the new regula- parts, their independence has little to do
market for outsourcing and regulation is tion. It is also likely to be the custodians with economic roles or capitalisation, but
modifying the landscape. Market har- that sort out the problem, not the more to do with politics and the desire to
monisation allows for increased trans- exchanges. MiFID objectives of harmini- keep autonomy.
parency in processes as well as an extend- sation, investor protection, high quality It is clear from a brief look at Spanish
ed geographical choice of custodians and execution and increased transparency politics that local power still has a signifi-
sub-custodians. With increased market look easier for Portugal than for Spain. It cant say any private or public action so
harmonisation, the need for strict com- is indeed unsurprising that it is easier to unless there is a political change of mind
pliance and increased system investments work in Portugal regarding share registra- the exchanges will stay separate. And
will follow.” Compliance seems to be tion than in Spain, according to Nuno unlike its American counterparts, there
something of an issue in Spain regarding Coelho, Director of Institutional Custody, are certain stocks that can only be traded
the share registration problem. “The MillenniumBCP. “We used to have a fee in certain exchanges. Supporters of the
share registration system in Spain is for share registration in Portugal which Spanish infrastructure see the exchange
indeed complex,” says Paloma Pedrola, you are no longer obliged to pay. In the system as evolved, in working order, plus
Head of Investor Services for Spain, Spanish market if I want to move some that it doesn’t act as a barrier of invest-
Societe Generale. “Every time there is a positions to another client I need to pay a ment into the market. Seeing close to
buyer in the market, we have to register lot, this doesn’t apply in Portugal.” 100% of the trading and capitalisation is
the name of the shares in the name of the I was surprised to see little to no com- done between Madrid and Barcalona and
final depository or the final owner.” Of petition between the Portuguese and this isn’t seen as a problem; if it ‘ain’t
course, this complex system can work in Spanish custody markets and no integra- broke, don’t’ fix it seems to be the
a custodians favour. A new system can be tion to speak of. In fact, most business Spanish motto.
rolled out offering efficiency to investors, insiders overtly stress the fact that there is Of course, the introduction of the
like a new pamphlet in your local bank, no Iberian market. Initially I presumed Bolsas y Mercados Espanoles (BME)
guiding you through the minefield of that although regional barriers may be should seen as some form at integration
share registration, and indeed new sys- falling due to European integration but because according to the BME website it
tems have been created. BNP Paribas perhaps old historical, political differ- “integrates the companies that direct and
Securities services manage the secu-
now have an rities markets and
Internet tool that “The Iberian markets are two seperate markets financial systems
aids share process-
ing. RBC Dexia IS
with two seperate rules.” in Spain.” But why
remain with four
and Citigroup also exchanges if inte-
provide technical support for share regis- ences still remain. Regarding integration gration is its aim? I wondered if the BME
tration. “It is complex but the market between the stock exchanges, a paper was quite necessary but according to Ms
understands the situation for quite some back in 1999 by Bernardino Adao com- Pedrola; “the BME has been present in a
time now,’ continues Ms Pedrola. “The missioned by the Banco de Portugal dis- lot of high profile European meetings and
way to get round this problem is by giv- covered that “when considered individu- they have done a lot in the past year
ing as much resources as we can to the ally each of the three stock markets con- regarding regulatory market changes,
back office by implanting solid and effi- sidered, Frankfurt, Lisbon and Madrid they have implemented a new way of
cient structures.” Of course there are plus Stock Exchanges, constitutes an almost communication regarding equity and
sides to complexity. A difficult situation perfectly integrated market [but] the level fixed income as securities, and thus
forces fiduciaries to step up and deliver of integration achieved by the Iberian adapting the law to new products.”
solutions and keep up to date regarding stock markets is lower that the one Many have lauded the BME as a success
regulation and technology. With the achieved between each Iberian market story. However there are two sides to
introduction of the Iberclear automatic and the Frankfurt market.” Geographic every story. In reality its floatation didn’t
matching facility, all types of clients have and economic proximity are in no way involve any new shares, was relatively
benefited. The system has been made linked if both Lisbon and the Madrid small in scale, and its initial trading rate
more efficient and according to Ms exchanges has greater similarity to the has decreased. If anything, the BME
Maddick this will encourage non-resi- Frankfurt exchange than to each other. seems to be an attempt to present a uni-
dents to invest. Regarding the question of four fied front for the fragmented Spanish
Those in Spain do not see share regis- exchanges (Madrid, Barcelona, Bilbao, market with political rather than eco-
tration as a significant problem, rather, as Valencia) in Spain, consolidation must be nomic motives.
Robert Nisbet, Director of International an issue. America has wide variety of Portugal does not seem to have as many
Relations at Gaesco, puts it, like the three exchanges, initially due to geography, problems due to its relatively small scale.
pin plug in England; different from the than due to trade specification, and now, According to Nisbet “Portugal has essen-
rest of Europe, but not a particularly dif- although consolidation looms (the CME tially become absorbed by Paris and
ficult problem to rectify. Plus it keeps takeover of CBOT being a clear example), Amsterdam, whereas Spain is sticking by
business in Spain until the problem is inter-exchange rivalry keeps the separate itself.” Since November 2003, the

36 INVESTOR SERVICES JOURNAL

 Regional Focus - Spain & Portugal

Portugal has seen increased transac-

tion volume over the past three or
four years and this volume is more
visible to the international market.
Large scale regulation changes that
aim to increase visibility and finan-
cial security now pose less of a
problem to Portugal than it does to
Spain because perhaps the former is
far more a part of a European net-
work than the latter. Whilst Spain
will always dominate Portugal
regarding size and transaction vol-
ume, Portugal has seen sense to ally
itself with bigger markets. Spain on
the other had, in keeping its inde-
pendence, may fall behind com-
pared to some emerging European
markets. ISJ

Euronext. The Iberian markets are two

The graph above highlights the misleading separate markets with two separate
quality regarding the foreign assets of rules.”
Iberian businesses. On face value, Spanish On the topic of regulation, “on Nov 4,
custodians have powered ahead with Banco 2005, the Spanish collective investment
Santander’s and Ferrival’s recent acquisi- institutions introduced for the first time
tions and a quick glance at Portugal’s legislation providing a regulatory frame-
growth shows a minimal change. However work that is expected to allow for the
size isn’t everything. Spanish financial growth of hedge funds. This will mean
infrastructure hasn’t coped with it’s fast that Collective instruments vehicles will
growth, whereas Portugal, by aligning itself
with Euronext Market, has created a small
but efficient market. ‘If it ain’t broke, don’t fix it’ seems
Source: International Financial Statistics to be the Spanish motto.
be able to invest in new products to
make their offer more attractive,”
according to Ms Maddick. Moves are
Portuguese market has been integrated being made to harness the potential
in the Euronext platform. Prior to inte- power of the Spanish market. In Efama’s
gration the platform belonged to 2005 report Spain accounted for 4.2 per-
Portuguese institutions and broker deal- cent of European market share in assets
ers. According to Mr Coelho, “the main under management and ranks as the 7th
difference between the old and new largest investment fund centre with EUR
model was the implementation of the 275.075 bn. Spain is also 6th largest for
central counterparty philosophy to pro- UCITS with 5.2 percent of the European
vide new management and liquidity in share and EUR 268.596 bn. The poten-
the market.” Coelho notes that the tial is clearly there, but the problem with
Spanish have kept the same model since potential is that it’s not especially prag-
2003 and regarding local trading plat- matic. Whilst Spain seems to be fretting
forms they don’t have any links with with internal politics, Portugal has taken
other markets but are focused on their a bold step by allying itself with
internal market. Coelho puts it simply; Euronext because it stated a realistic
“they will not integrate the local plat- opinion of its global influence. Although
forms with a European platform like losing some degree of independence,

INVESTOR SERVICES JOURNAL 37

Indicators - Securities Lending

“Neither a borrower nor a lender be.” Hamlet

Analysis of the key

indicators on
securities lending
and borrowing
statistics from Data
Explorers.

It seems no-one takes Shakespeare seriously any-

more, least of all the securities lending market.

Table 1: Key Statistics: The number of Securities

Available for Lending over the half-year period
from April to October increased by 70581l. The
value of these securities increased by around
USD 3171 bn, an increase of approximately 40
per cent. However the value of Securities on
Loan increased by only 30 per cent, from USD
1921 bn to USD 2502 bn.

Bar Graph 1 - Equities: Cash vs Non Cash

A striking difference when comparing equities
comes down to geography. The American
market has 85 per cent of cash lending, in
comparison to only 35 per cent in the European
Equities Market. This is simply down to
preference. In the US, regarding reinvestment
purposes, investors are more sophisticated with
cash compared to collateral. American Investors
logically prefer to use cash equities rather than
non-cash equities, unlike their European
counterparts, where the situation is reversed.

Table 2 – Lenders and Borrowers: Latest Data

America continues to be heavily moved by cash
with 84 per cent borrowed through the same
medium. Europe on the other hand as dis-
cussed above, prefers to stick to non-cash
methods. Asia interestingly ploughs the
middle ground, sticking around 62/50 per cent
for both. Another statistic that jumps out is the
difference between cash and non-cash
borrowing for bonds in the emerging market.
Only 8 per cent of borrowing is through bonds,
leaving 92 per cent of bonds lent through
collateral. This shows the lack of stability
within the emerging markets, collateral
being more secure than cash. It is also far
easier for the emerging markets to reinvest
collateral than cash.

38 INVESTOR SERVICES JOURNAL

 Indicators - Securities Lending

Line Graph 1: Group Data Analysis: Jan

06 to Oct 06 Group Data Analysis: Jan to Oct 2006
Regarding Group Data Analysis, the div-
idend season is clear to see where
lenders re-write the fee for the loan and
cash in on stock rise increases, result-
ing in a massive increase in Securities
Lending Fees during April and May.
With this exception all things have
remained steady for the remainder of
the year.

Tables 3 & 4: League Tables

Regarding the winners as of Oct 4th,
Overstock.com Inc was the most lend-
able equity by fee for equities that are
greater than USD 100 million (Table 3).
The Argentina Government
International Bond was the top per-
forming corporate stock for corporate
that are greater than USD 100 million
(Table 4).

Tools and Utilities

for Securities Lending

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Risk Management Association - Composite Analysis

RISK MANAGEMENT ASSOCIATION SECURITIES LENDING COMPOSITE -

Risk Returns... Comparison Quarter 2 2005, Quarter 2 2006
Below is a table showing a year-on-year snapshot of the industry worldwide. Lendable
Analysis of the latest assets refer to the value of loanable securities. -On loan vs. cash collateral refers to the
value of securities on loan in return for cash. -On loan vs. non-cash collateral refers to the
value of securities on loan in return for non-cash collateral.
securities lending data LENDABLE ASSET ON LOAN vs. CASH ON LOAN vs. NON-CASH TOTAL ON TOTAL ON

from the RMA. US Dollar $

2006
($MM)
2005
COLLATERAL ($MM)
2006 2005
COLLATERAL ($MM)
2006 2005
LOAN ($MM)
2006 2005
LOAN (%)
2006 2005
North American Treasuries/Bonds 1,308,616 1,438,281 402,192 430,298 69,763 79,267 471,955 509,565 36% 35%
Pacific Rim equities increased sharply from U.S. Treasuries/UST Strips 402,954 420,108 277,418 277,774 58,331 68,170 335,749 345,944 83% 82%
USD116 bn to USD282 bn over the past U.S. Agencies 151,165 166,129 60,329 57,734 6,662 7,263 66,991 64,997 44% 39%
U.S. Mortgage Backed Securities 138,612 125,754 28,618 26,418 423 659 29,041 27,077 21% 22%
three years, after a slight dip between 2001 U.S. Corporate Bonds 595,576 709,625 35,206 67,605 3,008 2,592 38,214 70,197 6% 10%
and 2003. The region is growing in the area Canadian Bonds (Gov't & Corporates) 20,309 16,665 621 767 1,339 583 1,960 1,350 10% 8%
of securities lending, having finally got over North American Equities 3,092,932 2,601,017 274,225 222,462 7,985 12,195 282,210 234,657 9% 9%
the crisis at the end of the 1990’s, and with U.S. Equities (includes ADR’s) 3,041,901 2,566,704 270,828 221,250 7,067 10,580 277,895 231,830 9% 9%
the relaxing of legislation, allowing foreign Canadian Equities 51,031 34,313 3,397 1,212 918 1,615 4,315 2,827 8% 8%
investment in and out of the region. European Equities 1,007,080 833,465 116,870 96,530 43,308 37,464 160,178 133,994 16% 16%
French Equities 137,861 114,008 42,227 36,666 7,051 6,486 49,278 43,152 36% 38%
While still increasing, growth in Europe is German Equities 115,455 81,396 23,739 17,316 6,856 5,934 30,595 23,250 26% 29%
Italian Equities 51,982 39,906 12,012 9,964 3,244 3,424 15,256 13,388 29% 34%
mixed. French equities contributed the UK Equities 337,624 290,936 1,717 902 8,185 8,013 9,902 8,915 3% 3%
highest value to the European total, rising Scandinavian Equities 74,388 59,373 13,240 11,575 1,963 2,117 15,203 13,692 20% 23%
USD50 bn by 2006. In the UK and Italy, All Other European Equities 289,770 247,846 23,935 20,107 16,009 11,490 39,944 31,597 14% 13%
growth has been steady while the rest of Pac-Rim Equities (Includes Australia) 496,124 335,625 29,709 22,353 11,030 12,250 40,739 34,603 8% 10%
Europe’s contribution is increasing at a Japanese Equities 308,257 203,646 16,486 14,216 7,332 8,540 23,818 22,756 8% 11%
sharper rate. Hong Kong Equities 39,197 27,041 3,287 1,962 951 793 4,238 2,755 11% 10%
Australia 82,113 63,036 7,669 4,336 1,820 2,102 9,489 6,438 12% 10%
All Other Pac-Rim Equities 66,557 41,902 2,267 1,839 927 815 3,194 2,654 5% 6%
US equity involvement in securities lending
All Other Equities (Not Previously Listed) 49,235 18,805 3,286 242 469 98 3,755 340 8% 2%
increased sharply from USD116 bn to Total Equities (Aggregate Total) 4,645,371 3,788,912 424,090 341,587 62,792 62,007 486,882 403,594 10% 11%
USD282 bn over the past three years. The
addition of Canadian equity in 2002, this EURO Denominated Sovereign Bonds 175,859 154,469 5,567 4,082 13,167 10,447 18,734 14,529 11% 9%
French Sovereign Bonds 33,716 31,802 863 268 1,854 2,266 2,717 2,534 8% 8%
quarter, contributed almost USD2 bn to the German Sovereign Bonds 61,942 53,390 2,585 2,043 3,782 3,321 6,367 5,364 10% 10%
US equity involvement in 2006. Italian Sovereign Bonds 21,391 15,293 308 446 1,269 776 1,577 1,222 7% 8%
Spanish Sovereign Bonds 11,363 9,288 28 7 618 210 646 217 6% 2%
All Other EURO Denominated Sovereign Bonds 47,447 44,696 1,783 1,318 5,644 3,874 7,427 5,192 16% 12%

UK Gilts 89,255 70,362 0 5 18,278 6,946 18,278 6,951 20% 10%

Emerging Market Eurobonds** 11,877 11,689 3,340 3,000 406 120 3,746 3,120 32% 27%
Eurobonds 205,156 217,507 5,103 14,555 28,166 22,275 33,269 36,830 16% 17%
All Other Sovereign Bonds † 66,591 29,307 4,006 3,142 6,890 2,424 10,896 5,566 16% 19%
Total Bonds (Aggregate Total, inc. US) 1,857,354 1,921,615 420,208 455,082 136,670 121,479 556,878 576,561 30% 30%

TOTALS 6,502,725 5,710,527 844,298 796,669 199,462 183,486 1,043,760 980,155 16% 17%
Average Number of Lending Markets 16 16 *(Reported in Aggregate) **(Latin America & E Europe) †(Not Listed Above)

The Survey reflects data provided by the following institutions: Barclays Global Investors; Boston Global
Advisors; Brown Brothers Harriman & Co.; Comerica Bank; Credit Suisse; Frost National Bank; Investors
Bank & Trust Company; JP Morgan Chase & Co.; M & I Global Securities Lending; Mellon Financial Corp.;
MetLife Insurance Company; Metropolitan West Securities LLC; The Northern Trust Company; PFPC Trust
Company; U. S. Bank, N.A.; Union Bank of California, N.A.; The Vanguard Group, Inc.; Wells Fargo
Institutional Investments

40 INVESTOR SERVICES JOURNAL

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Asia-Pacific Sec. Lending

says. “A lot more asset allocation is being

made to Asia, which means there are
more assets available to lend. With more
business flowing through, there is more
activity flowing through. It has increased

Crouching With China and

India leading the
phenomenally over the past year.”
Regulatory changes have been mostly
positive, both for new and existing mar-
kets, he adds. The Philippines, he

Dragon, way, the

Asia-Pacific region
begins to show its
believes, will be the next market to
launch a securities lending model. “I am
confident this will happen by year-end.”
Important steps forward are being

Hidden potential.
taken around the region, as demonstrated
by PASLA’s brief summary of the state of
play in a number of countries. In China,
it reports, the CSRC has issued two sets

Tiger Brian Bollen

of rules governing Local Securities
Companies that wish to conduct
Securities Lending and Margin
Financing activities. These rules do not
reports. provide for participation by Qualified
Foreign Institutional Investors (“QFII”).
Planned implementation is still unclear.
In short, the rules govern the Eligibility
criteria for Securities Companies and
Customers, Depository Accounts,
Contracts, Guarantees, Risk Controls,
The future’s bright, the future’s rosy, for Rights and Entitlements. The Shanghai
securities lending in Asia. That is the view Stock Exchange and Shenzhen Stock
of Sunil Daswani, chairman of the Pan- Exchanges are expected to issue their own
Asian Securities Lending Association. The rules for implementation shortly.
rising volume of investment asset alloca- “Malaysia has shared a model with the
tions to the region, combined with the industry on how it will work, using the
growing demand for securities from local stock exchange as a central counter-
hedge funds, means that, for the time party, and local collateral. The Bursa
being at least, there is only one conceiv- Malaysian sent copies of its proposed
able direction the product can move in: rules on SBL and Short Selling to PASLA
upwards. earlier this year for comment and the
PASLA’s own growth over the past year Board has prepared a number of com-
reflects this trend, the number of mem- ments for an open discussion in July on
bers up by more than 10% in that period, the basic format of the SBL market antic-
to 40, including 10 lenders, 26 borrowers, ipated by the Bursa with focus on the
two hedge funds and two local regulatory roles of the parties to the transaction and
bodies seeking to build their own knowl- the process. But these are still very early
edge and awareness of securities lending. days and as it stands their proposal might
Even Malaysia, none too fondly viewed be viable for the local financial commu-
within the industry for pulling the plug nity, but simply wouldn’t work for their
on lend- internation-
ing in
the A lot more asset allocation is being al equiva-
lent. No-
wake of
the last
made to Asia, which means there one would
suggest the
great are more assets available to lend local stock
Asian exchange
equity crisis, is making tentative moves would default, but the onshore-only
towards reinstating the practice. model introduces a country risk element
“There are 14 markets in the region that that is unacceptable to international
broker-dealers and hedge funds want lenders. They wouldn’t want to be
access to, and only half currently have a trapped with collateral they couldn’t sell.”
securities lending model that works,” he India, he adds, where around 60 per

