Upping the pace of consolidation
Bankers in more glamorous businesses may not think much about custody, but they should. The business sits underneath most of what they do, and the custody chiefs at their banks are at the forefront of the most radical re-engineering of global capital markets yet seen.
The driving force behind this change will be the move to settling securities transactions on the day following the trade, or T+1. It is an abbreviation that is likely to become as familiar to capital markets participants as those already notorious triplets Emu and Y2K. Indeed, John Owen, the former global head of derivatives operations at Bankers Trust and now a partner of consultancy the Capital Markets Company (CapCo), is in no doubt as to the potential significance of T+1. "In terms of the changes to systems that are needed to get his done, this is bigger than the year 2000 and the euro put together and multiplied by five."
Normally such an observation might be written off as simple consultant-speak, intended to garner a few fat fees. But the move to T+1 settlement is well on the way to becoming the hottest topic in capital markets once the minor hurdle of the new millennium is out of the way.