Industry Forum series

 

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Welcome to The Industry Forum series, in publication for over ten years.

The information in this report is provided by the world’s largest global

custodians. They are the most experienced securities professionals in the industry – the

first to enter an emerging market – chartered with the responsibility of supporting foreign

investors. They have a current and in-depth understanding of the nuances of local

market practices that is second to none. The Industry Forum is based on this

exceptional knowledge base.

Each edition of The Industry Forum ─ written for the professional investor and service provider in the

emerging markets ─ is presented in two sections:

Emerging Markets

Global custodians provide practical insights about the difficulties facing foreign

investors in the emerging markets.   No attempt is made to cover all the EMs and/or all the

mechanics of investing in a foreign country; these pursuits are left to other lofty,

academic publications. The focus of The Industry Forum is to explore the firsthand

experiences of the world’s most experienced securities professionals in the EMs.

Emphasis is placed on helping the foreign investor avoid the pitfalls created by the

many nuanced approaches in the local markets for such activities as market

entrance, regulatory compliance, trade settlement, taxes and funds repatriation.

The most troublesome market practices are highlighted.

Discussion Topic

The second section provides a lively discussion of the issues and trends facing the global investor. 

Most topics provide invaluable insights about developing markets, new investment vehicles and the

industry’s emerging infrastructure.    


2008

Discussion Topic:  Pan-European Securities Market

A number of new initiatives are reshaping the European landscape of cross-border securities trading,

clearing and settlement. Understanding the future impact of these changes is essential to foreign

investors and service providers in the new pan-European market. Global custodians continue to

enthusiastically participate in the significant developments now underway. Their experience provides

a basis for identifying a number of invaluable insights about the expected benefits and planned

improvements in the years ahead.

Our discussion was framed by a number of central questions asked of the global custodians:

  1. What are the major challenges in the pan-European market?

  2. Will the European Central Bank's TARGET2 Securities (T2S) settlement platform reduce risks and

costs for Eurozone settlement?

  1. Are the stated goals of the Code of Conduct for Clearing and Settlement being met?

  2. How will Multilateral Trading Facilities (MTF) impact service providers?

  3. Does the emergence of Central Counterparties (CCP) create settlement problems in Europe?

  4. Are ICSDs a competitive threat to global custodian's franchise?

The global custodians participating in this survey are the most well informed securities professional in

the industry. Their insights and commentary provide an exceptional understanding of the nuances of

this emerging market.


ISBN 1-891008-53-6 (e-Version)

Published 2008

2007

Discussion Topic:  Foreign Portfolio Investors in Mainland China

Qualified Foreign Institutional Investors (QFII) are poised to gain greater access to China’s “A” share market. The current state of this market and the greatest challenges facing the foreign investor and global custodian are discussed.

Our discussion was framed by a number of central questions asked of the global custodians:

What are your expectations for the level of foreign investment in mainland China, more specifically QFII Class “A” shares?

For the QFII Class “A” market, how would you rate the challenges?

Will the Class “B” share market be around for awhile?

As a global custodian, what are you doing to position yourself as a service provider in mainland China? Briefly describe current/planned services offered in mainland China.

Is QDII (Qualified Domestic Institutional Investor) business — i.e. China domestic investors in foreign stocks — the preferred way for global custodians to establish a presence in mainland China?

What should foreign investors do to better prepare for increased portfolio investments in China? Are you helping in any way?

Is any one trading venue best positioned for the greatest growth – Shanghai Stock Exchange or Shenzhen Stock Exchange?

The responses to these questions form the basis for an informed and current understanding of the very complex challenges facing foreign investors going directly in mainland China. The global custodians participating in this survey are the most well informed securities professional in the industry. Their insights and commentary provide an exceptional understanding of the nuances of this emerging market.