42 INVESTOR SERVICES JOURNAL

 Asia-Pacific Securities Lending

cent of investment is retail, has proposed become the focal point for Asia ex-Japan ex-Japan trading to Hong Kong from
an almost identical model. “PASLA has stock lending. We have seen the majority Japan and while we saw certain lenders
continued to lobby the SEBI and Indian of the Stock Lending and market access leaving Hong Kong a few years ago, their
regulators to help draft upcoming SBL for Asia ex-Japan move to Hong Kong seems to be a trend for the lenders to be
regulations. To this end, the SEBI has not with lenders and borrowers beefing up opening up or beefing up in Hong Kong
engaged PASLA in its efforts. PASLA will their teams in the region because of its to service the strengthened borrower
continue its contact with local regulators, location and relative ease of access to the teams.”
offering its help and advice for market new markets.” The ability to blend securities lending
development, despite the fact that to date “Korea was the first of the emerging and corporate governance requirements
our overtures have been met with little markets with active derivatives, remains an industry-wide issue, says Blair
response.” convertible bond issuance and active McPherson. “There is increased pressure
“In Taiwan, PASLA has begun work on merger and acquisition market to estab- for all participants to demonstrate active
a standardized lending addenda to be lish an acceptable legal regulatory and corporate governance and regulatory
used by the industry. tax infrastructure to promote lending. oversight. Lenders will be looking for
Russin & Vecchi have been awarded the The trading opportunities exist in service providers who can partner with
contract for providing PASLA with a Taiwan, and it looks to be the next them on integrating systems and infra-
standard industry agreement which market where supply will open up. India structure improvements to address these
would be an addendum to the standard and China are key emerging markets to issues, for example, creating lending pro-
GMSLA. They have confirmed that it will focus on going forward.” grammes that maximize returns within
only be in the context of
English and The economic growth in China and India and its lenders' corporate
contain all the
relevant tax
influence on other Asian economies will continue governance guide-
lines and allowing
laws. On agent
side letter to the
to have a significant impact on the global economy them to make
informed decisions
client authorisation agreement will also “Over the last few years market regula- with regard to proxy voting.”
be drafted. ” tors in the Asian emerging markets have The agency lender disclosure initiative
“In Thailand, the Thai TSCD has been realized that securities lending is not as will affect Asia as its full force begins to
at work on the points raised by PASLA risky as was initially thought. Regulators be felt. In a presentation on the subject
earlier this year. The TSCD has taken now realize that securities lending is a earlier this year, Eugene Picone Sr. Vice
responsibility for the SBL master agree- necessity for liquid and efficient equity President JPMorgan Securities Lending,
ment and are working with their legal markets. The impact and success of noted that increased information disclo-
adviser to identify the netting opinion implementing a lending structure in sure will affect everyone participating in
and other legal requests made by PASLA. Korea has encouraged other regulators to this business (agent lenders, US broker-
This was due by mid June, but some follow suit. However where the securities dealers, beneficial owners, and vendors).
delays make a late July time table more lending structure deviates from the inter- “Regulators have required that all
likely. The Thai SEC has formed a work- national norms, due to regulator or principals currently participating in
ing group, comprising Thai market par- exchange intervention, we find participa- agency security lending be re-certified
ticipants, to concentrate on the market tion in these markets limited.” by broker dealers and that going forward
issues. The feedback and concerns from “The economic growth in China and any new principals added to an agent
PASLA has already been forwarded to the India and its influence on other Asian lenders' program require explicit
SEC by the TSCD and we hope to hear economies will continue to have a signifi- approval by the borrower. Broker-dealers
from them soon.” cant impact on the global economy. As borrowing from agent lenders will need
Blair McPherson of RBC Dexia believes these markets embrace market capitalism to receive principal level loan data on a
that emerging markets will offer new we will continue to see new equity oppor- daily basis from each agent and monitor
avenues for lenders to earn above average tunities in Asia which should mean that exposure and compute capital charges at
income. “While we continue to see Asia is the place to be for securities lend- the principal level.”
increased demand in the mature markets ing growth.”
in the region, the current major trend is “While the importance of technology,
to obtain access to stock in the emerging STP and automation is a key issue for the
markets. In the emerging markets, limited industry, until the emerging markets can
availability means larger spreads and be classified as mature lending markets,
first-to-market which will provide the market access will be the key driver
opportunity to generate "superior fees". affecting business led by legal and regula-
Taking all this into consideration, we tory reform and the due diligence process
have seen business in the region as very of providers, lenders and borrowers.
buoyant. Our Far East balances are a Keeping pace with regulatory initiatives
growth area and we anticipate this will and changes on an industry-wide scale
continue moving forward.” will be essential for providers if they want
How have these changed, if at all, over to remain competitive.”
the past year, we asked? “Hong Kong has “Certain borrowers have moved Asia

INVESTOR SERVICES JOURNAL 43

Asia-Pacific Securities Lending

“The outlook is that a majority of bene- chance there is for a borrower to discon- begun and information is currently being
ficial owners should not see any change tinue borrowing from an entity due to transmitted by agent lenders regarding all
in the way they do business with their lack of information (mostly financial principals in their programs. Starting
agent lender. But beneficial owners information). Borrowers will get that from October 1, 2006, agent lenders have
should be aware that their information information either from the agent lender been providing principal level break
(legal name, tax ID, down information on all
address of incorporation, loans conducted on an
place of business, etc) will Within Asia, certainly companies are agency basis. Borrowers will
be transmitted to borrow-
ers and borrowers will be
expanding their businesses to more be monitoring and control-
ling levels of exposure to
conducting a credit review than one geographical location each principal based on the
on each principal.” daily loan principal break
“Borrowers will be looking for financial or from publicly available sources.” down information.”
information on each principal in order to “Beneficial owners who choose not to The implementation of Basel II rules
make sound credit decisions, justifiable in disclose certain information either to will also have an impact in Asia just as it
a regulatory examination. The more their agent lenders or to the borrowers will have an impact elsewhere in the
readily available the information about a directly may find themselves turned off financial world, noted Paget Dare Bryan
principal is, the faster they will be from lending to certain broker dealers. of Clifford Chance in a similar presenta-
approved by borrowers and the less The re-certification process has already tion. “Under Basel II rules firms must
now include potential exposure, in addi-
tion to current exposure, in the calcula-
Express Briefing: As-Pac Sec. Lending remain. Funds now need Asia in their portfolios - tion of regulatory capital. Potential expo-
long & short. sure should include stock and collateral
Melinda Schutte, Division Director, Head of volatility, FX risk, liquidity risk and term
Securities Lending, Macquarie Securities Ltd How much would you say technology is affecting risk. In order to accurately assess its
the business, and is that pace of change accel- exposure a firm must calculate the regu-
How would you summarise the current major erating? latory capital to each principal. Without
trends and issues affecting the securities lend- Technology is constantly evolving and potentially disclosure of principal details and associ-
ing industry in Asia? offering ease of process, for a product that histor- ated borrow and collateral information it
1. Hedge Funds - a greater focus as clients, ically has been slow to change. is not possible to assess enforceability of
whether synthetically or straight Prime Brokerage Firms are more than ever setting aside profit to netting and collateral and therefore the
2. Voting rights as exemplified by the Henderson invest in infrastructure and IT platforms to meet firm needs to calculate the regulatory
Deal in HK ever-changing market as well as clients needs. capital on a gross basis (i.e. without the
3. Focus on India & Taiwan. Asia needs technology to help it comply with the benefit of collateral).”
4. Exclusives losing their value higher number of regulatory requirements found Bryan identifies a number of potential
in each of the local markets. consequences that could arise from non-
How have these changed, if at all, over the past disclosure:
year? Are there new entities springing up in the mar- Removal of the business from the
1. Hedge funds are changing the landscape; ketplace that we need to be aware of?
advanced risk based capital models:
increasing competition to service and prime bro- Within Asia, certainly companies are expanding
their businesses to more than one geographical Substantial increase in capital charges
kers trying to defend their ground and lock in the to the business.
hedge funds. location, whether it be Hong Kong, Tokyo,
Australia or Singapore. Whether Seoul or Taipei Loss of netting: Capital requirement is
2. Supply is always expanding but the percentage then calculated on a gross basis.
of hot names remains the same. Competition for will ever be necessary is still to be seen.
the same trades. There are historical US/Euro institutions who Additional capital requirements under
are quite openly investing time, money and pillar 2: Incremental subjective assess-
Which areas are seeing the most activity, and resources into Asia, with an aim of opening up ment of capital requirements for risks
the fastest growth? new Asian hubs. not captured under chosen modelled
1. India, Taiwan and China approach.
2. Hopes for Malaysia Are there any changes taking place on either Inability to accurately assess concentra-
3. Tri-party in Asia is being pushed, although it is the lending or the borrowing side that we should tion risk: Potential compliance issues
difficult. take notice of? relating to books and records require-
4. Equilend and other online products Borrowers: Hedge funds are starting to employ ments.
5. An increase in synthetic activity their own Equity Finance people to intermediate Due to the size of the capital require-
between prime brokers and the lenders. ments firms may not be willing to
Are there any areas that remain resistant to the Lenders: Looking to get more out of their portfolios borrow on an undisclosed basis.
practice? across all their Asian markets, whilst at the same As always with any major new addition
Indonesia, Philippines, Vietnam. time having to justify fees generated, given the to the complexity of commercial life, only
transparency that Data Explorer brings. Custodian
time will tell exactly how the new
Does securities lending have a rosy future product is lagging behind in terms of lending out
their emerging market assets. requirements will affect the volume and
in Asia? fluidity of future business. ISJ
Of course. Liquidity constraints and volatility will

44 INVESTOR SERVICES JOURNAL

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Company Profile: Pirum Systems

other counterparty is expecting to

In the illusive, and often convoluted world of receive. “I have heard of clients who
middle and back office STP, one software would spend up to one week reconciling
a single bill with one counterparty,
company is pushing the boundaries around because it is a really big relationship and
the bill runs to thousands of pages,” says
automation and risk mitigation for securities Mr Perry. “Now, they can do the same
lending and repo. thing using our system in a matter of
minutes.”
Where Pirum’s SBLREX product comes
up trumps is in its alleviation of the man-
Alan Duerden speaks to Rupert Perry, ual fashion in which these securities lend-
Director, Pirum Systems about their ing reconciliations have been done in the
past. The software allows for both
innovative business strategy and the automation and risk mitigation, and as
Mr Perry suggests, a process that is gener-
new breed of automated reconciliation ally much quicker and easier to manage.
Perry also believes that the other bonus
and STP solutions. of a more automated focus around recon-
ciliations lies in a greater accuracy of the
information that clients use for managing
their businesses. “If you don’t reconcile
for a month, some of the differences may
go unnoticed for that whole period of
time,” says Mr Perry. “During which all of
that reporting and information you are
generating is based on inaccurate infor-

Model Behaviour? mation because you are working with bad

data.”

A model software delivery model?

Working as an Applications Service
Provider (ASP), Pirum uses a different
business model to most software
pany, however, also deals with other rec- providers. Unlike traditional vendors who
Amid the dotcom boom in late 1999 write a software package, deliver the soft-
and early 2000, Rupert Perry and Jeff onciliations as well, namely, pending rec-
onciliation, which matches settlement ware and licence to the client, and then
Armstrong, then two employees in the the client buys their own hardware and
securities lending IT department at UBS, details in transactions, and income claims
reconciliation/STP, which helps lenders of has their own people in house, an ASP,
set up Pirum Systems with the intention not only writes the software but also pro-
of exploiting the internet to solve some of securities collect the dividends they are
entitled to with greater efficiency. vides and hosts the hardware and oper-
the STP shortfalls they were seeing in the ates the service centrally for every client.
securities lending industry. “We chose Identifying differences in securities
lending data held by both client and This model dramatically simplifies the
reconciliation as an initial focus because implementation of software solutions and
there didn’t seem to be many other peo- counterparty systems can be likened to
the idiom of finding a needle in a provides the client with a much lower
ple doing that,” says Mr Perry. “We started total cost of ownership (TCO), based on
writing the software in 2000 and our first haystack. Especially in billing, the sheer
volume of data makes it time consuming the scale economies from operating a sin-
customers were up and running in 2001.” gle instance of the system rather than
Since its beginnings in 2001, Pirum has work to identify and correct those inaccu-
racies manually. Over the month period multiple instances across the client base.
gone from strength to strength, with year- Pirum’s software is available through a
on-year growth of over bills can get quite large and it only takes
secure Internet server
100 per cent, and now
reconciles nearly $1 “I have heard of clients who would spend whereby clients send
their data, via file
trillion of outstanding
stock loans and repos
up to one week reconciling a single transfer, directly to
every day. bill with one counterparty.” Pirum. The data is
centrally processed
Through its Securities and then clients can access the Pirum
Borrowing and Lending Reconciliations one mistake on the price of a security on
a single day to cause the amount one application screen through a website.
system (SBLREX), the two main thrusts “The client no longer has to buy any
for Pirum are daily contract compare and counterparty is expecting to pay to differ
significantly from the amount that the hardware, they don’t have to install any
monthly billing reconciliations. The com- software on their PC’s and don’t need any

46 INVESTOR SERVICES JOURNAL

 Company Profile: Pirum Systems

people to run it,” explains Mr Perry. “All are up to a sufficient level that they are exposure processing service, on which
they do is produce a data extract in their ready to start connecting with counter- their first clients will go live very shortly.
own format which they send to “We are very excited
us and we do everything at this A potentially problematic area arises about this,” states Mr
end.” Perry. “We are pushing
One advantage behind Pirum’s around how secure the Internet and the boundaries and doing
implementation of the ASP
model is that they can offer their
computer systems actually are. stuff in our industry that
has not been done before.
software solutions on a pay-as-you-go parties, for us, that is a big challenge,” The time savings to be made from putting
basis, so clients only pay for what they believes Mr Perry. STP around these processes are even
use. “We don’t license the software so That said, however, Pirum Systems greater than on existing services and this
there is no big fee upfront,” says Mr wants to be seen as an innovator in the has resulted in clients giving very enthusi-
Perry. “People who use our services pay securities lending software space and is astic initial feedback on the new service.”
on a monthly subscription basis, and the currently working on a new marks and ISJ
subscription depends on how much they
are using it that month.” - They cannot (whatever the vendor prom-
This pay-as-you-go system also sets
ASP Pro’s & Con’s
ises) provide the same level of customi-
Pirum apart from some other software In the last year the ASP model, or what is sation that an inhouse deployment offers.
vendors because there becomes no need often referred to as a ‘hosted service’, The nature of an ASP, which offers essen-
for them to up-sell new versions of their has grown significantly in both its popu- tially one central application for a large
software. Where clients are paying a sub- larity and prevalence; there are several number of users, is best suited to com-
scription, a certain level of service is reasons why the ASP operating model is moditised business processes that do not
expected each month, and on an on- proving particularly attractive for cus- ‘add value’ to a customer’s product/serv-
going basis, so enhancements to the tomers, including: ice offering. Although some of the more
Pirum solutions are introduced naturally - The ‘total cost of ownership’, that is, sophisticated ASP vendors are able to
and all clients are always using the latest all the costs associated with buying, customise the application to an extent, it
version. housing and maintaining the software is not in the vendor’s commercial inter-
While this all seems like a very good way are significantly reduced. The client ests to do so.
to do business, a potentially problematic does not have to add to their hard- - The client’s data is not stored inhouse
area arises around how secure the Internet ware, which eliminates any capacity which might prove problematic; data
and computer systems actually are, espe- issues and significantly minimises the storage and security have been catapult-
cially if counterparties are transferring complexity of the customer’s hardware ed into the headlines in recent months,
large amounts of their data over the environment. Customers can subscribe by several high profile cases of data theft
Internet and across different servers. Mr and pay on a monthly basis. and loss. While vendors will naturally
Perry acknowledges that security is of - ASPs can also provide a ‘pay as you undertake the necessary security provi-
utmost importance, and says that internet use’ model (depending on the nature sions, Internet security remains an ongo-
based applications can be made as secure of the application in question) which ing battle, and analysts have argued that
as internally hosted applications by follow- means the software essentially oper- Web 2.0 (the so-called ‘updated’ version
ing good security practice. “Obviously we ates as a ‘service’, for which the cus- of the web) will be no safer.
have to be very careful about security and tomer pays proportionally. - As a result of the above problems ASP’s
external consultants come in and test the - Operating on an ASP basis enables might not satisfy the regulators in every
security on our systems,” he says. “We have customers to circumnavigate a large context; they will want to know that the
layers of security measures in place so even number of legacy systems, which business processes are properly con-
if, in the unlikely event that someone can reduces integration efforts and speeds trolled, and may determine that this can
get through one layer, there are still other up delivery time. Legacy systems con- only be adequately performed internally.
multiple layers to protect the system.” tinue to serve as the number one - Hosted services do not solve the prob-
obstacle to inhouse technological lem of legacy systems, but provide a con-
The Challenging Future innovation in financial services. venient means by which to avoid con-
Middle and back-office end processes - The vendor has to provide continuous fronting them. Ultimately, the most effi-
are usually comparatively lower in service support, rather than a ‘break- cient businesses will be those which can
automation priority than those in the fix’ support model, for which clients fully harness their software and re-deploy
front office and tend to end up at the operating on a traditional software it quickly to meet with rapidly changing
bottom of the queue for scarce IT model often have to pay an additional business needs, to ensure a speedier
resources. In complex process areas such charge. time to market. Hosted services do not fit
as income claims processing, this is caus- into this model, because the software is
ing some problems as companies are Despite these benefits however, ASPs not owned by the business. For this rea-
struggling to get their internal processes should be deployed only in the right con- son ASPs might not prove an adequate
automated first before being in a position text, and cannot be regarded as a long-term business strategy, but ulti-
to look at extending automation to exter- panacea, for several reasons: mately the market will determine whether
nal counterparties. “Getting people to the this is the case, not the providers.
stage where, internally, their own systems

INVESTOR SERVICES JOURNAL 47

Pre-FIMA 2006 (Financial Information Management Association)

This year FIMA takes place in London,

with 15 Global Heads of Data
Management and 250 senior Data
Management professionals imparting
insights and strategies on the Data
Management industry. And let us not
forget this year’s coup de maitre, the
FIMA Special Guest Speaker Evan Davis,
the Host of the infamous Dragons’ Den.
Ten years ago or less, what would have
amazed a financial insider is not the fact
that FIMA could bring in 15 business
figureheads, or there was such a pro-
gram as Dragons’ Den, but that there
were Global Heads of Data Management
in the first place. According to Tim Lind,
Senior Vice President of Product
It’s Hip to be Square Strategy of GoldenSource; “The profes-
sion of Data Management is nascent
within most institutions, the title Chief
Data Officer, and the whole notion that
that function would rise to the board-
room level is a fairly new concept and
likewise the infrastructure and opera-
Giles Turner looks ahead to FIMA tional processes around centralising data
is a fairly new notion for most firms.”
and assesses the inexorable With the increasing importance of
rise of Data Management. Data Management over the past decade,
the need for a platform of communica-
tion has become increasingly apparent.
FIMA itself is a young conference and its
emergence has provided a forum where
banks now have the opportunity to dis-
sect and discuss relevant issues in the
Data Management space. As Predrag
Dizdarevic, Partner and President of
Capco Reference Data Services, rather
succinctly puts it “having a conference
dedicated to this topic demonstrates its
importance to the industry. Data
Management is no longer an after
thought, but a priority to the firms and
worthy of its own forum.”
Perhaps the most interesting statistic
regarding FIMA 2005 attendees is there
is an even cross section of attendees by
job function. Again looking back at the
development of the data reference

FIMA 2005 Attendees by...

