To Our Readers,

Each year, EM countries are reviewed to highlight those troublesome issues¾EM Hot Spots¾of import to the most savvy investor.  This year’s choice for the most improved EM maybe somewhat controversial, as the selected country received an equal amount of votes for most improved and alas, the most difficult and operationally challenging market.  A consideration of developments, over several  years, swayed our vote to the plus side of the ledger.  For all markets, the investor is provided with practical insights, accompanied by seasoned advice for sidestepping the many pitfalls.  This year, a few custodians were less than pleased with developments in certain mature markets.  Commentary on these countries is included as well.

The industry’s move to a more streamlined  settlement process continues.   The Global Straight Through Processing Association (GSTPA) has made very significant progress to date, achieving a number of   milestones in a short time.  What lies ahead is a series of major industry challenges, as viewed by the global custodians.  All market participants in the international arena will be affected by fundamental changes underway.   A concern about the possibility of  two diverging models for post trade processing was expressed, as a U.S. model, which addresses the industry change to T+1 settlements, differs from the global model.  The survey discusses GSTP  implementation challenges, expected benefits and implementation costs.

The international securities lending business had another boom year, with a 20% plus growth rate over last year.  Although most custodians have lending business in over 30 countries, the mature countries tend to dominate the landscape.   The European markets were strong, buoyed by the U.K. gilts market in 2000.  The section is packed with charts and tables on current and past experiences by the world’s largest players.

The evolution of the Internet is once again reviewed. This year promises to bring the greatest roll-out of new, Internet-based products by global custodians.   The survey touches on these  new products, in addition to sorting-out a few exciting trends which are starting to unfold.   The advent of e-commerce strategies deployed at the major banks may be the future platform for delivery of global custody services.  A new, Internet-driven movement portends to rattle the competitive landscape in the not too distant future.  The IT investments for the initiative are staggering.

In the Profiles section of the Yearbook, a new service offering was included because of its growing importance in the industry.  The selection of a custodian to provide administrative and operations support for certain post-trade processing¾called “outsourcing”¾is catching on with funds, plan sponsors, and investment managers.  The services offered are described in-depth.

Once again, a hearty and sincere thank you to the participating global custodians for their many candid insights about the important industry developments.   The submitted material was the most voluminous and far reaching ever.  And to our readers, thank you for supporting Buttonwood’s  annual survey, now in its eight year.  We strive to make the Yearbook the most comprehensive and serious treatment of those issues which drive the securities industry in the EM.

Sincerely, 

John J. Giudice

Editor