ISBN 1-891008-49-8 (e-Version)

Published:  September 19, 2007

2006

Discussion Topic:  Alternative investments

As discovered in previous Buttonwood International studies, institutional accounts such as pension funds, endowments and foundations are placing very sizeable investments into hedge funds, private equity and other alternative asset classes.  The Industry Forum explores those issues of importance to the professional investor, fund manager and service provider alike.   Practical insights are provided about the extent of the transparency issue, valuation problem areas, information shortfalls affecting risk management, typical investor reporting, etc. This section of the report is written for all participants in the very competitive and growing space of Alternative investments.

The Industry Forum is written for the professional investor in the emerging markets. Global custodians provide practical insights about the difficulties facing foreign investors in over 30 EM.   A second section, Alternative Investments, is written to be of value to the investor, hedge fund manager and service provider interested in better understanding the challenging issues of this growing and important asset class.

ISBN 1-891008-43-9 (e-Version)

Published 2006

2005

Discussion Topic: Issues and Trends

Global custodians have worldwide responsibility for a bewildering array of securities processing services. In the mix are various foreign investor requirements and local country practices – the result being a diverse set of issues to be addressed. Global custodians comment on the major issues which are receiving their greatest attention and commitment of resources in supporting foreign investments. Many efforts are directed to ensure investor safety and compliance with local country regulators.

The Asia-Pacific Region

The Asia-Pacific is the fastest growing EM region for custody assets and related services. Investors Bank & Trust and State Street Corporation provide additional commentary about foreign investing in the Asia-Pacific region, including views on the future direction of market developments.

ISBN 1-891008-40-4 (e-Version)

Published 2005


2004


TAIWAN RECEIVES TOP HONORS FOR MOST IMPROVED

FOREIGN INVESTORS BEWARE OF MARKET PITFALLS

The pitfalls in the emerging markets and sage advice for the foreign investor are offered by custodians, from their firsthand and current experiences in over 40 EMs. Improvements, or lack thereof, are described in the local markets, including market entrance requirements, local broker practices, clearing arrangements and banking practices. Global custodians vote on "most improved" and "most difficult" EM.

Argentina, Bolivia, Botswana, Brazil, Chile, China,Cyprus, Czech Republic, Egypt, ESCB and CESR, European Union, Germany, Ghana, Greece, Hungary, Iceland, India, Italy, Japan, Jordan, Kenya, Korea, Kuwai, Malaysia, Mexico, Nigeria, Peru, Poland, Portugal, Qatar, Russia, Slovak Republic, Taiwan, Thailand, Turkey, United Arab Emirates, Venezuela,Zimbabwe

ALTERNATIVE INVESTMENTS

Alternative investments continue to gain popularity with the investment community. Maketplace trends, investor preferences and the many challenges facing investors and custodians are discussed. Topics include an in-depth discussion of a number of industry-wide issues, information shortfalls, and the current state of information technology developments.

OUTSOURCING

In the early stages of outsourcing, the middle- and back-office operations of investment managers were the primary focus. While these areas are still in vogue, the breadth of service offerings has expanded to other business enterprises as well. A current review of marketplace trends and typical benefits experienced by the use of outsourcing services are covered.

INDUSTRY CONSOLIDATION

Today, the four largest global custodians control over 70% of worldwide custody assets! The industry is a two-tier market, i.e. the top four banks and everyone else. The global custodians speak-out on their vision for the industry's future and the impact on providing services. A must-read for buyers of custody services wanting an informed view of those important issues shaping the industry.  

THE ASIA-PACIFIC REGION

The Asia-Pacific is the fastest growing EM region for custody assets and related services. The Bank of New York, The Northern Trust Company and State Street Corporation provide thoughtful insights about foreign investing in the Asia-Pacific region, including views on the future direction of securities infrastructure developments. Each article was written for exclusive publication in The Industry Forum.

Future Settlement Infrastructure Models For Asia

by The Bank of New York

Earning Trusted Relationships in China

by The Northern Trust Company

Winning in Asia-Pacific with Global Scale, Local Presence

by State Street Corporation


ISBN 1-891008-37-4 (e-Version)

Published 2004