48 INVESTOR SERVICES JOURNAL

 FIMA 2006: Vendor Profiles

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Interactive Data Corporation is a leading global SmartCo provides software solutions for the financial
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The Company's businesses supply time-sensitive which covers all the data area, including market data,
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ComStock, CMS BondEdge and eSignal, Interactive complete and modular suite of modules designed for
Data has approximately 2,200 employees in offices asset management companies, including Portfolio
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Pearson plc, an international media company,
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common stock of Interactive Data Corporation.

INVESTOR SERVICES JOURNAL 49

Pre-FIMA 2006 (Financial Information Management Associatin)

industry, it would be expected that no-

one but IT staff would turn up to a data Business or Politics?
reference conference, but instead the top
brass make up at least a third if not
more of the attendees. This high level of
management has meant that the FIMA
conference doesn’t deal with the subject
in a theoretical way but in fact is more
practical and results orientated.
Regarding the evolution of Data
Economic Growth

Management, Mr Lind believes that

“those in the Data Management profes-
Four-year US electoral cycle
sion who were responsible for maintain- Quarterly model
ing data bases of security information Natural Growth Model
and customer account information were The graph highlights a theoretical similarity between a
well aware, or as David Bowie puts it, four-year US electoral cycle and a quarterly business model.
quite aware of what they’re going As the Boardroom needs to impress on a quarterly basis, profit
through.” Perhaps music pedants will is key. However, data management needs time to implement
complain that actually Iggy Pop wrote effective policies, so therefore, whilst less profitable initially,
the lyrics for China Girl, but regarding if left to implement long-term policies, data management
Bowie and Pop it took two to tango and, officers might be able to work more efficiently in comparison
although a slightly esoteric link on my to being driven by business models.
part, the same can be applied to the
development of Data Management; it No Y Y2 Y3 Y4 No
vE 1 ve
took a combination of IT and manage- lec
tio
lec
tio
n n
ment to assess the what people already
knew, and what should be done about it.
It was clear that the industry needed
to step up to the plate and sort out the it together’ can perhaps go too far. As Mr lem of dialogue. “In terms of evolution
Data Management problem. Data Dizdarevic states “a key issue for FIMA the dialogue needs to change. We have
impacts every part of a financial institu- is that banks and vendors who present spent the past two years defining the
tion and effective Data Management cre- tend to gloss over the real issues as they nature of the problem and now the dia-
ates a seamless and economically effi- do not want to paint a picture that they logue has to take a step down in terms of
cient business practice. New regulation have not been successful. It would be granularity and detail. We need to move
and the recent industry drive towards good to provide the attendees with from defining the nature of the problem
data efficiency has forced firms to take informal gloves-off sessions that enable to defining the nature of the solution.
their data into account and as Mr the participants to lean from each Data Management problems are like
Dizdarevic states “FIMA has helped other’s successes and mistakes.” snowflakes, no two are the same.”
bring attention to these issues, the solu- Yet by bringing people together, you’re FIMA is on the right path however
tions, what has worked and what has creating some form of structure where because to achieve your goals, whatever
not, and is also helping they may be, dialogue is
bring about acceptance to of fundamental impor-
new solutions.” There is also “Data Management problems are like tance. As the attendance
charts show, there are a
a sense of increase comrade-
ship between the Data snowflakes, no two are the same.” wide variety of people
Management sectors of attending; buy side, sell
firms. Custodians that might be rivals side, asset servicing
on the trading floor come together at progress can take place, but as we have including custody, as well as data ven-
FIMA to discuss problems and solutions. just mentioned, there may be problems dors and platform vendors. As Mr Atkin
As Peter Serenita, the Chief Data Officer with the composition of FIMA. “FIMA is stresses, “what we really want to do is
for JPMorgan Worldwide Securities a conference company not a financial realise what everyone’s orientation and
Services puts it, “you have JPMorgan information participant and therefore is objectives are and what comes out of it.
and the other firms at one table talking slightly behind where the industry really We have to work out what peoples com-
about various issues and how we have is. If you’re going to have a conference mercial interests are, the best thing to do
solved them and to be honest, I think that is evolving as rapidly as this one you is to make sure that all sides are present.”
FIMA has done a terrific job of listening need to make sure that you are current It has also been highlighted that the
to their constituents; they’ve come to us with the industry and ideally a little now that the Data Manageent industry
and asked what are the topics and sub- ahead of where the industry is going,” has developed, its structure doesn’t not
jects that are important to us. They are states Michael Atkin, Managing Director quite fit in with the promises made by
not dictating the agenda.” of the EDM Council. Mr Lind, from quick-fix solutions. According to Mr
Of course, the feeling that ‘we’re all in GoldenSource, also agrees with the prob- Lind, the vision must extend beyond the

50 INVESTOR SERVICES JOURNAL

 Pre-FIMA 2006

performance numbers for a particular pared with 5 per cent a year in the post- polices and process overhauls cannot be
quarter and must consider the long term election and mid-term years. Short term feasibly turned around for profit in just
sustainable value of what the appropri- gains to give a positive outlook before one quarter. If Data Management
ate data management infrastructure will the election and then the government Officers have to bow down to quarterly
mean to be the business. You can’t get has to offset these policies by a few years performance pressure then Data
six-pack abs in two weeks and you won’t of fiscal restraint. The short-term eco- Management policy processes will, in
solve all your data issues in the next nomic gains are then offset by the failure effect, mirror the general economic pat-
three months.” The senior managers to address long term policy problems as tern of short-term success and long-
have a significant pressure to perform shown by the four-year US electoral term failure. If those in charge of Data
quarter to quarter. An obvious parallel cycle in the graph above. The same Management are allowed time to imple-
can be drawn to the pressures of politi- problem can be applied to a firms ment policies, then as the Natural
cal leaders, trying to appease the voter growth cycles. Companies have been Growth Model suggest, whilst initial suc-
through short-term gains at the expense overly concerned with quarterly growth cess may not be initially reap immediate
of long-term policies and sustainable rates. The more money your department benefits, the long term increase will out-
growth. makes this quarter, the better you’re weigh preliminary loss. Lind sums up
The graph above overlays the political going to come across in the boardroom. the problems by stating “the aims of
economic cycle with two hypothetical However Data Management is not some- short-term results and long term sus-
and extremely simplified Data thing that can be addressed in 3-month tainability are not always compatible for
Management growth models. the Data Management
As stated earlier, political “Data Management is not intuitive, infrastructure or the
pressures dictate economic building of a competi-
growth. According to The it is a way of life, it never stops.” tive environment that
Stock Trader’s Almanac the can deal with change
average gain over the pre-election and cycles because data is rooted in all and unexpected regulatory events. The
election years is 17 per cent a year com- aspects of a business. Data Management whole notion of longer-term thinking

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Pre-FIMA 2006 (Financial Information Management)

and discipline and the needs of the next lowing industry best practices” states
generation is something we need to deal John White of State Street. Regarding the
with. I think that is why some Data future of Data Management, the smok-
Management projects were deferred, ing gun days of negative press coverage
they often span multiple quarters and are gone. It was quoted some time back
the lifespan of CIOs isn’t that long. that 60 per cent of all failed trades occur
Building sustainable infrastructure as a result of inaccurate reference data.
requires patience, focus and vision. Perhaps 90 per cent of statistics are
Data Management is not just an initia- wrong, but even if they are true, as Mr
tive or a one-off project, it is a way of Serenita succinctly states, “If you can’t
life, a key asset for the firm.” measure it, you can’t manage it. ISJ
Unfortunately it is uncertain how a
problem like this would be resolved
without vision and commitment. What Not To Miss
Perhaps the current changes in regula-
tion will give the Data Management at FIMA 2006
departments a chance to shine and gain
greater autonomy because if firms come 09.45am 14th Nov – Optimising Data
through the changes unruffled, a signifi- Accuracy Through The Implementation Of A
cant part of it will be down to them. Centralised Reference Data Platform For
Kevin Bradshaw, Global Head of Securities And Counterparty Data: Case
Enterprise Information at Reuters states
“the current regulatory burden presented Study: Daiwa Securities.
by the EU Anti-money Laundering Act or Graham Muirhead, Chief Information
Know Your Customer (KYC), UK Officer, Daiwa Securities
Financial Services and Market Act, and
the Patriot Act, amongst others, around 09.15 15th Nov – Creating Reference Data
legal entity data and compliance will Operational Hubs In Low Cost Centres To
surely impose a tremendous challenge for Reduce Costs And Improve Efficiency.
FIMA delegates. Companies will need a
Peter Serenita, Chief Data Officer, JP
The smoking gun days Morgan

of negative press 13:30 15th Nov – Current Challenges

Facing Global Mutual Funds: A White Paper,
coverage are gone. Global Head of Enterprise Information.
Kevin Bradshaw, Global Head of Enterprise
comprehensive source of accurate, audit-
ed and fully maintained legal entity data.” Information, Reuters.
The plus side is that there is a lot of posi-
tive belief coming from Data 17:00 15th Nov – Enterprise Data
Management professionals. “I think that Management: A Practical Perspective.
financial institutions stand up well to Mike Atkin, Managing Director, EDM
their process and business requirements Council
associated with regulation” states Atkin. It
is clear that firms want to do all they can 12:30 16th Nov – Assessing The
to meet compliance requirements, but to Implications Of Data Licensing Across A
do that they need to organise data that
runs across the entire organisation. Atkin Financial Institution.
continues by stating; “We’re now talking John White, Principal, Data Management
about how do you set up a data strategy State Street Global Advisors
to support regulatory obligations and
where it fits in the total mix of Data 15:00 16th Nov – Creating Efficiencies and
Management requirements, so my opin- Creating Competitive Advantage Through
ion is that regulation is just another area Outsourcing.
where Data Management in essential.”
The perceived importance of regula- Predrag Dizdarevic, Partner and President
tion is unanimous. “Monitoring and of Capco Reference Data Services, will
effectively addressing additional regula- be chairman and speaker alongside
tion and ensuring buy-side firms are Renaud Migeot, ING
delivering accurate content and are fol-

52 INVESTOR SERVICES JOURNAL

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Corporate Actions - The Debate

Corporate Actions Panel Debate

Industry experts look at the state of play
in the Corporate Actions field.

Simon Bennett James Femia Philip Painter Nat Sey Harvey Colborne Darryl Twiggs
CAPCO DTCC ETHEIOS INTERACTIVE MONDAS SMARTSTREAM
DATA

Simon Bennett, Managing Principal, Capco. Mr Bennett is Most recently Mr Painter was Director and Head of
focused on delivering transformational change to clients Custody at Schroder Investment Management. Before this,
in Capital Markets, via both process reengineering and he held Senior Management roles at S. G. Warburg,
strategic sourcing. He joined the company from iGate Citibank and Chase Manhattan Bank.
Global Solutions, an offshore integrated IT/Ops service Mr Painters career started at National Westminster Bank,
provider, where he was Executive Vice President, Europe. where he studied part time for his Institute of Bankers exams.
Previously he spent seven years at UBS Investment Bank,
successfully delivering a variety of large scale change pro- Nat Sey, Manager, Delivery and Infrastructure, Interactive
grams on a global basis primarily for the Equities busi- Data Europe. Mr Sey is a member of the Reference Data
ness. Prior to UBS Mr Bennett spent seven years within User Group (RDUG) and its corporate actions working
J.P. Morgan (Fleming) Investment Management in a vari- group, and is also Interactive Data's representative on the
ety of line and project management roles. Technical Standards Committee (TSC), the WG11 (ISO
He holds a M.B.A. from Henley and is A.C.I.B. qualified. Working Group 11), as well as one of the representatives
on the MiFID Joint Working Group.
James Femia, Managing Director & General Manager,
DTCC Solutions LLC. Mr Femia was named to his current Harvey Colborne, Principal Consultant, Head of Marketing
position in 2004, and had served as Managing Director & Pre-Sales, Mondas. Mr Colborne has extensive market
and General Manager of DTCC’s Custody and Asset knowledge and has over 10 years experience in the securi-
Services since 2002. In this role, Mr Femia had direct ties industry in the areas of operational risk and software
responsibility for overall product management for the cus- implementation.
tody, securities processing, corporate action and data serv- Mr Colborne’s career has given him a valuable mix of
ices units. practitioner and vendor experience as a FOREX dealer for
Prior to joining DTC, he served as the Northeast Regional Nedbank, in corporate actions operations for JPMorgan
Manager for the Dial Corporation, a consumer products Investment Management, Chase Manhattan Custody and
company, from 1983 to 1987. also client services/relationship management at The Bank
Mr Femia holds a Bachelor’s degree in marketing and a of New York.
Master’s degree in business administration from St.
John’s University in New York. Darryl Twiggs, Product Manager for TLM Corporate
Actions, Smartstream. Mr Twiggs is responsible for the
Philip Painter, Operations Director & Management design and development of SmartStream’s market leading
Consultant, Etheios. Mr Painters management expertise application.
includes all aspects of the Custody Industry, Stock Mr Twiggs has worked with financial institutions
Lending, Corporate Action System Builds and extensive across the world offering consulting and implementa-
knowledge and practical expertise in Outsourcing Global tion services to assist firms automating their Corporate
Retail and Private Client Custody Outsource Projects. Actions processing.

54 INVESTOR SERVICES JOURNAL

 Corporate Actions - The Debate

Over the last twelve-months has there been much dard has set a benchmark by which all partici-
progress in harmonizing corporate action pro- pants can be measured and assist in the rationali- How can the risks associated with global corpo-
cessinng standards in Europe? zation of message constructions. Participants can rate actions processing be reduced and how can
Simon Bennett - As expected slow but steady now be certified for their messages bringing with instiitutions protect themselves quickly?
progress continues at the message level and the it improved confidence to automation projects. James Fernia - That’s frankly the reason DTCC set
tag level via groups such as ISITC and also bilater- up our Global Corporate Actions Validation
ally between market participants. No major step Harvey Colborne - The harmonization of corpo- Service. One of the problems is that no one ven-
changes are visible, however. The recently rate action processing standards is being con- dor has all the data on every security and every
announced Securities Markets Practice Group ini- stantly and consistently improved upon. Progress event type in the world, no matter how big they
tiative in this area will be something to watch with is due in no small part to leading data vendors’ are. That’s why we take feeds from a number of
interest in terms of standards harmonization. fast response to the introduction of ISO 15022, in vendors and compare them and validate the infor-
mapping their feeds to the standard. After the mation they contain. Even that is not enough –
Philip Painter - The European Central Securities larger data vendors decided to give the standard a our staff of 60 is constantly on the phone, scour-
Depositary Association continues to lead this ini- try, others followed suit, resulting very quickly in a ing the web, or reading through offering docu-
tiative which is supported by a number of work- standard data feed format option across the glob- ments to fill in the missing gaps or repair incon-
ing parties. In May this year the British Bankers al market. In the last year the choice available has sistent information. It is this unrelenting focus
Association set up its own working party to look grown significantly and the client take on is accel- that allows us to provide a fully comprehensive,
at European standards. There has been some erating. The ISO15022 product has improved sub- timely and high quality corporate action compos-
progress made in Holland, ite record in a standard and
Germany and Euroclear, but “The ISO15022 product has improved consistent format. GCA
the market is still expecting a Validation provides the broad-
step change and currently substantially over the past twelve months.” est coverage of any service in
this has not happened. stantially over the past twelve months due in no the world – covering more than 1.5 million securi-
small part to the fact that SWIFT makes a point of ties from over 160 markets. And, as an added
Nat Sey - One of the biggest strides forward over consulting its users to gauge feedback during the check and unlike anyone else, we combine this
the past 12 months has been the release of the year before updating the standard for the follow- effort with the private and proprietary announce-
Event Interpretation Grid (http://smpg.webex- ing year. With regard to available software, the ment data our customers’ receive from their cus-
one.com/default.asp?link). This matrix shows the market has definitely matured over the last twelve todian banks. Using various sources, rechecking
various event types and the permissible options months with vendors successfully operating in the data, and providing a third check with a custo-
within each of the regions. This in itself does not different global markets with different types of dian feed, all in a single data format (we provide
make processing corporate actions easier, but it customer such as asset managers, investment both ISO 15022 and a proprietary feed), operating
does improve the understanding of the differ- banks, custodians and retail brokers. We’ve also against customer-oriented SLA's (service level
ences between the various regions and acts as a seen harmonisation in depot processing and agreements), is the best way, in today’s environ-
great starting point for harmonization. transaction processing with the merger between ment, we know to reduce the risk of having bad
Crest and Euroclear providing the UK and Europe data or missing an event.
Darryl Twiggs - Three actions in the last twelve with a SSE (single settlement engine).
months have moved Corporate Actions process- Simon Bennett – To me, the most obvious risk
ing forward. First the release of the Equivalency James Fernia - Well, obviously there has been a lot reduction tactic in a complex world is to central-
Matrix by SMPG and ISITC to support harmo- of discussion, but I’m not sure we’ve seen a lot of ize, internally, the organizational view of a)
nization of Option Type associated with different changes actually being implemented. While many announcements and b) positions to reduce the
event types. The publication of Option Types is people would love to see a single market practice risk of an unknown event and hence a loss of enti-
one of the key elements of ISO15022 messaging for corporate actions processing in Europe, I’m tlement and hence capital loss. Protecting oneself
and in the past has proven an issue within the not sure it will ever happen, or even if it is a quickly could include this centralization tactic
global community. A better understanding of necessity. As long as there is a consistent mes- (centralize prior to investment in new processes
expected Option Types for each event type is pro- sage standard format, and the market practices or technology) coupled with two other possibili-
viding common ground when generating notifica- within the individual countries or markets for cor- ties. Firstly a review and enhancement to custodi-
tions. Secondly the establishment and participa- porate actions are consistently applied, and there an SLA's from a contractual perspective – to
tion of the market data vendors in the Market are efficient ways to get the required information, ensure risk and accountability are completely
Data Vendor Group whereby these vendors have I think that would solve a critical part of the prob- clear. Secondly, to provision appropriately – in
migrated their data feeds to ISO15022 has had a lem. Of far more concern to me, and I think to advance – for operational losses; at least to
positive impact. The growing support for all event other firms involved in corporate actions process- improve tracking of loss events and source caus-
types has provided a common messaging stan- ing, are the problems that occur when there are es and hence improve organizational focus, if not
dard enabling lower cost solutions and reducing no standards, or there is no consistent way to get to explicitly reduce risk per se.
solution support costs. This migration reinforces information. This is especially true in less devel-
the ISO15022 messaging paradigm, harmonizing oped markets. The fact is that there is a lot of Philip Painter - The key to reducing risks is to
the data definitions of each event type and raises investment flowing into emerging countries make better use of SWIFT messaging to auto-
awareness of the message standard for all partici- where there is high growth potential, countries mate receipt of event data and generate instruc-
pants. Finally, the launch of the SWIFT message like Brazil, Russia, India and China, where it tions. This needs to be balanced with skilled
certification test centre whereby banks, broker- much more difficult to find out what corporate resources that can deal with the exception pro-
dealers and vendors are able to certify their mes- actions are under way. That is far more of a prob- cessing arising from any inconsistencies. We
sages against the ISO15022 message design stan- lem than harmonizing standards in Europe. would advise Fund Managers to be pro-active on

INVESTOR SERVICES JOURNAL 55

Corporate Actions - The Debate

reviewing SLA’s with custodians to ensure best labour intensive operations enables processes to step for corporate actions processing automation
practice on delivery of notifications and instruc- be analyzed, risks identified and new processes and standardization. Without that, you can virtu-
tions and a robust escalation process for missing and safe guards put in place. Corporate Actions ally be assured of a manual, risk-prone process.
or late instructions. processing moves from an operationally intensive
activity to the management of workflow. All activi- Philip Painter - The key is for continued invest-
Nat Sey - Many consider the single largest step ties and process flows become managed and ment by data vendors to support the scope and
that can be taken to improve the processing of measured to ensure compliance and mitigate risk. coverage of events and robust data scrubbing and
corporate actions – and reduce risk accordingly – validation of notifications and instructions.
is to adopt and use ISO 15022. The degree of With the wave of regulations surrounding data
transparency that arises as a result provides sig- management, is greater investment the key? Harvey Colborne - Greater investment is not nec-
nificant benefits across the processing cycle. The Nat Sey - Greater preparedness is the key. Firms essarily the answer. It would be better to utilise
adoption of such standards not only increases the must ensure that they have sources for the con- the time first making sure the firm is working as
likelihood of a better understanding of the infor- tent that will be required as a result of these regu- smartly and effectively as it can before thinking
mation that is being conveyed, there is also sig- latory changes. One very important aspect must about throwing more money at any perceived
nificant and continually increasing support for the be borne in mind: the expected speed of imple- problem. A good starting point would be to
standard from the software processing world. mentation of these changes seems to be increas- review your data to check that the product used is
Therefore, comparing one source to another is ing. This is leaving less and less time available for the correct solution for the business.
now a much more fruitful undertaking. the implementation of new systems and the data
Automation in itself is Darryl Twiggs -
not necessarily a major “Sadly, there does not appear to be a quick fix Investment may arise out
risk-averting tactic, but of an analysis of a firm’s
automating the less com- to the corporate actions processing dilemma.” exposure to data process-
plex events – and then prioritizing the exceptions sources themselves. It is therefore becoming ing. Data is often held on different data process-
that tend to be the more esoteric and therefore increasingly important to ensure that firms either ing systems and that in itself is a high risk and
risky events for manual attention – can easily be already have the required rich seams of reference high support cost scenario. Rationalization of dis-
so. Sadly, there does not appear to be a quick fix data, or at the very least, have access to sources parate data processing solutions to migrate to
to the corporate actions processing dilemma. that can be implemented very quickly indeed. To central data stores supported by a single process-
Significant groundwork needs to be undertaken in be prepared for these changes, it is necessary to ing environment enables data processing regula-
order to reduce risk, but the rewards can often be have a rounded view of the impact on the industry. tions such as Basle II and MIFID to be supported.
astounding. Firms should be encouraged to participate in the It is necessary to fully understand current data
various industry working groups and bodies, such management and expose data redundancy and
Harvey Colborne - Risk can be reduced by as ISITC and the MiFID Joint Working Group, integrity risk. Only then can an optimized data
automating as much of the core processing with- which effectively provide forums for the discussion management architecture be determined and a
in an organization as possible and making sure of these important issues that reshape the land- path of delivery be generated.
the system has good quality data being fed in, in scape in which we all operate. Having a voice in
a timely and accurate fashion. The most effective such forums has never been so important. With regulators focusing more on the quality off
way to start protecting yourself from risk as quick- corporate actions information, many are seeking
ly as possible is to avoid the ‘Big Bang’ approach Simon Bennett - Data management and the to ensure compliance whilst minimizing disrup-
to automation and build your corporate action investment therein is always a challenge since the tionn to their STP processes. Can STP still be
solution step by step allowing incremental deliv- business case is difficult to construct, sponsor or maintained whilst new corporate actions proce-
eries to the business. As soon as the first part of approve. Smarter approaches in terms of external dures are recommended and implemented?
the process is automated, risk is significantly sourcing are potentially more helpful and have Philip Painter - We at Etheios believe STP is at the
reduced and continues to reduce as each module significantly enhanced RoI as compared to inter- heart of maintaining and improving the corporate
is added, delivering benefit to the business with nal technology capex. action process. It can ensure event details are
each delivery. This is also a relatively simple, less identified, validated and captured into systems.
costly and least disruptive way to complete the James Fernia - I think investments in automation However, you still need to be prepared to resource
process as new regulations come into force. Also, is certainly important and key to ensuring you and manage exceptions due to inconsistencies
by building a corporate action system gradually, have the information and are getting it to the key and timing issues between vendor and custodian.
organisations are able to spread their investment places you need to in your organization. In the STP needs to work hand in hand with improve-
over several years, reducing more risk and opera- corporate actions area, knowing what has just ments in procedures across the market place.
tional cost each year, while the firm adjusts to the happened, and making a decision or advising
inevitable culture change. your client on how that announcement will affect Simon Bennett - In a word, yes. CA processes are
your position is probably the most important essentially offline from transaction processing
Darryl Twiggs - Manual processes are reliant on aspect. Developing a centralized warehouse of and hence can be developed and delivered in par-
human action and paper processing. data within the firms would greatly reduce their allel from the core STP pipes. Clearly, overlap
Automating data processing through electronic costs and, more importantly, their risks – store occurs in respect of e.g. open trades at record
messaging is an immediate and effective means and manage this data only once. Again, applying date, or auto-booking of dividend receipts, but
to reduce risk. Once event information is received consistent standards and market practices, ensur- the twin track approach has been proven success-
in a message format software solutions can pro- ing that everyone fully understands and can ful within several large houses.
vide a centralized processing operation and sup- appropriately respond to the corporate action
port automated workflow processing. Removing announcement, would be the most critical first James Fernia - Absolutely. Regulators and others

56 INVESTOR SERVICES JOURNAL

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Corporate Actions - The Debate

just need to allow enough time for firms to com- firms have support for income processing events. from the source, it could never be wrong. This is
mit the resources and time to do the reprogram- The requirement is often to provide automation an initiative that DTCC is leading in the United
ming required. I think the industry recognizes the for voluntary or decision event types. It is quite States; an initiative we term ‘At Source”. We
need to improve the quality and consistency of possible and practical to implement a new solu- believe the market is ready to take this step – both
corporate actions data, as long as it allows for tion to support voluntary event types and at a from a technological and regulatory perspective.
firms to have some flexibility in what they can do later date migrate income processing to the new
when announcing an action. Since these prob- solution. Alternatively some firms wish to imple- Philip Painter - Firstly there needs to be buy-in
lems won’t go away tomorrow, many of DTCC’s ment components of the total process for all and support from custodians and vendors regard-
customers choose our service today to achieve a events, for example to process ISO15022 mes- ing messaging standards and how they are
higher level of STP since we bring them only one sages for both mandatory and voluntary events. applied. Once you have consensus, you can start
feed, in a consistent and standardized manner. Or a data cleansing solution can be implemented to build a full end-to-end solution that needs to
to improve event data quality and subsequently focus on the benefits of STP and reduce the risk
Nat Sey - Regulators have not addressed the qual- provide an information service downstream sys- profile of the process. In the past companies have
ity of the information and there does not appear tem for all event types. only spent large amounts on corporate event
to be any current attempt process as a result of a
to do so. In fact, corpo-
rate actions information
“Regulators and others just need to allow large loss occurring. This
area of the business
has remained largely
untouched – whether this
enough time for firms to commit the resources needs constant improve-
ments in line with the
situation will continue is and time to do the reprogramming required.” market initiatives.
unclear. What ought to
drive the market for reliable data content is Darryl Twiggs - There should be none. Any solu-
healthy competition between the various informa- What are the inhibitors to implementing a corpo- tion requires justification in a business case.
tion vendors, especially as the major players are rate actions STP solution? Automation delivers the opportunity to resolve
now able to provide industry-standardized mes- Simon Bennett - Internally the key inhibitor is the many of the high cost, high risk, labour intensive
sages than can be compared and contrasted. complexity of creating a compelling business activities that are today all too common in
case, since the RoI will depend – to a significant Corporate Actions processing. Alleviating labour
Harvey Colborne - Intelligent planning is always extent – on avoidance of future losses and hence intensive tasks reduces the cost of operation and
the key to achieving all long and short-term cor- will be received somewhat sceptically by senior provides an opportunity to provide greater cus-
porate action objectives and minimizing disrup- management. The market also lacks a set of func- tomer service or redeployment of resources to
tion during those projects. A clear idea of what tionally rich, mature vendor software products other high valued activities. Corporate Actions
needs to be achieved and a clear timetable for although this situation is slowly improving and solutions today provide an automated solution
delivery will minimise any expectation manage- hence changes the build versus buy dynamic. for all message designs and media. That’s exactly
ment problems and further delivery disruptions. Externally the challenge remains clean and stan- what we’ve designed TLM Corporate Actions to
Ironically, it’s also vital to remain flexible within a dardized data (although the MT 56n message set do. Typically a firm has correspondents that send
rigid framework to accommodate any changing via SWIFT and services such as DTCC GCA are or receive Corporate Actions information across a
demands as they arise and enable workflow to be helping drive this forward) coupled with the inter- range of media including SWIFT, proprietary mes-
adjusted to accommodate new corporate actions action of CA events in terms of derivatives confir- sage feeds, FAX and email. Any Corporate Action
procedures. Always pick a solution that can be a mation and lifecycle management. solution should be able to support the processing
long-term solution but has the ability to deliver of these media and provide a normalized data set
interim benefits. A modular approach to system James Fernia - Well, obviously there are a number that it processes and finally returns correspon-
building will also minimize potential disruption of factors – lack of standards and adherence to dence to the relevant party in their supported
as the core system keeps processing and deliver- market practice, as we already talked about, for media. Over time more organizations will migrate
ing some benefit, while staff can familiarise them- sure. The lack of standards, however, goes back to electronic messaging and participate in a com-
selves with each new element as its added in a even further – the problems can be traced back to mon information design highway. Beyond corre-
parallel environment, rather than suddenly being the issuer or the offeror of the corporate action. spondents, Corporate Actions solutions can be
faced with a completely different system as will Think about it: as a deal is being put together, a deployed either as a total solution or as modules
happen with a ‘Big Bang’ approach. takeover for example, the issuer, together with its or functional components that interface with
bankers, attorneys, advisors, accountants, etc. are existing processing solutions. Any project will
Darryl Twiggs – Yes, current STP support can be all huddled together to structure the terms of the analyze the most efficient approach to solution
maintained and at the same time new procedures deal. These terms are then drafted, reviewed, edit- implementation and minimize risk and disruption
and support implemented. This can be achieved ed and eventually printed and distributed. Various to office life. The Corporate Actions solutions
by taking a phased or modular approach to interested parties, such as the vendors, agents, must have flexibility in deployment topography so
implementing new solutions. It is not necessary CSD's, and exchanges then review this informa- as to seamlessly integrate with other Back Office
to replace fragmented existing solutions with a tion and attempt to codify it within their systems systems. Regional differences in event definitions
new solution in a big bang approach. New solu- and the systems of others. Ultimately, some ver- and process flows will be overcome by imple-
tions, such as SmartStream’s TLM Corporate sion of this data makes its way to the investor so menting a solution that founded on a soft data
Actions, are modular or can be deployed as com- that he or she can make an informed decision. model and configurable workflows. In this way
ponents that augment existing solutions and Wouldn’t it make sense if those originators of the any firm that may have a unique processing
orchestrate the processing of existing and new data distributed this information in a standard, requirement can quickly build a solution to meet
event processing. As an example, most if not all codified manner? Since the information is coming their needs today and adjust to future needs.

58 INVESTOR SERVICES JOURNAL

W hen itcom es to trading,
slow doesn’tw in the race
W hen you’re trading,you need fast,accurate inform ation on corporate actions to m ake the right
decisions. In fact,according to a recentstudy by O xera,a U .K .econom ics consultancy,such data is
essentialto take advantage of short-term trading opportunities caused by even routine corporate
actions.

D TC C ’s G lobal C orporate A ction Validation Service collects and quickly distributes com plete
inform ation on alm ost 1 m illion other corporate action events from m ore than 150 countries
involving 1.5 m illion securities. N o one else offers broader,better globalcoverage.

Trading is tough enough even w hen you know w hat’s going on. You need every advantage
you can get.

Form ore inform ation,contactDTCC Solutions LLC atgcainfo@ dtcc.com

orby phone at:GCA Sales:New York Phone:+ 1 212-855-4144
GCA Sales:London Phone: +44 (0)20 74440403
GCA Service Center:ShanghaiPhone: +(8621)3220-4710 x8021
Fora freedownloadable copy ofthe Oxera report,go to
http://www.dtcc.com /Publications/oxera2006.pdf The LogicalSolutions Provider
Corporate Actions - The Debate

cent accuracy into English. And of course, some portfolio management systems. It may be neces-
Nat Sey - Firstly, gaining acceptance that there is of those cost savings get eaten up by managerial sary for the Corporate Action solution to be aware
a problem can sometimes prove challenging. supervision, controls and training. At GCA, we of differences in how information is identified
When a budget line item already exists to cover speak nearly 20 different languages and operate across potentially different accounting and portfo-
potential processing losses – and that line item three service centres – one in NY, one in London lio management systems and to provide a transla-
has always existed – it can be difficult to explain and one in Shanghai Clearly, two of these centres tion capability when in communication with dif-
why it is necessary to break away from that para- are in the most expensive labour markets – some- ferent systems.
digm into a potentially brave new model. The thing that for now we’ll need to continue to
answer, of course, is that no matter how well secure talented and experienced staff. You can Harvey Colborne - For larger firms, reference data
planned there is always the possibility that that train people on corporate action structures, but hubs, capturing and sharing information to vari-
contingency fund may not be large enough. In you can’t teach experience. ous parts of the organisation at any one given
some respects, the STP solution can be seen as time, are definitely the way forward. When you
an insurance policy. Cost is always going to be a Simon Bennett - In our view this approach makes have a high volume of transactions, it makes per-
potential inhibitor. Most STP undertakings are a lot of sense – not only to drive out duplication fect sense, economically, to have all your data tidi-
not insignificant pieces of work, and with the and reduce unit costs, but also to free up ly parked in a single common platform that can
potential payback in terms of risk reduction being resources (people, funding) to focus on market or be shared across the multiple workflow and
so great, they are never likely to be. Lastly, finding client facing activities. The vast majority of data is process systems. This is also much easier to
the resource, often inter- audit. For smaller
nal, to invest in such proj-
ects at a time when many
“Corporate Actions solutions must have flexibili- organisations, however,
a reference data hub
other pressures are bear- ty in deployment topography so as to seam- could easily be a
ing down on the business sledgehammer to crack
can be very challenging lessly integrate with other Back Office systems.” a nut. A smaller firm,
indeed. potentially with one
not unique to an organization and hence there is office, simply may not need that degree of
Harvey Colborne - Corporate actions is a very a strong logical case for a vendor provided shared automation for the volumes it handles.
high-risk area and likely to be responsible for a service utility where further scale economies can
significant proportion of a firm’s overall opera- be generated – for the benefit of vendors and What developments have there been over the last
tional risk. By starting to automate even part of firms alike. year in assessing ‘best practicce ‘in corporate
the process, risk can be significantly reduced, actions efficiency?
with immediate benefit and these benefits far Philip Painter - The accuracy and confidence in Philip Painter - In the past 12 months we have
outweigh the disadvantages of retaining manual the data is key while the location and cost are sec- seen a number of developments. The first being
systems. Some practitioners are genuinely - but ondary. The other factors to creating reference the growth of working parties working towards
needlessly - worried that corporate actions data are where does the data originate? How is it harmonization and standards across Europe. The
automation will increase their risk to exposure. validated? If a low cost centre can achieve the use of the SWIFT messages has continued to
Human intervention is still essential in checking above then this is a win/win situation; anything grow in usage (although still slower than expecta-
exceptions and making elections - but the quality less will not support the market. tions). There has been a rationalization of corpo-
of data feeds today are so high that is simply not rate action vendor systems, however those
necessary for people to identify the exceptions Darryl Twiggs - The issue of centralized reference remaining in the space continue to develop and
when the right IT system can effectively do it in a data has long been a discussion topic for all mature. Finally Asset Managers are starting to
fraction of the time. If a firm is too people- organizations. The support of disparate reference see the benefits of efficient corporate action
dependent today it runs the risk of not being able data solutions is a high cost and high risk for data processes.
to recruit enough experienced, reliable staff to integrity. All processing solutions, including
operate its manual systems as experienced back Corporate Actions require assess to reference Simon Bennett - None are immediately visible –
office staff are in short supply today and getting data in order to support event processing and most industry benchmarks focus on transaction
scarcer. This is mainly due to the increase in trad- data validation. In order to move forward and processing efficiency, or reconciliations matching
ing volumes and corporate actions in the market reduce cost and risk a centralized reference data rates and less on CA processes. In any case CA
and the move by many investors back to the mar- repository is an obvious component. It is not events are by definition somewhat unpredictable,
ket from property and cash investments. however a mandatory requirement ahead of complex to handle and hence comparing like for
implementation of any Corporate Action solution. like across firms is particularly challenging.
Creating reference data operational hubs in low These processing solutions require an interface to Benchmarking works better in mature, more stan-
cost centers to reduce costs and improve efficien- reference data and the interface is often a soft dardized processes and the CA world has yet to
cy – to what degree is this the way forward? component, or should be, thereby capable of sup- reach this point.
James Fernia - It certainly helps, although I don’t porting changes in the source of reference data.
necessarily see that as the biggest issue in corpo- The key issue is to ensure accuracy and timely James Fernia - What we’ve seen at some of our
rate actions processing. Low cost centres work update of the identified source of reference data clients is that they are making investments neces-
only if there is availability of skilled and talented and to ensure consistency in receipt and delivery sary to ensure that all the data comes from the
labour pools. To solve the global issues, you also of information that contains this data. For exam- same database, and that it is distributed across
need to ensure that you have staff that can read ple to ensure that the known securities for which their organizations to whatever area needs it, be
and speak multiple foreign languages, fluently, there are Corporate Actions are common across it at the trading desk or the back office or the ana-
and to translate such information, with 100 per the reference data depository and downstream lytics area. That is certainly a “best practice” that

60 INVESTOR SERVICES JOURNAL

 Corporate Actions - The Debate

will be increasingly adopted by forward thinking sary. Many organizations have held back from without a significant financial inducement. With
financial organizations. As I’ve said, I think key embarking on an automated straight through pro- no shortage of experienced back office jobs on
areas of focus for the industry continue to be in cessing (STP) solution, allowing others to ‘test offer, sometimes in different processing centres
standardization and market practices. There is a the water’ but confidence in STP has grown enor- like Singapore and New York, it can be difficult to
lot of good work coming out of SMPG (Standard mously in the past year, with a significant increase retain experienced staff. This can have a signifi-
Market Practices Group). And we would hope to in the number of organizations now automating cant impact on the cost of processing in general
see others take a lead on developing “At Source” their systems. salary costs. The need to employ contractual staff
solutions in their markets. There are solutions to cover seasonal volume fluctuations when per-
out there, such as GCA Validation, to help firms Darryl Twiggs - Certainly the publication of the manent staff are overstretched can also push up
automate the information consistently through- Equivalency Matrix and the participation of the costs. This problem can then be further com-
out the firms, so that the data can be distributed market data vendors is moving forward the har- pounded by a lack of senior staff to train juniors
in the most efficient and cost effective way. monization of Corporate Action processing. The or monitor contractors. As an arbitrary point,
starting point for any global process must be a however, is that SWIFT has just announced
Nat Sey - As mentioned earlier, one of the common understanding of the data defining an (9th October) that its costs are being reduced.
biggest developments over the past 12 months event. By providing market support in the use of So, for the SWIFT users in corporate actions, this
has been the release of the Event Interpretation Option Types and migrating to a common mes- will be a benefit, especially the heavier users like
Grid. For our part, Interactive Data connected to sage design platform the industry is improving custodians.
the SWIFT network in 2005 so that customers efficiency.
can receive ISO 15022-formatted services in a James Fernia - Yes, because of the wider holdings
very similar fashion to notifications from their Has the cost of corporate action processing gone of investors, organizations have a much broader
other counterparties. Customers can now per- up and if so what are the key driivers behind this? book of securities to track than ever before, and
form compare and contrast functions on the con- Simon Bennett - We would expect the relevant tracking down corporate actions across the globe
tent and so create ‘golden copy’ records, and costs to have risen for the typical firm for three makes processing much more expensive. Good
perhaps pre-populate records with vendor con- reasons: Firstly, a wider spread of global assets corporate actions specialists are becoming harder
tent in advance, whilst awaiting counterparty and asset classes held (i.e. a greater proportion of to find. This year looks like it will be a record year
communications. We see this development as a x-border investment flows hence wider instru- in the number of corporate action events.
major milestone in the Seasonality is always
process of making content
and services easier to con-
“Organisations have become much more a concern. Emerging
markets, a growth
sume, whilst pushing the mature in their approach to monitoring opportunity for all
value of such services firms, are less sophis-
towards the content and corporate actions processing over the last year.” ticated and require
functionality rather than the format and delivery ment coverage. Secondly, the explosion of deriva- much more handholding. All of these factors
channels. There is now the means to enable cod- tives volume where tracking the status of multiple place upward pressure on expenses. There is no
ing of content to such an extent that STP underlings becomes more and more challenging, reason why these costs can’t be contained by hav-
becomes a reality. However, at the point of con- and now includes credit events in addition to ing a central agency like DTCC gather, validate
sumption there is often a marked difference instrument events. Thirdly, higher trading vol- and distribute global corporate actions informa-
between the automated processing rates of static umes create a larger potential group of open tion using multiple vendors, rather than paying a
data and event data: the latter always seems to trades and hence claims activity around record large, highly skilled staff at each organization to
lag behind. The problem appears to be one of date. In other words, more work to do regardless do the same thing. DTCC has proven this model
interpretation and trust in the processes and of the size of the asset base or balance sheet works, time and time again.
applications – but once a reliable source is involved.
found, the benefits can be considerable. Darryl Twiggs - Most firms face an increase in
Harvey Colborne - Straightforward software Philip Painter - In our experience the cost of cor- operational cost when volume sensitive processes
assessments are available but the best measure, porate action processing has gone up. There has have to cope with growing markets. The growth in
in my view, is to look at how the systems are per- been a greater spread of complex events and Corporate Actions processing has been driven by
forming in practice. The base requirements for instruments i.e. derivatives, fixed income and both corporations and public investments; more
any corporate action system are the same and the emerging markets. There have been increased private individuals are making investments
differences that arise from these requirements controls to mitigate risks and standardize excep- through new Internet services, therefore the num-
are normally due to the different types of busi- tional processes and finally, due to market short- ber of securities, funds and Corporate Actions to
ness looking to adopt the system, i.e. from asset ages, the cost of good staff continues to rise. be processed is growing. Without support from a
management to investment banking etc. scaleable automation solution the only way to
Organisations have become much more mature Harvey Colborne - Yes, corporate actions pro- support growth in processing is to increase head-
in their approach to monitoring corporate actions cessing costs have increased, but the volumes count. A Corporate Actions solution provides a
processing over the last year. Most will also have the teams handle have also increased significant- platform for growth without increasing head-
internal systems such as Change Management ly so, depending on the particular firm, the cost count. Corporate Actions solutions are scaleable
teams in place, with responsibility for examining per transaction may have stayed fairly level. One and can provide any firm with a global operating
all the organization’s internal processes, scoring of the new difficulties firms are currently facing platform. Firms are looking to expand their mar-
the effectiveness of new systems including corpo- which is definitely starting to push up costs is a ket operations in new global markets and will find
rate actions, quantifying benefits and recom- severe shortage of reliable people who are keen, that it is necessary to support Corporate Actions
mending any re-engineering considered neces- or even prepared, to work in a back-office role with an automated solution. ISJ

INVESTOR SERVICES JOURNAL 61

Meet The Future - Walkers

ing, and a fiery baptism to the world of corpo- a.m. until 8:00 - 8:30 p.m. Once the children

Walking rate, commercial and trust work. I find the

training as a newly qualified lawyer enriching;
Walkers definitely prides itself on training its
lawyers. I am very comfortable in this environ-
ment and am particularly interested in mutual
are in bed, I sneak back on the computer to
ensure my inbox is clear of urgent matters.
Walkers ensure that we can sit at our desks at
home, and it is very addictive.

Tall funds work.

What do you enjoy most about your current

position at Walkers?

The variety and complexity of legal matters, the

clients I am being exposed to, the 'work
Where else would you like to work in the
world?

I am a home girl. I have lived around the world

and there really is no place like home. I love the
islands. If I had to leave these shores it would
be for the Cayman Islands. I would consider the
hard/play hard' approach and the firm's 'family US, but not long term.
tolerance' ideals. It also gives me the opportu-
nity to be hands on in the development of arts If you were given the opportunity to take a
programs Walkers has launched for children in sabbatical or year out what would you do?
the BVI.
Pursue a MBA degree at Harvard or Yale in the
Who are your mentors / role models? US for the academic stage of my business
training.
My mentor is Margaret Almyra Penn, who I first
met when she joined the BVI Ports Authority in If you were named Walkers employee of the
1991. She is like a mother to me. I am a British year, how and where would you celebrate?
citizen who grew up in a Caribbean country,
sandwiched between United States Virgin It's funny, Walkers does have an employee of
Islands, with access only to American culture - the month program. I was just saying to a
to which I am naturally over-exposed. Oprah Partner that I expect to be flown to the
Winfrey is my role model for so many reasons, Mandarin in Hong Kong for dinner if I should
but chiefly because she encapsulates the Maya win such an honour. He said he would be
Angelou Poem "And Still I Rise". obliged.

ISJ speaks to Ayana What is your work-life balance like? What one thing would you change about the
company, the British Virgin Isles or your job?
Hull-Brathwaite of Walkers, More work and less life. I have two children, a
continuing the series of daughter, Rikkiya (9) and son Rikkoi (7). I see The lack of quality/cutting edge hotels for
‘Meet the future’ profiles. them for couple of hours, if I'm lucky, on people visiting the BVI.
evenings during the week. On weekends, I try to
Law was always my first love, but for various dedicate as much time to them as I can; put-
reasons my first degree was in marketing, not ting in serious family time on Sundays. THE ISJ MINUTE
law, at Florida State University. At 21, I
returned home and was promoted at the Ports Where do you see yourself in five years time? CD or MP3? I still use CDs and try to keep up with
Authority. Being exposed to their legal prob- my husband and daughter, who have MP3s.
lems, my passion for law returned. At the ripe That's easy; as a partner in the Corporate Books or Films? books, but some film
age of 24, I packed my bags for the University Department at Walkers - which will still be off- Cocktails or Wine? Wine
of the West Indies, Barbados. shore law firm of the year. Theatre or Club? Definitely Theatre
Elvis or Johnny Cash? Johnny Cash
Why did you choose your career initially? What are your long-term goals for the future? Nights In or Nights Out? Nights In
Watching or Playing? Watching if its football, bas-
I chose law early; everyone said that I should It used to be to run for political office, particu- ketball, soccer; playing if its volley ball, baseball,
be a lawyer. I like to argue, love a good debate larly Minister of Education, but my appetite for or board games
and never give in unless I'm proven incorrect. politics is lessening with age. I intend to prac-
Bad habits die hard. At the time law was not tice law for the next 20 years, till I am about
the sexy career of choice in the BVI. Business 50. I think that is long term enough for now! Ayana Hull-Brathwaite, 31
Title: Associate, Walkers
degrees were prevalent. In the end I decided a Education: BSc (Hons) Marketing (Florida State
degree was better than none at all and We at ISJ work hard, we did hear you work
University), LLB Degree University of West Indies, LLM
embarked on the easier one first. long hours too. What is your average working Degree University of Cambridge, England
day like? Employment: 1996 - 1999 Administrative Manager, BVI
Describe your experience at Walkers Ports Authority, 2004 - 2005 Legal Counsel, BVIFinancial
In the BVI, we try to relax a little, exhale and Services Commission,
My experience at Walkers has been a reward- enjoy nature. My average work day is from 8:30 2005 to present Associate, Walkers

62 INVESTOR SERVICES JOURNAL

 Disaster Recovery Column

Keith Ford looks to the I hope you’re getting where I’m coming
from here. I’m not saying that business
cool, logical and continuity planning is a waste of time.
Just the opposite. I’m saying that it’s so
methodical approach important that one needs to tackle it with
consummate professionalism – plus some
for business continuity common sense assessments of the differ-
planning. ent risks that each company faces.
But even the best laid plans can’t
accommodate every eventuality. Perhaps
the most difficult challenges to protect
against are cases of sabotage by staff. The
Disaster Recovery Guide tells a couple of

Daddy, scary stories that illustrate just how

unforeseeable some employee actions can
be. In the first, a company experienced a
sudden and inexplicable surge in system

Daddy Cool malfunctions. After nine months, it

secretly installed CCTV surveillance and
soon spotted an engineer attaching a
paperclip to a disk drive. Apparently, the
man was in financial trouble and desper-
ately needed extra overtime. Over the
You must have noticed how, as a species, rather neatly illustrates just how hard it is
nine months he had netted £689. The
we’re truly pants at assessing risk. It was for even highly trained professionals to
put aside their personal prejudices and company lost over half a million.
brought home to me recently when I In the second scary story, a different
found myself at a farmers’ market. experiences. Many years ago a homeless
wino was for the umpteenth time up company (at least, I hope it was a differ-
Obviously I was lost at the time. ent company) experienced repeated
Anyway, there was a bloke there who before the beak, charged yet again with
being drunk and disorderly. The stipendi- power outages. These happened only at
was obsessively picking through the night when it wasn’t possible to reini-
organic parsnips. And he made me stop ary magistrate was a kindly and elderly
gent of the old school (in his case, Eton). tialise the systems because there was no
and think. Now I’m in no position to engineer on duty. Consequently, all the
determine absolutely whether minute He told the prisoner that he was minded
to give him one last chance, but only on operators had to be sent home. The com-
traces of government approved pesticides pany soon worked out that the outages
will end up eating my frontal lobe or nur- condition that the dipso tramp would
first promise never to touch another drop always occurred when the same night
turing nascent cancer cells in my lower shift was working, and subsequently dis-
bowel. But this chap clearly wasn’t willing of alcohol.
“And when I covered an
to take the chance, and I had no grounds
for arguing with him. What did seem odd say not a Even the best laid plans can’t operator in
the act of
to me, however, was how deeply this drop,” he con-
health freak was inhaling the smoke from tinued, “I accommodate every eventuality. turning a
mean none at master
his full-fat Marlboro’s. power switch off and back on.
In making my point here I’m not trying all. Not even the teensiest dry sherry
before dinner.” Apparently, this guy was insanely jealous
to have a go at smokers. After all, how of his beautiful girlfriend whom he sus-
many of us drive home without bother- So how much is risk assessment in busi-
ness influenced by the personal prejudices pected of being unfaithful. One night
ing to put on their seatbelts, all the while there had been a genuine power cut and
fretting about the whiff of secondary and experiences of the assessors? Quite a
bit, I suspect. Though that assessment he found himself arriving home unex-
smoke they just picked up in the parking pectedly in the wee hours. It occurred to
lot? may well be influenced by my personal
prejudices and experience. him that this was an ideal way of keeping
The truth is that few of us are any good a continuing check on his beloved’s fideli-
at calculating risks. And the question is: But I’ll bet that somewhere in the world
there’s a company who’s headquartered ty. So he started engineering his own
just how good are risk assessment special- power blackouts.
ists in business? Yes, I know the theory. on a flood plain and whose risk assess-
ment is carried out by a UFO anorak. There really isn’t any easy way to plan
These are professionals who – just like for these sorts of sabotage. But that does-
judges – are trained to leave their preju- Certainly, you can be sure that that com-
pany has exquisitely detailed contingency n’t make business continuity planning
dices at home and to weigh up the facts any the less important. The trick is to
with clinical detachment and scientific plans that will allow it to continue to
trade in the aftermath of any form of approach it coolly, logically and methodi-
precision. What bothers me is that they cally. And be ready to bring in a profes-
may be too much like judges. alien invasion. And you can be equally
sure that that company has no idea of sional to help, if necessary. Just make sure
There’s a famous old story that remains that your consultant isn’t a smoker who
popular with our learned friends and that how to recover from a flood.
hangs around farmers’ markets. ISJ

INVESTOR SERVICES JOURNAL 63

Mandate Update Downdate

MANDATES AWARDED TABLE

2006
Month Winner Client Location Assignment Mandate Size

September State Street IKANO Lux Securities Services USD 3.8 bn

September AA Mellon Hoogovens Netherlands Custody & Accounting EUR 5 bn
September Citigroup Kiwibank New Zealand Securities Services n/a
September Northen Trust Abu Dhabi UAE Custody n/a

August AXA Rosenberg Nykredit US Equities USD 60 b

August AXA Rosenberg Nykredit US Equities USD 50 bn
August Statestreet Virgin Money UK Custody GBP 2.6 bn
August AA Mellon North YorkshirePF UK Custody & Accounting GBP 1 bn
August JPMorgan WSS Freddie Mac USA Transaction Processing USD 700bn
July AA Mellon North Yorkshire UK Custody & Accounting GBP 1 bn
June JPMorgan WSS Royal Mail UK Custody GBP 2.2bn
June AA Mellon Merchant Navy UK Custody & Accounting GBP 3.2bn
June BNP Paribas Istituto Nazionale Italy Depot bank EUR 0.6bn
May HSBC RLAM UK Securities Services USD 40bn
May AA Mellon Railpen UK Custody GBP 17bn
May Northern Trust SFP Netherlands Asset Servicing EUR 330m

Game on!
The post-summer lull is coming to an end. Some of you
however, have been getting your knees dirty.....
It’s the end of summer, everyones getting back from SIBOS in drips and draps, and nobody wants to play in the world
of mandates. However, some of you have been playing ball and for the rest of us, here are the highlights from
September:

The catch of the month has gone to ABN AMRO Mellon Global Securities Services B.V. way out in the bleachers. ABN
AMRO has been appointed by Stichting Pensioenfonds Hoogovens (Hoogovens), the pension fund for the employees
and pensioners of Corus Netherlands in IJmuiden, to provide global custody and data warehouse solutions for assets
worth EUR 5 billion. Those assets are now fully transitioned. To meet Hoogovens’ complex service requirements ABN
AMRO Mellon is providing a bundled solution, which includes global custody, investment accounting, regulatory
reporting, securities lending, cash management, FX and full-trade confirmation. Investment accounting for non-cus-
tody assets – encompassing private placements, mortgages and real estate – is also part of the package.

State Street have kept the ball rolling with a comfortable EUR 3.8 billion mandate win. State Street was selected by
IKANO Fund Management S.A. to provide third party securities lending services. IKANO Fund Management, part of
the IKANO Group, is a highly focused fund management company specialising in multi-manager fund products.

Citigroup has teamed up with Kiwibank and have announced that Kiwibank will provide a range of international
accounts and services, leveraging Citigroup's products and processing capabilities. With this offering, Kiwibank's cus-
tomers will hopefully enjoy a broad range of sophisticated international payment and trade products, including cross
border funds transfers, trade services, foreign currency accounts and forward contracts.

Northern Trust has been selected by the multi billion dollar Abu Dhabi Pensions & Benefits Retirement Fund as sole
global custodian and to provide investment risk and analytical services, including performance measurement and attri-
bution analysis. The Fund was created in 2000 by the Abu Dhabi Government for national government, semi-govern-
ment and private sector employees.

64 INVESTOR SERVICES JOURNAL

 Events - Dates/Diary

Dating BHF Bank Event: Daddy Cool

Global Securities
Services events
07 November 2006, 2 days 05 December 2006, 3 days On the 22nd of last month BHF Bank kindly
Asset Allocation Asia 2006 Hybrid Securities World Australia invited ISJ for a night on the town.
The Conrad Hotel, Hong Kong Rydges Jamison Hotel, Sydney In true ISJ style, we duly accepted and attended
T: +65 63222 721 T: +61 2 9005 0724
www.terrapinn.com/2006/aaa/ www.terrapinn.com/2006/hs%5Fau the star-studded premiere of Daddy Cool at
London’s Shaftsbury Theatre.
We would like to thank BHF Bank again for a
08 November 2006, 3 days 12 December 2006, 3 days wonderful evening, and if any more of you feel
Ethanol & Biofuels Asia 2006 Pension Fund Investment World like spending some intimate time with ISJ, then
Singapore Arabella Sheraton Grand Hotel,
T: +65 6322 2726 Frankfurt please let us know. I think you’ll find us the most
www.terrapinn.com/2006/eba/ T: +44 207 092 1224 agreeable of playmates!
http://www.fundsmanagement-
world.com/2006/PFI/
13 November 2006, 4 days
Hedge Funds World Africa 2006
Cape Town Internatßional 12 February 2007, 3 days
Convention Centre, Cape Town, Alternative Beta - IRC Conference
South Africa The Landmark, London
T: +27 (0) 11 516 4054 T: +44 (0)207 827 5972
www.hedgefundsworld.com/2006/h http://www.hedgefundsworld.com/2
fwza/ 007/altbeta/

14 November 2006, 3 days 28 February 2007, 3 days

FIMA Conference Hedge Funds World Australia
Guoman Hotels, The Tower, The Westin, Sydney
London T: +65 6322 2715
T: +44 (0)20 7368 9585 http://www.hedgefundsworld.com/2
http://www.wbresearch.com/FIMAe 007/hfw%5Fau/
urope/index.html Wolfgang Danicke, BHF Bank & Nicola Barker-Moseley,

05 March 2007, 4 days

19 November 2006, 3 days Hedge Funds World Middle East
Trade Finance MENA 2006 Madinat Jumeirah, Dubai
Al Bustan Rotana Hotel, Dubai T: +44 207 092 1224
T: 0044 (0) 20 7827 4156 http://www.hedgefundsworld.com/2
www.terrapinn.com/2006/tfme/ 007/hfwme/contact.stm

27 November 2006, 3 days 06 March 2007, 3 days

Banking Technology Africa CDO World USA 2007
Sandtown Convention Centre, Bridgewaters, New York
Johannesburg T: +44 20 7092 1263
T: +27 11 463 6001 http://www.terrapinn.com/2007/cdo
http://www.terrapinn.com/2006/btza/
Christine Bohm & Moritz Ostwald, BHF Bank
20 March 2007, 3 days
28 November 2006, 3 days Investing in Infrastructure Assets
Hedge Funds World Zurich 2006 Embassy Suites Hotel, New York
Swissotel, Zurich T: +44 207 092 1224
T: +44 (0) 20 7092 1225 http://www.terrapinn.com/2007/iiaa
www.hedgefundsworld.com/2006/z /contact.stm
urich
26 March 2007, 5 days
28 November 2006, 3 days Asset Allocation Summit 2007
Real Estate Investment World Sandton, Johnannesburg
Japan T: +27 11 463 6001
Four Seasons Hotel, Chinzan-so, http://www.terrapinn.com/2007/ass
Tokyo etza/contact.stm
T: +65 6322 2309
www.terrapinn.com/2006/reiwjp
5 December 2006, 3 days Our deputy editor proves he’s a hit with the birds.

INVESTOR SERVICES JOURNAL 65

 People Moves -Moving & Shaking

Moving expansion strate-

gy. He will contin-
ue to report to
Portfolio and
Fund
Management
& Adam Bryan, pres-
ident and chief
Straight Through
Processing (STP)

Shaking executive officer.

State Street
solutions for
investment man-
agers, fund man-
Corporation, the agers and hedge
provider of finan- funds, has
cial services to announced the
institutional promotion of
investors, has John Burchenal Graham Bright to Graham Bright
announced the the role of
appointment of Cassie Martin to vice Managing Director, Financial Tradeware
president of sales and relationship man- plc. His new role also encompasses
agement for State Street's transition Financial Tradeware (Suisse) SA, based
management team in Europe. Ms in Geneva. Former Managing Director,
Martin will report to Edward Pennings, Alberto Fontana retires after 9 years
head of sales & relationship manage- heading up the IT services company. Mr
Merrill Lynch & Co. and Investment ment for State Street's transition man- Bright joined the company in 2005 as
Technology Group, Inc. have announced agement business in Europe, Middle Head of International Sales, after a
the appointment of Steven J. Sorice as East and Africa. In this role, Ms Martin twenty year career with SWIFT.
chief executive officer of their new joint will be responsible for outreach to the Following the retirement of Fontana and
venture, effective immediately. Mr UK and Irish consultant relations as well his return to Italy, Bright takes up the
Sorice, 45, comes to Block Alert with as direct sales to asset owners and fund new position effective from today, based
over 20 years of industry experience. He managers. Prior to this role, she worked in London.
spent ten years at ITG in several senior for a number of leading financial com-
roles, most recently serving as the CEO panies including RBC Global Services, The Board of Directors of Orc Software
of ITG's Hoenig division. Prior to join- Friends, Ivory & Sime and Putnam has appointed Thomas Bill as CEO. Bill
ing ITG, Mr Sorice was at ESI Securities Investments in various marketing-relat- joins Orc from Protect Data where he
Company where he held several posi- ed roles with a strong emphasis upon has been CEO for the past four years.
tions, including head of the internation- relationship management and customer Under his leadership, Protect Data has
al trading desk. service. developed into a leading data security
company. “As demonstrated in his vari-
Omgeo, a provider of post-trade, pre- SunGard has announced that Gareth ous management positions throughout
settlement trade management services, Quinn has joined SunGard's Enterprise the years, Mr Bill has the proven leader-
has announced that John Burchenal is Solutions group as managing director of ship skills and expertise needed to drive
now managing director of global alternative investments. As one of the Orc’s profitable growth and build long-
straight-through processing (STP) part- major providers of technology for the term value for its shareholders,” says
ners, in addition to his existing leader- alternatives industry, SunGard's Magnus Böcker, chairman of Orc
ship of asset class expansion. appointment of Mr Quinn signals its Software.
Additionally, Paul Antosh has joined the continued commitment to providing “Thomas has
company as executive director, global consolidated solutions for the sector. been very success-
product management. Mr Burchenal’s Based in London, Mr Quinn will focus ful in establishing
added responsibilities and the seniority on helping customers best leverage Protect Data’s
of Antosh’s role at Omgeo are a direct SunGard's broad solution suite for alter- technology as a
reflection of the company’s continued native investments. Mr Quinn has over global standard
focus on providing best-of-breed solu- 15 years experience in international insti- for mobile data
tions across multiple asset classes, tutional financial services, with assign- security. In addi-
both by building robust, flexible prod- ments ranging from Hong Kong to New tion, he has held a
ucts that meet the evolving needs of its York and London. He also has proven number of senior
clients and by partnering with other experience within the prime positions with
industry-leading firms. With additional brokerage/electronic trading arena. Front Capital
Prior to joining SunGard, Mr Quinn was Systems, which Thomas Bill
responsibilities as managing director of
global STP partners, Burchenal, who chief executive officer of Trade Stream provides software solutions for broker-
joined Omgeo in 2005, will leverage his Global. Before this he held various roles ing, trading and risk-management.”
extensive experience in developing busi- at Deutsche Bank, Lehman Brothers Lars Johansson has resigned from Orc
ness partnerships and building syner- and Morgan Stanley. Software and will depart January 31,
gies that support Omgeo’s asset class 2007.
Financial Tradeware, provider of

66 INVESTOR SERVICES JOURNAL

 People Moves - Moving & Shaking

of GMI in the UK and Europe, and now

Reuters has appointed the CEO of one Governance. She previously held senior
additionally, the Asia Pacific region.
of its subsidiaries to be the new global technology leadership roles at BMO
head of its Research and Asset Financial Group and Canadian Imperial
Deutsche Bank Private Wealth
Management division. Michael Peace Bank of Commerce. At Barclays, she will
Management has announced the
will succeed Julie Holland to the top assume responsibility for the “Getting
appointment of Rudy Suter as
role in the division and will report IT Right” Program, a multi year initiative
Managing Director and Head of
directly to Reuters Chief Operating to enhance IT effectiveness across the
Financial Intermediaries. In his new
Officer, Devin Wenig. Mr Peace is a for- Barclays businesses. Ms Campbell will
role, he will be responsible for structur-
mer graduate trainee at Reuters who also lead Strategy, Vendor Management,
ing, bundling and developing Private
joined the company in 1987 before ris- Governance, QA and Reporting and will
Wealth Management capabilities in this
ing through marketing and sales roles lead the coordination of the IT agenda
segment, which will include client acqui-
in Asia. His most recent position was in with the HR and Finance groups.
sition and service enhancements as well
the dual role of CEO of Lipper, the
as a broader use of existing booking
Reuters mutual fund information sub- Saxo Bank has recruited Kevin Ashby, as
centres around the globe. Rudy Suter
sidiary acquired in 1999, and head of Chairman and CEO of the bank’s Asia-
joins Deutsche
Reuters Global Wealth Management. Pacific subsidiary, Saxo Capital Markets
Bank from UBS
Ltd in Singapore. Mr Ashby moved to
where he was
Citigroup Corporate and Investment the bank Saxo Bank from a position as
Head of
Banking Asia CEO of Patsystems, a publicly listed,
Intermediaries
Pacific has London-based purveyor of derivatives
for the Americas.
appointed trading systems and will be responsible
He spent a total
Lawrence Komo for boosting the investment bank’s
of 16 years at
as Managing regional profile. The Asia-Pacific region
UBS in different
Director, Head of is already the source of 30% of Saxo
leadership posi-
Securities Finance Bank’s new business. Commenting on
tions in Zurich,
for Asia Pacific. the appointment, Mr Ashby says: “Over
New York,
Komo will report the past few years, I have become
London,
to Margaret increasingly convinced that trading is Rudy Suter
Frankfurt, Tokyo
Dawson, Asia becoming borderless, both geographi-
and in
Pacific Head of cally and from an asset class perspec-
Michael Peace Melbourne. Mr Suter will be based in
Securities and tive. I am therefore very pleased to be
Zurich and report to Dr. Hans-Jürgen
Fund Services joining a company which is already rec-
Koch, Head of Deutsche Bank Private
and Tim Douglas, Global Head of ognized as a leader in this space.”
Wealth Management International and
Securities Finance and will be based in
Chief Executive Officer of Deutsche
Singapore. Mr Komo joins Citigroup SunGard have also announced that Leif
Bank (Switzerland) Ltd.
from UOB Group in Singapore, where Strid has been appointed Asia Pacific
he was executive director of Asset Director for SunGard‚s GMI, a clearing
Investment Technology Group, Inc. a
Management Sales. Before UOB, Komo and accounting system for global
provider of technology-based trading
was at Citigroup from 1998 to 2002 exchange-traded derivatives, futures and
services and transaction research, has
serving in a number of roles, including options. Based in Hong Kong, Mr Strid
announced that the Board of Directors
head of equity finance in London. is responsible for managing the GMI
appointed Robert Gasser as Chief
Before he joined Citigroup, he held infrastructure within Asia Pacific, serv-
Executive Officer and President, effec-
equity finance positions in Asia at ing existing cus-
tive October 4, 2006. Mr Gasser will
Daiwa, Lehman Brothers and Goldman tomers and coor-
also become a member of the Board of
Sachs. Mr Komo completed a BA in dinating the
Directors. Ray Killian will retire as CEO,
Economics at Yale University and an expansion of the
but remain at ITG as Chairman of the
MBA from Emory University in Atlanta. business in the
Board. Mr Gasser, 41, was previously
region. Prior to
CEO at NYFIX, Inc, a provider of global
Barclays has announced that Heather this role, Mr
electronic trading solutions. Prior to
Campbell has joined the Group’s Chief Strid was a sen-
joining NYFIX, he was CEO of NYFIX
Information Office (“CIO”) in the newly ior sales consult-
Millennium, a subsidiary of NYFIX, Inc.
created role of Chief Operating Officer. ant for GMI in
Before NYFIX, Mr Gasser was Head of
Campbell is a member of the Barclays New York. His
U.S. Equity Trading at JP Morgan. Mr.
CIO Executive and reports to Don industry experi-
Killian, 69, founded ITG in 1987. ISJ
Trotta, Barclays Chief Information ence spans 18 Leif Strid
Officer. Ms Campbell joins from Rogers years in various
Communications, one of the largest operational, business analyst and man-
telecommunications and media compa- agement roles in the global futures and A selection of the
nies in Canada, where she was Vice derivatives arena. As Asia Pacific appointments
President, Planning, Performance and Director, Mr Strid will report to from WWW.ISJFORUM.COM
Christopher Meens, managing director

INVESTOR SERVICES JOURNAL 67

People Moves - Securities Services Vacancies

Senior Corporate Development Specialist City to £70k

This Top Tier UK Banking Group have an opening for a Qualified Accountant.
with in-depth understanding of corporate finance principles of managing
ffffffffff
transactions from origination through to completion.

Financial Controller West End to 65k

Rare opportunity to join this growing private equity firm. Varied project work,
strategy, analytical, business focused and board level exposure. Must be ACA
qualified. Includes bonus and benefits.

Senior Settlements Clerk City 40k

Top 3 European Bank requires a Equity Settlements clerk with strong euroclear
skills. The ideal candidate will have at least 2 years experience and be a good
team player.

Senior Corporate Actions Clerk City 40k

Major London investment Bank requires a senior corporate actions clerk with
a minimum of 5 years UK and international corporate actions experience.

FOR RECRUITMENT ADVERTISING

Fund Accountant West End 28/35 Ph
Prestigous Hedge Fund urgently requires an experienced Fund Accountant. IN INVESTOR SERVICES JOURNAL,
Candidates should have previous Investment Management, Unit pricing
experience and exposure to Invest one. ISJFORUM.COM, OR FUND FUTURES
PLEASE CONTACT
For more information on any of these positions or to apply please
email your details to: [email protected] JUSTIN ON +44 (0)20 7493 9966 OR AT
Cameron Kennedy
[email protected]
6th Floor, 25 Bucklersbury, London, EC4N 8DA
Telephone 020 7653 1800, Fax 020 7653 1810 www.cameronkennedy.com

68 INVESTOR SERVICES JOURNAL

 People Moves - Securities Services Vacancies

HEAD OF INTERNATIONAL
MULTI-MANAGER INVESTMENTS -
LONDON
High profile position to supervise investment
practices, procedures and resources as they relate
to Europe, Middle East as Asia.

Responsibilities will encompass overseeing the

manager research, portfolio management and client
relations business.

All discussions entered in to are strictly confidential.

Please forward your CV outlining your remuneration
and notice period in the first instance.

International Multi-manager
Recruitment Specialists

www.fisherbarrie.com
[email protected]
+44 20 7613 3915

INVESTOR SERVICES JOURNAL 69

 ISJ Directory of Services

Consultants
C: Professor Michael Mainelli,
Z/Yen helps organisations make better choices. Our name combines Zen and Yen -
Executive Chairman
“a philosophical desire to succeed” - in a ratio, recognising that all decisions are
E: [email protected]
trade-offs. Z/Yen’s mission is to be the foremost risk/reward management firm.
In the financial markets Z/Yen conducts numerous research projects on a variety of C: (Disaster Recovery and Project
wholesale and retail issues, as well as providing technical strategy, support and Management): Keith Ford,
prediction systems. Z/Yen’s renowned annual studies include: Senior Consultant
i. Global cost per trade benchmarks on equities, money markets and foreign E: [email protected]
exchange;
T: +44 207-562-9562
ii. Operational performance of broker ratings;
F: +44 207-628-6786
iii. Operational performance of client (buy-side) ratings.
W: www.zyen.com

Custody & Clearing

Australia and New Zealand Banking Group Limited (ANZ) is one of the leading finan-
cial institutions in the Australian and New Zealand markets. We provide an extensive
range of Retail, Corporate, Institutional and Private Banking services in addition to a T: +61 03 92733563
range of specialised functions including Custody Services through ANZ Custodian F: +61 03 92732650
Services. ANZ Custodian Services is committed to our home markets and continu- C: Philip Dowman
ously seeks to provide our clients with highly competitive service through our cus- E: [email protected]
tomer-focused and experienced teams, extended business hours and ongoing invest- A: Level 25, 530 Collins Street
ment in technology. Our capabilities incorporate core Custody and Clearing of securi- Melbourne Victoria VIC 3000
ties, Investment Administration Services, Cash, Foreign Exchange and Securities Australia
Lending. W: www.anz.com
Assets under Custody: AUD$90 billion

BHF-BANK is one of Germany's most prestigious private banks. Its roots date back to the year
1854. As an advisory, service and sales & trading bank, we offer our discerning clientele a C: Cornelia Keth
comprehensive array of customised solutions. BHF-BANK combines the strengths of a private bank T: +49 69 718 3738
with a long track record of capital market competence. Trust, an individual approach and F: +49 69 718 6050
impartiality - these qualities are at the very heart of the long-term guidance and advice we provide E: [email protected]
for our clients. Our bank's activities are grouped within the divisions Asset Management & C: Moritz Ostwald
Financial Services, Financial Markets & Corporates and Private Banking. Financial Services
T: +49 69 718 6838
comprises the bank’s custody services, investment company (depotbank) services and its securities
and derivatives clearing business. The bank’s longstanding experience in the German securities E: [email protected]
services market goes hand in hand with a corporate culture that values prompt acknowledge- A: Strahlenbergerstraße 45,
ments and short decision-making channels. BHF-BANK offers tailor-made custody services to 63067 Offenbach a.Main
meet its clients’ particular requirements. It’s reporting services include a comprehensive SWIFT Germany
reporting matrix as well as its Internet-based reporting tool cds@web. W: www.bhf-bank.com
Assets under Custody: EUR 210 bn No of funds: 232

The CACEIS Group is a partnership between the Investor Services business lines
T: +33 1 57 78 10 78
of Crédit Agricole S.A. and Groupe Caisse d'Epargne. We rank among the top 10
custodians worldwide, with EUR 1,697 billion in assets under custody C: (France)
(30/6/2006). CACEIS provides a full range of services to institutional clients in Patrick Lemuet
France, Luxembourg, Spain and Ireland. These services include, global and local E: [email protected]
custody (safekeeping of listed and OTC assets) depositary/trustee services, T: +352 4767 2567
STP transactions (SWIFT), corporate actions and income collection, proxy voting, C: (International)
tax services, compliance and performance monitoring, flexible online reporting, José-Benamin Longrée
securities lending, matching, processing and settlement. We also have links to E: [email protected]
200+ UCITS registrars. Our network of sub-custodians provides a secure
W: www.caceis.com
environment for your assets in over 70 markets worldwide.

DBS offers a full range of custodial services including securities safekeeping, settlement of
trades, corporate actions and market information updates. These services are available in T: 65 6878-1830
Singapore, Hong Kong and other selected markets. DBS offers short-term, highly liquid F: 65 6878-4166
overnight facilities for its clients’ accounts to earn daily interest on any excess funds. DBS also C: Ms Low Swee Fun
provides the value added service of tax reclamation without holding tax reductions (where local E: [email protected]
regulations permit) on income arising from securities safekept with it. Proxy voting services for
A: DBS Bank Ltd
clients’ holdings at Annual General Meetings and Extraordinary General Meetings are also
available on request. Global Transaction Services
Securities services is an integral part of Global Transaction Services within DBS bank. With Securities Services, 6 Shenton
more than 20 years of experience in the custody business, DBS’ strengths lie in its ability to Way, 36-02, DBS Building Tower
provide quality services, in depth knowledge and expertise of the Asian markets. Its clientele 1, Singapore 068809
compromise the major global custodians, investment banks, private banks, insurance compa- W: www.dbs.com
nies and investment managers etc.

70 INVESTOR SERVICES JOURNAL

 Custody, Clearing & Settlement ISJ Directory of Services

DnB NOR is the largest and leading provider of Custody, Clearing and
T: +47 22 94 92 95
Remote Member Service in Norway In addition, DnB NOR provides a wide
F: +47 22 48 28 46
range of value added services to both Foreign and Domestic clients.
Contact: Bente I. Hoem
Through an Alliance solution with banks in Sweden, Finland and Denmark,
E: [email protected]
DnB NOR can offer seamless regional products, which can be customized to
W: www.dnbnor.com our client's needs.

T: +46 8 701 2988 Handelsbanken was the first Nordic bank to provide complete custody services in the
F: +46 8 701 2990 entire Nordic region. We conduct in-house processing in each Nordic country, with
Contact: Johan Wennerberg well-experienced staff with in-depth market knowledge and access to market
E: custodyservices@handels- information. Each client is allocated an account manager fully responsible for the
banken.se day-to-day activities, as well as a regional relationship manager. Handelsbanken
Address: Blasieholmstorg 12, provides specialised and tailor-made custody services including complete corporate
SE-106 70 Stockholm, Sweden action services, securities borrowing and lending for all Nordic countries, as well as
www.handelsbanken.com/nordic_ settlement and clearing services to clients that are remote members of the Nordic
_custody_services stock exchanges.

New York: Christopher Lynch

T: +1 718-242-7555
JPMorgan Worldwide Securities Services provides custody and securities servicing
E: [email protected] solutions to the world's leading institutional investors, including fund managers,
London: Dick Feehan insurance companies, pension funds and banks.
T: +44 (20) 7742-0102 As one of the world's leading global custodians, we have $11.7 trillion in assets
E: [email protected] under custody.
Sydney: Laurence Bailey JPMorgan meets institutional investors' needs by providing extensive experience,
T: (61-2) 9250-4833 comprehensive products and advanced technology designed to optimize efficiency,
E:[email protected] enhance revenues and mitigate risks associated with global investing.
W: www.jpmorgan.com/wss

Nordea is the leading financial services group in the Nordic and Baltic Sea region
and operates through three business areas: Retail Banking, Corporate and
Institutional Banking and Asset Management & Life.
T: +47 2248 6238 - The leading financial services group
Contact: Anne-Lise Kristiansen - A world-leading Internet banking and e-commerce operation
Head of Sub-custody and - The largest customer base of any financial services group in the region
Clearing - A leading asset manager in the Nordic financial market
E: [email protected] - The most comprehensive distribution network in the region
Nordea is the leading custody services provider in the region. Nordea provides high
quality, tailor-made custody services for local and foreign investors dealing with
Nordic, Baltic or global securities.

RBC Dexia Investor Services offers a complete range of investor services to institu-
T: +44 (0) 20 7653 4096
F: +44 (0) 20 7248 3946
tions worldwide. Established in January 2006, we are equally owned by Royal Bank
Contact: Tony Johnson of Canada (RBC) and Dexia. We rank among the world's top 10 global custodians,
Head, Sales & Relationship with approximately USD 2.0 trillion in client assets under custody, including in-
Management house assets of RBC and Dexia. Our innovative products and services help clients
E: [email protected] maximise operational efficiency, minimise risk and enhance portfolio returns. And
Address: 71 Queen Victoria Street,
our 3,800 professionals in 15 markets offer proven expertise to enhance clients’
London, EC4V 4DE, UK
business performance.

SEB is the leading provider of securities services in the Nordic and Baltic area. We
are committed to custody and clearing processes for the wholesale market. We hold
securities worth over EUR 460 bn and provide services in more that 70 markets, 9
T: +46 8 763 5770 of them under the SEB name (Sweden, Norway, Finland, Denmark, Luxembourg,
F: +46 8 763 6930 Germany, Estonia, Latvia and Lithuania).
We offer a full range of securities services including corporate action and
Contact: Goran Fors
information services, securities lending and services to remote members of the
E: [email protected] Nordic and Baltic stock exchanges. We continuously develop new products in
W: www.seb.se connection with clients and partners to ensure we deliver the high-quality
products our clients demand. We always strive to make the processes more
efficient. With a history of 150 years in the securities industry; we know the market
and our clients well.

71 INVESTOR SERVICES JOURNAL

 Financial Asset Services is the custody and investments-servicing division of
Standard Bank, providing a unique suite of services to sophisticated investors in A:Standard Bank
South Africa and eight sub-Saharan markets. Financial Asset Services
3rd Floor
Standard Bank views custody, investment administration and securities lending as a 25 Sauer Street
core business crucial to many other services the bank offers. The bank has invested Johannesburg 2107
significant capital in developing Financial Asset Services and is continuing to invest T: +2711 636 6615
to maintain and extend its leading position in its chosen markets. E: adam.bateman@standard-
bank.co.za
Standard Bank has assets under custody to the value of ZAR1.5 trillion and an W: www.standardbank.co.za
overall market share of approximately 40%.

Swedbank provides client-focused custody services to domestic and international

securities lending (including auto-borrow facilities), derivative clearing services,
proxy voting, full corporate actions and income service. Flexibility is an important
aspect of Swedbanks products and services. Our dedicated Client Relations T: +46 8 5859 1800
Managers and Account Managers are focused on personalized processing and F: +46 8 7237 147
reporting solutions. C: Neal Meacham, Head of
Custody
Other Features: ISO9001:2000 quality certification. Swedbank Markets Online
(SMO) internet information and reporting toolfor Custody and Securities Lending. E: [email protected]
Nordic Custody alliance with DnB NOR (Norway), OKO Bank (Finland) and A: Stockholm SE 105 34
Amagerbanken (Denmark) to offer regional custody product. Sweden
Institutional Assets under Custody: USD 70 billion
No. of Institutional Clients: 110

Data Services
Capco Reference Data Services (CRDS) provides a suite of reference data
management solutions that help financial services providers to achieve C: Donna Faup Bailey
superior data integrity, solve data integration issues and transform
operational performance while lowering data management costs. These Director Business Strategy &
services include a comprehensive managed services offering - a proven Marketing, Capco
alternative to in-house management of reference data as well as index T: +212 284 8749
and ETF data solutions. CRDS also provides consulting services E: [email protected]
including advisory, assessment, migration, implementation, integration,
project management, development and training. For more information, W: www.capco.com/crds
please visit www.capco.com/crds.

Through its subsidiaries, DTCC provides clearance, settlement and information services for
equities, corporate and municipal bonds, government and mortgage-backed securities and London: Richard Bustard
over-the-counter derivatives. DTCC's depository also provides custody and asset servicing for T: +44 (0)20 7444-0403
more than 2.5 million securities issues from the United States and more than 100 other coun- E: [email protected]
tries and territories. In addition, DTCC is a leading processor of mutual funds and insurance
transactions, linking funds and carriers with their distribution networks. DTCC has operating New York: Susan Spivey
facilities in multiple locations in the United States and overseas. For more information on T: + 1 212 855-4144
DTCC, visit www.dtcc.com. E: [email protected]
DTCC’s GCA Validation Service gathers and distributes validated global corporate actions General information
announcement information on more than 1.4 million securities from more than 150 countries T: +1 212 855-1000
in more than 16 languages, more than any other provider.

Interactive Data Corporation (NYSE: IDC) is a leading global provider of Interactive Data (Europe) Ltd
financial market data, analytics and related services to financial institutions, active A: European Headquarters
traders and individual investors. The company’s businesses comprise: FT Interactive
Fitzroy House, 13-17 Epworth
Data, ComStock, CMS BondEdge and eSignal.
Street, London EC2A 4DL
FT Interactive Data provides global securities pricing, evaluations, dividend, corporate T: +44 (0)20 7825 7800
action and reference data designed to support financial institutions’ and investment F: +44 (0)20 7608 3514
funds' pricing activities, securities operations, research and portfolio management. FT
E: [email protected]
Interactive Data collects, edits, maintains and delivers data on more than 3.5 million
W: www.interactivedata.com
securities, including daily evaluations for approximately 2.5 million fixed income and
international equity issues. FT Interactive Data specialises in ‘hard-to-value’ instru- C: Brendan Beith – European
ments and ‘hard-to-get’ information from emerging markets. Sales Director

SunGard's solutions for data management provide technology for the management
W: www.sungard.com/dataman-
and delivery of market, historical and reference data to financial services
agementsolutions
institutions, energy and public sector organizations. SunGard also offers outsourced
T: 1-888-441-9935
data management services, as well as real-time, interactive and flat-file data feeds
F: 212-977-7144
for application integration. Aggregating market data and financial content from more
C: Marketing Department
than 100 third-party sources, SunGard's solutions for data management add value
E: [email protected]
through a range of services including cleansing, enrichment and analytics. To find
A: SunGard
out how SunGard's solutions for data management can help improve productivity,
888 Seventh Avenue
portfolio optimization and investment opportunity with predictive analytics and
New York, NY 10106
packaged data please visit www.sungard.com/datamanagementsolutions.

72 INVESTOR SERVICES JOURNAL

 Fund Administration
Andrew Collins Managing Director Butterfield Fund Services (BFS) provides valuation, accounting, corporate secretarial,
T: 441-299-3954 compliance, directorial and shareholder services to hedge funds, fund-of-funds, and
E: [email protected] mutual funds. BFS also services international pension & insurance trusts. Clients
Tania Kowalski Marketing such as financial institutions, insurance companies, and institutional investors use
Manager T: 441-278-6300 Butterfield Fund Services to set up and launch investment funds. BFS operates in
E: [email protected] Bermuda, Bahamas, the Cayman Islands and Guernsey.
A: Rosebank Centre 11 Whether a fund is just starting out or is well established, Butterfield Fund Services
Bermudiana Road, Pembroke, can provide complete solutions to help clients better service their investors. With
Bermuda HM 08 / P.O. Box HM over $50 billion in assets under administration, many alternative funds have turned
195 Hamilton, Bermuda HM AX to Butterfield Fund Services for timely and accurate administration services.

The CACEIS Group is a partnership between the Investor Services business lines of
T: +33 1 57 78 10 78 Crédit Agricole S.A. and Groupe Caisse d'Epargne. With a total of 823 billion in
C: Patrick Lemuet (France) assets under administration (30/6/2006), we are Europe’s premier third party fund
E: [email protected] administrator. CACEIS provides a full range of services in France, Luxembourg,
Ireland, Belgium and The Netherlands. These services include portfolio valuation
T: +352 4767 2567 with multiple and automated pricing sources, NAV calculation, product structuring,
C: José-Benamin Longrée tax relevant data calculation, fees and commissions calculation, on-line client report-
(International) ing, legal and statutory investment guideline monitoring, performance measurement
and globalisation techniques such as Cloning. Our transfer agency services include
E: [email protected] retail and institutional account management, Europe-wide transaction processing,
W: www.caceis.com distribution network management, third party distribution and shareholder services.
The Fastnet Network, operated by CACEIS, undertakes some of the above services
and is a partnership venture with the Fortis Group.

Derivatives Portfolio Management provides onshore and offshore alternative asset fund
T: +1 732-667-1155 administration, back and middle office outsourcing, portfolio valuation, daily NAVs, risk
C: Skander Aissa administration and portfolio transparency solutions for fund managers, asset allocators,
E: [email protected] institutional investors and proprietary traders. DPM Mellon’s services are designed to
A: 400 Atrium Drive, Somerset, solve complex administrative needs and improve operational efficiency. DPM Mellon has
New Jersey, the systems, infrastructure and experience to handle your toughest administrative
NJ08873, USA challenges. DPM Mellonhas a world-wide staff of 200 employees. DPM’s HQ is in
W: www.dpmmellon.com Somerset, New Jersey with offices in London, the Bahamas, and the Cayman Islands.

A Mellon Financial Company.

New York: Christopher Lynch JPMorgan Fund Administration provides a full suite of products for all aspects of
T: +1 718-242-7555 fund administration, enabling asset managers to focus on their core business of
E: [email protected] investment management. Fully integrated with JPMorgan's custody and fund
London: Dick Feehan accounting system, it also accepts automated data feeds from clients' in-house or
T: +44 (20) 7742-0102 third party accounting platforms. By automating these activities, we leverage
E: [email protected]
technology to build flexible business systems that increase efficiencies and deliver
Sydney: Laurence Bailey customer focused solutions.
T: (61-2) 9250-4833
E:[email protected] A world-class team of experienced industry professionals provides the expertise you
W: www.jpmorgan.com/wss need in fund administration services.

C: Fred W. Jacobs, III PFPC is a premier provider of processing, technology and business solutions to the
A: PFPC, 301 Bellevue Pkwy global investment industry. Our core offering includes accounting, administration,
Wilmington, DE 19809 USA investor services, middle-office services and regulatory administration services. Whether
T: 302-791-2000 your products are U.S. or non-U.S. domiciled funds, trust vehicles, limited partnerships
F: 302-791-1570 or commingled investment products, PFPC’s multi-jurisdictional, multi-fund capability
E: [email protected] allows us to process your complex fund structures - from hedge funds, fund of funds
C: Fergus McKeon and private equity funds to master/feeder and multi-managed funds.
A: PFPC Riverside Two
Sir John Rogerson’s Quay PFPC offers personalized alternative investment solutions tailored to your unique
Dublin 2, Ireland needs. With more than 30 years in the fund servicing industry, our seasoned and
T: +353-1-790-3500 responsive professionals bring you the know-how, focus and dedication to deliver the
E: [email protected] services you need, when and where you need them, any way you want them.

T: +44 (0) 1481 744000 Our clients have access to a broad range of value added services and tailored solu-
F: +44 (0) 1481 744529 tions including global custody and fund administration services for funds domiciled
C: Jose Santamaria in the Caribbean and Channel Islands.
E: [email protected]
A: PO Box 48 Canada Court Our services include Trustee, banking and credit facilities, treasury and foreign
St Peter Port Guernsey exchange, trade execution, financial accounting, corporate services, derivative sup-
GY1 3BQ United Kingdom port services and online access, leveraging a custody network that covers 80 plus
W: www.rbcprivatebanking. markets worldwide. Our service combines leading edge technology with professional
com/ci.html expertise and a truly integrated service delivering creative, customised solutions.

73 INVESTOR SERVICES JOURNAL

 Atlanta: Peter Cohen
For over 25 years, professional advisors, financial institutions, corporations and high net T: 001-404-233-5275
worth families worldwide have relied on Trident Trust for integrity, reliability and commit- BVI: Barry Goodman
ment to client service. T: 284-494-2434
Main Services: A full range of back office administration services tailored for hedge, pri- Cayman Islands: Rick Gorter
vate equity and closed-ended funds. We offer flexibility in structuring administration T: 345-949-0880
which allows us to work closely with accounting firms and other service providers. Guernsey: Mark Le Tissier
Services include full fund accounting, NAV calculations, registrar and transfer agent, T: 01481-740-930
corporate secretarial including company formation, due diligence compliance and inter-
UK: Robin Harris
net reporting.
T: 44-(0)207-935-1503
Assets Under Administration: $13 billion * No. of Funds Administration: 185
W: www.tridenttrust.com

UBS Fund Services offers comprehensive fund administration services including

fund set-up, registration and support around the world (currently 28 countries), fund W: www.ubs.com/fundservices
accounting, NAV calculation, compliance management, risk control and reporting.
We provide a flexible offering from the full range of services, including Private C: Mr Gerhard Fusenig
Labelling, to selected functions. Services are based on leading fund administration T: +41 44 235 4992
architecture, multi-source pricing and powerful compliance tools. F: +41 44 234 2840
Capabilities also extend to services for hedge funds through our teams in Cayman, E: [email protected]
Ireland and Canada. A: UBS Fund Services
In times when management attention is increasingly focused on value creation, it Stauffacherstrasse 41,
may be rewarding to re-evaluate whether asset administration remains a strategic PO Box, CH-8098 Zurich
core business to you. CH-8098 Z Switzerland
Luxembourg: Jean-Paul Gennari, tel. +352-44-1010 1
Switzerland: Markus Steiner, tel. +41-61-288 4910
UK: Mike Marsh, tel. +44-20-7901 5000

Hedge Fund Administration

Robert N. Chin, General Manager
T: (+) 5999 738 1351 ext 11
E: [email protected]
ATC Fund Services is a specialized hedge fund administrator who has consistently Kedi J. Chang, Managing Director
received excellent reviews from its clients. ATC provides full administration to hedge T: (+) 5999 738 1351 ext 10
funds, including daily processing of all funds’ activities, nav calculation on a daily, E: [email protected]
weekly or monthly basis and registrar & transfer agency services. In addition, ATC
ATC Fund Services
takes a pro active approach in assisting start up hedge fund managers with the Bon Bini Business Center, units
incorporation of their fund in jurisdictions such as the Cayman Islands, the British 2B2K & 2B2L
Virgin Islands and the Netherlands Antilles. Schottegatweg Oost 10
Curaçao, Netherlands Antilles
F: (+) 5999 738 1311
W: www.atcgroup.info

Custom House Administration

Custom House is the specialist hedge fund administrator that also offers a turnkey & Corporate Services Limited
package start-up service. Custom House was the first hedge fund administrator to A: 25 Eden Quay, Dublin 1,
be awarded a Moody’s Management Quality Rating. Ireland
Custom House provides advice and assistance in the organisation of alternative
T: +(353) 1 878 0807
investment and hedge funds, together with the provision of a full administration
F: +(353) 1 878 0827
service, which covers all aspects of the day-to-day operations.
Reporting can be effected through “CHARIOT”, Custom House’s secure C: dermot.butler@customhouse-
web-reporting platform for managers and investors. Custom House Administration & group.com
Corporate Services Ltd. is authorised by the Irish Financial Regulator under Section C: david.blair@customhouse-
10 of the Investment Intermediaries Act, 1995. group.com
www.customhousegroup.com

DPM Mellon provides onshore and offshore alternative asset fund administration,
back and middle office outsourcing, portfolio valuation, daily NAVs, risk
administration and portfolio transparency solutions for fund managers, asset W: www.dpmmellon.com
allocators, institutional investors and proprietary traders. T: +1 732 667 1155
DPM Mellon’s services are designed to solve complex administrative needs and F: +1 732 662 2650
improve operational efficiency. From the most basic reports to complex portfolio C: Skander Aissa
valuations, risk analysis and daily transparency, DPM has the systems, infrastructure E: [email protected]
and experience to handle your toughest administrative challenges. A: 400 Atrium Drive Somerset
DPM Mellon has a world-wide staff of approximately 200 employees. DPM Mellon New Jersey NJ 08873 USA
is headquartered in Somerset, New Jersey with offices in London, the Bahamas, and
the Cayman Islands.

For over 25 years, Trident Trust has been a leading provider of corporate, trust and
fund services to the financial service sector worldwide.
Fund Services: A full range of back office administration services tailored for W: www.tridenttrust.com
hedge, private equity and closed-ended funds. Flexibility in structuring a fund’s T: +44 (0) 20 7935 1503
administration allows us to work closely with accounting firms and other service F: +44 (0) 20 7935 7242
providers to offer a cost-effective administrative solution. C: Robin Harris
Services include full fund accounting, NAV calculations, registrar and transfer E: [email protected]
agent, corporate secretarial including company formation, due diligence compliance A: 7 Welbeck Street
and internet reporting. Assets of Funds Serviced: $20 billion No. of Funds: 300 London W1G 9YE UK
New York: Mario Novello T: 212-840-8280 London: Robin Harris T: 0207-935-1503
BVI: Barry Goodman T: 284-494-2434 Cayman Is: Rick Gorter T: 345-949-0880
Guernsey: Mark Le Tissier T: 01481-727571 Jersey: Mike Spittal T: 01534-733401

74 INVESTOR SERVICES JOURNAL

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 UBS Fund Services, based in the Cayman Islands, Ireland and Canada holds a lead-
ing position in the area of hedge fund administration, offering a complete range of
services including accounting, NAV computation, share holder services, banking and
Cayman Islands: Darren Stainrod,
credit facilities.
T: +1-345-914 1076
With the dedication and experience of a professional team of over 150 and our
Ireland: Don McClean,
state-of-the-art web reporting, accounting and shareholder systems, we are well posi-
T: +353-1-436 3636
tioned to provide clients with a first class service.
Canada: Pearse Griffith,
With specialist expertise in both single manager and fund of hedge fund adminis-
T: +1-416-971 4702
tration, we provide facilities for both onshore and offshore funds.
Capabilities also extend to services for investment funds through our teams in
Luxembourg, Switzerland and the UK.

Prime Brokerage
Fimat’s Alternative Investment Solutions team (AIS) is a dedicated global Prime
Brokerage team serving the alternative investment community including hedge C: Philippe Teilhard
funds and CTAs. A: Fimat International Banque SA
The AIS team offers a global range of brokerage activities on a wide range of asset (UK Branch) - part of the Societe
classes including equities, bonds, currencies, commodities, and their related listed & Generale Group
OTC derivative products. The team also provides a dedicated account management SG House, 41 Tower Hill
team, cross-margining tools between securities & derivative instruments, hedge fund London EC3N 4SG, UK
start-up services, hedge fund industry quantitative information and capital T: + 44 207 676 85 36
introductions services. F + 44 207 628 44 47
The AIS team is part of Fimat, which employs over 1,600 people in 26 markets, E: [email protected]
and is a member of 46 derivatives exchanges, and 17 stock exchanges worldwide.

Payments & Settlement

CheckFree RECON-Plus Frontier automates cash and securities reconciliation to
optimise risk management, shrink costs and improve management control. It enables
global organisations to align internal and counterparty records for reduced revenue
leakage and streamlines workflow for speedier processing, reduced overheads and A: Bakers Hall
higher margins. 7 Harp Lane
Frontier is a scalable standards-based platform that enables London EC3R 6DP
T: +44 (0) 20 7621 5300
enterprise data to be integrated across disparate systems for realtime viewing. A E: [email protected]
multi-tier architecture boosts processing volumes while harnessing the enterprise W: www.checkfreesoftware.com
intranet for easy implementation and reduced maintenance. Advanced exception
processing power and intraday capabilities improve trade settlement STP and
cross border information flow while supporting European regulations and
multiple currencies.

The Settlements Directory for CLS removes the uncertainty surrounding which A: Exchange Tower
instructions to use, easing time pressure on query handling and investigation in One Harbour Exchange
back office operations. London
E14 9GE
T: Asia: +81 (0) 2 3517 2791
The Settlements Directory for CLS is a web-enabled application powered by
Europe: +44 (0) 20 7971 5700
SSISearch containing contact details, basic settlement information and MT300 North America: +1 212 943
preferences. It offers Settlement Members ongoing certainty of accurate settle- 2290
ments information and a fast, simple method of publishing and accessing CLS E: [email protected]
static data. W: www.cls-group.com

Eiger Systems solutions are designed to be best in class and are the leading products
within their market sectors. Developed to meet the needs of organisations with complex or A: Eiger Point
mission critical payment processes, our solutions interface easily with existing business Swift Park
applications and are available for all main operating systems. Old Leicester Road
EigerPAY Gateway is a global payments platform which handles complex payment require- Rugby
ments and multiple payment channels. Already the UK’s leading BACSTEL-IP solution,
CV21 1DZ
EigerPAY Gateway is ideally suited to organisations with one or more of the following:
United Kingdom
• a mission critical reliance on payments
• complex functional or technical requirements T: + 44 (0) 1788 554800
• a requirement for numerous communication channels such as (Sales): +44 (0) 1788 554810
BACSTEL-IP, CHAPS, SWIFT, or PE-ACH connectivity
EigerPAY Gateway’s flexible architecture enables organisations to integrate with the
many new and developing payment systems, with minimal change to legacy systems.

A: Europe/Asia/Africa
Fundtech's payments solutions automate all aspects of the funds transfer and cus-
42 New Broad Street
tomer notification process, enabling straight-through-processing (STP) of payments. London EC2M 1SB
Fundtech also offers payments solutions for continuous linked settlement (CLS), nos- United Kingdom
tro account management and enterprise-wide payments management. T: +44-207-588-1100
Global PAYplus - The enterprise-wide payments management solution for global F: +44-207-588-1155
financial institutions. A: Americas
PAYplus RTGS - A fully integrated, multi-currency payment system for banks resid- 30 Montgomery Street
ing in countries outside the U.S. that have established Real Time Gross Settlement Suite 501
(RTGS) standards. Jersey City, NJ 07302
T: +1-201-946-1100
PAYplus USA - The leading payments solution for financial institutions in the US.
F: +1-201-946-1313

76 INVESTOR SERVICES JOURNAL

 Securities Lending
Data Explorers Limited, a specialist and independent company, offers impartial
W: www.dataexplorers.com
T: +44 (20) 7392 4000 quantitative measurement of securities lending performance services to the global
F: +44 (20) 7392 4004 securities financing industry. We help our clients monitor and understand the
A: 155 Commercial Street, relative performance of their lending activity and risk, and turn raw lending, borrow-
London E1 6BJ United Kingdom ing and collateral data into useful, actionable information. We also provide proxies
London: Julian Pittam for short selling information.
T: +44 (20) 7392 5018 Working with the industry we ensure information flows are appropriate and peer
E: [email protected] groups relevant. We are not involved in transactions.
Boston: Tim Smith All of our services: Performance Explorer, Transaction Explorer, Risk Explorer,
T: + 1 (617) 973 5099 Index Explorer and Report Explorer are web based and available to clients
E: [email protected]
over the internet.

T: +1 212 901 2200 EquiLend Holdings LLC was formed by a group of leading financial institutions to
C: Carrie R. Schwartz develop a global platform for the automation of securities finance transactions.
E: carrie.schwartz@equi The EquiLend platform is designed to increase efficiency by standardizing, cen-
lend.com/[email protected]
tralizing and automating front and back office processes, while delivering global
A: 17 State Street, 9th Floor
access to liquidity, reduced risk and scalability. The EquiLend platform is
New York NY 10004
designed to process equity and fixed income securities finance transactions on a
T: +44 20 7743 9510
A: 54 Lombard Street global basis. Investors include: Barclays Global Investors; Bear, Stearns & Co.
London EC3V 9EX Inc.; Credit Suisse; The Goldman Sachs Group, Inc.; J.P. Morgan Chase & Co.;
W: www.equilend.com Lehman Brothers; Merrill Lynch; Morgan Stanley; Northern Trust Corporation;
State Street Corporation; and UBS.

eSecLending is a global securities lending manager and a leading provider and

T: US- +1 617 204 4500 administrator of customized securities lending programs. Its programs attract
T: UK- +44 (0)20 7469 6000 some of the world's largest and most sophisticated asset gatherers, including
C: Dan Ahern pension funds, mutual funds, investment managers and insurance companies.
E: [email protected] Over the past six years, the company has auctioned over $950 billion in assets
W: www.eseclending.com and has achieved significant growth in its client base, lendable assets and assets
A: 175 Federal Street, 11th FL, on loan. The firm awards principal securities lending business through a compet-
Boston, MA 02110, US itive auction process that has provided clients with higher returns compared to
A: 1st Floor, 10 King William traditional program structures and improved transparency and objective criteria
Street, London EC4N 7TW, UK upon which to make decisions. More information about eSecLending can be
found at www.eseclending.com.

T: +41 (0)44 218 14 14 IFBS offers the financial industry a wide range of consulting services as well as
F: +41 (0)44 218 14 18 individual and standard software solutions. The firm supports clients along the entire
E: [email protected] security value chain - from business modelling to change management processes.
A: IFBS AG, Buckhauserstrasse IFBS’s IT solutions range from FINACE®, a Securities Finance and Collateral
11, CH-8048 Zurich, Switzerland Management Platform, to the development of tailor-made IT applications.
W: www.ifbs.com

New York: Christopher Lynch

JPMorgan Securities Lending offers institutional investors the opportunity to earn
T: +1 718-242-7555
E: [email protected] extra income on investment and pension portfolios with minimal risk and
involvement by lending their securities to qualified borrowers. With more than 300
London: Dick Feehan
lending relationships and lendable assets in excess of $1.2 trillion, JPMorgan is
T: +44 (20) 7742-0102
E: [email protected] clearly committed to the market and to the value that our clients place in it. Our
resources enable you to develop programs that comply with your business
Sydney: Laurence Bailey
T: (61-2) 9250-4833 requirements and achieve your business objectives. When you select JPMorgan as
E:[email protected] your securities lending agent, you have chosen a premier provider of securities
lending services worldwide.
W: www.jpmorgan.com/wss

Nomura Group is a global investment bank dedicated to providing a broad range of

financial services for individual, institutional, corporate and government clients.
T: +44 (0) 20 7521 5672
The Group’s business activities include investment consultation and brokerage
F: +44 (0) 20 7521 2683
C: Jonathan Cossey, Head of services for retail investors in Japan, and, on a global basis, brokerage services,
Equity Finance securities underwriting, investment banking advisory services, merchant banking,
A: Nomura House, and asset management.
1 St Martin's-le Grand, London, Nomura offers a full range of Equity Finance services to institutional participants
EC1A 4NP United Kingdom in over thirty markets, through regional trading desks in London, New York,
W: www.nomura.com
Tokyo and Hong Kong. Identifying client needs and providing bespoke solutions
is our top priority.

77 INVESTOR SERVICES JOURNAL

Technology
ADP Brokerage Services Group is an industry leading outsourcing vendor for global
transaction processing systems, desktop productivity applications and investor
T: +44 (0) 207 551 3000
communication services to banks and brokerages worldwide.
-Proxy Edge – comprehensive solution for institutional global proxy voting management. E: [email protected]
-Gloss – leading international STP system which automates the trade processing
lifecycle from trade capture through confirmation, clearing agency Address: The ISIS Building,
reporting and settlement. 193 Marsh Wall, London,
E14 9SG, UK
-Tarot - a UK retail and private client stockbroking, custody and fund management solution.
-Securities Data Management – outsourced data services for securities operations.

Advent Software EMEA, established in 1998, provides trusted solutions for the front
through to back office operations, based on a true real-time fund/portfolio
accounting platform, to the investment management community throughout Europe, T: +44 (0)20 7631 9240
Middle East and Africa. Advent has an established network of offices across the F: +44 (0)20 7631 9256
region serving a growing client base of asset managers, hedge fund managers, prime
E: [email protected]
brokers, fund administrators, wealth managers, private banks and family offices who
continue to improve their businesses using Advent’s suite of integrated investment
Address: One Bedford Avenue,
management solutions. Advent Software EMEA is part of Advent Software Inc. London WC1B 3AU, UK
(Nasdaq: ADVS), a global organisation that has been providing solutions to the W: www.advent.com
world's leading financial professionals since 1983. Firms in more than 50 countries
using Advent technology manage investments totaling more than US $8 trillion.

Progress Apama provides the next-generation Algorithmic Trading A: EMEA - Progress Apama
Platform for both the buy and sell-side financial institutions - giving 68 Lombard Street
traders full control over composing, deploying and managing algorithmic London EC3v 9LJ
trading strategies, such as VWAP, spread trading and index arbitrage. T: +44 (0) 870 3517212
E: [email protected]
Apama has customers using the Algorithmic Trading Platform in equities,
A: USA - Progress Apama
futures & options, foreign exchange and bonds and often trading multiple 10th Floor, 230 Park Avenue
assets classes within the same strategy. New York NY
T: +1 203 606 5006
Apama's platform plugs straight into any market data feeds, order E: [email protected]
management systems and databases.
W: www.progress.com/apama

Asset Control is the world's leading provider of Centralized Data Management (CDM) C: Belinda Hamer (US)
to financial industry firms. With a complete range of in-house and outsourced E: [email protected]
options, Asset Control delivers a hybrid approach to data management. The T: +1 212 445 1076
selection of developer tools, turnkey software solutions and outsourced services F: +1 212 445 1079
enable users to optimize their investment data for efficiency, cost control, reduced C: Pascal Guignabaudet (EU)
operational risk and increased value from their data. E: [email protected]
Address: 54 Lombard Street,
Asset Control solutions manage prices, reference data, risk factors, credit risk data, London, EC3P 3AH, UK
corporate actions and research data. The solutions support market risk, Basel II, T: +44 (0)20 7743 0320
portfolio management, trading and enterprise-wide operational coherency. F: +44 (0)20 7743 0321
W: www.asset-control.com

T: +1 212 922 6590

Eagle Investment Systems LLC, a Mellon Financial CompanySM, is a global provider F: +1 212 922 7677
of financial services technology, serving the world's leading financial institutions. E: [email protected]
Eagle's Web-based systems support the internal straight-through processing A: 200 Park Avenue,
requirements of firms of any size including money managers, mutual funds, hedge East Mezzanine,
funds, plan sponsors, banks, corporate trusts, and insurance companies. Eagle is New York, NY 10166
committed to providing leading-edge technology, professional services, and global T: +44 (0) 20 7163 5700
support for portfolio management, investment accounting, performance F: +44 (0) 20 7163 5701
measurement, attribution, reference data management, AIMR/GIPS compliance, A: Mellon Financial Centre,
reporting, and outsourcing. To learn more about Eagle's solutions, contact 160 Queen Victoria Street,
+44 207 163 5700 or [email protected] or visit www.eagleinvsys.com. London, EC4V 4LA
W: www.eagleinvsys.com

GOAL is the widely-acknowledged industry leader in providing creative products,

services and solutions to automate and optimise the reclamation of withholding T: +44 (0) 207 247 3094
tax on cross-border securities dividend income and royalties. Our research has C: Stephen Everard or Saghar
shown that in excess of US$6 billion of withholding tax remains unclaimed each Bigwood
year by the rightful owners and beneficiaries. A: 10, Earl Street, London,
To establish your potential ability to reclaim over-withheld taxes GOAL provides a EC2A 2AL, UK
free analysis of income entitlements. We simply require details of the income E: [email protected] /
entitlement(s) together with the type and domicile of the underlying beneficiar- [email protected] /
ies. We do not need the name(s) of the beneficiaries. [email protected]
Our Products include GTRS, GQI, e-Reclaim, GOAL TaxBack, DMS and Bespoke W: www.goalgroup.com
Software Development.

78 INVESTOR SERVICES JOURNAL

C: Paul Hewitt, Business
Development Manager, Europe Manifest offers global voting services to institutional investors encompassing 75,000
A: Manifest lines of stock around the world. We are renowned for the thoroughness,
9 Freebournes Court independence and timeliness of our services, placing company research within an
Newland Street, Witham appropriate local context. We deliver unrivalled consistency and transparency with
Essex, CM8 2BL, UK
desktop-to-meeting electronic voting through our own web-enabled platform. Our
T: +44 (0)1376 503500
D: +44 (0)1376 504502 SWIFT membership gives us direct and seamless access to counterparties across the
M: +44 (0)7884 495165 globe. With research, policy, analysis, voting and delivery integrated into a single
F: +44 (0)1376 503550 straight-through process, it's easy to see why audit and control are central to our
E: [email protected] service. Manifest - big enough to deliver, small enough to care.
W: www.manifest.co.uk

AIM-listed Mondas plc provides specialist software solutions to firms dealing in the
C: Harvey Colborne Global Financial Markets. Our solutions increase process efficiency, improve
E: [email protected] customer service and reduce operational risk.
A: 17 - 29 Sun Street Mondas is a market-leading supplier of solutions for global corporate actions
London, EC2M 2PT, UK processing; financial research and client reporting, and management of new issues
E: [email protected] and placings.
T: +44 (0) 207 392 1300 Mondas’ clients include HSBC, Credit Suisse, ING, Panmure Gordon & Co.,
F: +44 (0) 207 392 1301 Brewin Dolphin Securities, Investec, Williams de Broë, Man Financial, Stocktrade,
W: www.mondas.com Evolution Securities and Rabobank.
www.mondas.com

peterevans is a leading independent provider of front to back office systems to the

financial services sector, providing both global solutions to major institutions and
T: +44 (0)29 20402200
highly-focused technology to smaller organizations.
F: +44 (0)29 20402213
The Company's creative, high-end solutions integrate seamlessly with existing infra-
A: New Broad Street House, 35
structures to ensure business performance is optimised.
New Broad Street, London
peterevans’ flagship products TRACS and Axim support end-to-end straight through
EC2M 1NH
processing for the full range of back office automation and transaction requirements,
E: [email protected]
including SWIFT messaging. Tira, the company’s front to middle office system, links
W: www.petervans.com
effortlessly with the back office, providing fund and investment managers with one
of the most comprehensive tools on the market.

Princeton Financial® Systems, a wholly owned subsidiary of State Street

Corporation, is a leading provider of investment management and accounting
T: +1 609-987-2400 systems and ASP services for global institutional investors.
F: +1 609-514-4794 Its flagship PAM® investment management systems provide comprehensive STP-
C: Lorne Whitmore, Vice ready functionality that can be licensed for in-house use or accessed via the
President, Global Sales & Internet. PAM® systems are currently used worldwide by over 275 leading invest-
Product Management
E: [email protected] ment managers, insurance companies, mutual funds and unit trusts, pension funds,
A: 600 College Road East, hedge funds, endowments, banks and corporation, which manage combined total
Princeton, NJ 08540, USA assets over US $3 trillion.
W: www.pfs.com Princeton Financial has offices located throughout the United States, United
Kingdom, Belgium, Australia, Singapore, Amsterdam and Canada. Form more
information, visit Princeton Financial’s website.

SimCorp Dimension is a powerful, comprehensive and truly seamless investment

management system. It can handle NAV and other calculations, with complete
T: +44 (0) 20 7651 8800 related accounting, for a huge variety of fund structures and product types, including
F: +44 (0) 20 7651 8811 regional specialities. Support for broader functions, such as performance attribution
C: Ian Crompton, sales director, and risk management, are particular strengths of the system.
SimCorp Dimension
E: [email protected]
London EC4N 8DQ, UK SimCorp Dimension has been designed from scratch as a total straight through pro-
W: www.simcorp.com cessing system, handling all aspects of the investment management process, consis-
tently. Data is recorded into a single database so that reporting is made easy, there
is no reconciliation of data and no duplication of procedures.

Training and Education

The ICMA Centre, University of Reading has an international reputation for providing
quality academic and professional programmes tailored to the capital markets indus-
T: +44 (0)118 378 8239 try. Established in 1991 with funding provided by the International Capital Market
F: +44 (0)118 931 4741 Association (ICMA) in Zurich, the Centre is housed in a purpose-built modernist
E: [email protected] building with state-of-the-art facilities including two dealing rooms. Our academic
C: Samantha Heslop programmes include the MSc International Securities, Investment and Banking, MSc
(please quote ref:IS001) Capital Markets, Regulation and Compliance, MSc Financial Risk Management and
A: University of Reading, MSc Investment Management.
Whiteknights, PO Box 242, Professional programmes offered:
Reading RG6 6BA - - ICMA and NASD certificate and diploma programmes
W: www.icmacentre.ac.uk - - Practical finance workshops for market professionals (Market VaR, Options, Repo,
FX and Money Markets) – can be customised to company requirements
- - Simulated trading days.

79 INVESTOR SERVICES JOURNAL

Hindsight/Foresight

THGISDNIH FORESIGHT
“Life can only be understood backwards, Teri Jansen, president of hedge fund
but it must be lived forward.” manager and commodity pool
Soren Kierkegaard operator Alterama looks back at what
the company has done and forward to
what they will do.
HINDSIGHT FORESIGHT

How have investment management strategies evolved Are hedge funds still alternative?
over the past five years, with the benefit of hindsight?

Over the past five years we have witnessed some Looking forward some are questioning if hedge
significant changes in term of volatility for currencies funds are still alternative. In our opinion this is not
futures which are the core trading vehicule for Alteram the correct question. A lot of the techniques used by
Inc. Daily volatility annualized has been higher than hedge funds are more and more used by “traditional”
weekly or monthly volatility, which suggests that markets money managers. It is not the hedge funds that are
have been reversing short-term moves or mean-reverting becoming main stream. It is the mutual funds that are
over longer periods with the result of the poor using more alternative strategies. The reasons are
performance in the currency markets which historically obvious: some older managers who were around in the
have been consistently profitable with good trending 1970’s are questioning the current bull market for
characteristics. Aditionnaly there has been a decline in stocks. Are we seeing a cyclical bull market within a
trading ranges. One cannot generate more profits than secular bear market? Better to be prepared.
what a trading range may allow.

How have lessons learnt impacted on the development of Over the next few years where will the largest returns
new and innovative strategies? come from?

In order to capture smaller moves and in an attempt to Over the next few years it seems extremely unlikely
take advantage of the fractal nature of markets we applied that big returns will come from arbitrage strategies
the same trading strategy to shorter time frames. With the with more and more players chasing the same spreads.
privilege on hindsight we should also have also lowered the The best performers should be global macro funds
leverage. At the time it seemed that the diversification pro- taking the right bets on metals, energy and currencies
vided by shorter time frames would be enough to keep the when some major global imbalance, at some point, will
volatility at the previous level. We also diversified by adding get adjusted. But who really cares? It is obvious that
energy, bonds and metals to our portfolio mix. Again we hedge funds investors are not longer hungry for out-
thought that the diversification across products would keep sized returns. They rather are seeking low volatility.
the volatility in check.

With the benefit of hindsight on market conditions and What's the biggest risk you face?
volatility, what would you do differently?

Diversification in trading aims for balanced returns, but We have to adjust to this new reality of the market
there are periods when events, whether geopolitical, place. We are launching a low volatility fund of funds
weather-related or speculative in nature, drive many mar- using the Mosaic Platform launched recently by
kets to reverse direction at the same time. This is what Alphametrix in Chicago. The main challenge for a
happened in May and June of this year. Now it seems small firm like ours is to find the right balance
obvious that we should have substantially lowered our between lowering the volatility of the products that we
leverage while diversifying. We should probably also con- offer to our investors and maintaining a decent rate of
tinue lowering our time horizon but that implies imple- return … and some decent incentive fees for us.
menting algorithmic trading which our small company
doesn’t feel ready to do at this time. ISJ

80 INVESTOR SERVICES JOURNAL

 FINACE®: ready for your future needs
The state-of-the-art IT solution for:
Securities Lending
Repo
Structured Securities Finance
Collateral Management

FINACE® is currently the only fully-integrated solution which FINACE® is a product of IFBS AG
supports future business models within the areas of Securities
Finance and Collateral Management. With flexibility at its core, Main Office:
customer-driven modifications and extensions can readily be Buckhauserstrasse 11, CH-8048 Zurich
implemented. Phone +41 (0)44 218 14 14

New York Office:

45 Rockefeller Plaza, 20th Floor
New York, NY 10111
Phone +1 212 332 7144

www.finacesolution.com www.ifbs.com [email protected]

BBVA Custody Services

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