wp-the post trade evolution
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The Post-Trade Evolution
by Infosys Lodestone
How TARGET2-Securities and other market drivers are changing the post-trade world
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Table of Contents
Summary 2
Post-trading today and tomorrow 3
- The post-trade value chain 3
- Characteristics of the post-trade business 4
- Key market drivers and the changing competitive landscape 4
- TARGET2-Securities is shaking up the industry 4
- Regulatory changes require attention 6
- Clients are becoming more demanding 6
- Competitive pressure is rising 7
Addressing the post-trade imperatives 7
- Time to take action 7
- Focusing on client services 8
- Infosys Lodestone’s service analysis model 8
- Conclusion 11
Glossary 12
About Infosys Lodestone 12
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Summary
The post-trade world is evolving. TARGET2-Securities is changing the industry and breaking down bar-
riers to entry. Consequently, both national and international central securities depositories as well as
custodians are finding it easier to get a foothold in local markets. Founding a central securities depos-
itory branch is also becoming an option.
At the same time, market players need to meet ever more regulatory requirements. Moreover, today’s
clients expect more from their post-trade service providers and are becoming more willing to switch
to other firms. Overall, competitive pressure is rising throughout the value chain and the industry is
consolidating. In sum, the post-trade market of the future will look very different from how it looks
today. It will also have new market actors.
In the past, most key market participants were mere providers of infrastructure in their domestic mar-
kets who enjoyed monopolistic status. Today, however, just sitting back is a risky strategy in the post-
trade market. Rather, if market participants are to maintain and gain market dominance, they must act.
In this new competitive landscape, comprehensively defining the client service model is key. Providers
need to be forward thinking when it comes to their service portfolio, service design and their result-
ing positioning in the marketplace. Those who fail to respond to changes in the post-trade environ-
ment are likely to fall behind. The only way to succeed in the new post-trade world will be to embrace
change and find new ways to serve clients.
By investigating client needs and wants, market participants can design a service portfolio that takes
into account the immediate business context – and what competitors are doing. They can also uncover
new business opportunities and establish a holistic post-trade strategy.
The starting point for formulating any strategy is client analytics. From there, one needs both to con-
sider what competitors are doing and to examine one’s own business context. Only by scrutinising
all three aspects of the service portfolio – clients, competitors and the corporate context – can one
achieve a successful post-trade strategy.
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Post-trading today and tomorrow
“Clearstream expands its ICSD business” 1
“Euroclear shares a collateral pool with DTCC” 2
“LSE acquired Monte Titoli and plans to open a CSD in Luxembourg” 3
“BNY Mellon founds a new CSD” 4
Headlines like these show Europe’s central securities depositories
(CSDs) and custodians are rethinking their strategies.
Why? Because the post-trade world is evolving. To understand
how to succeed in the new post-trade world, one needs to take a
look at the post-trade value chain, the main characteristics of the
business and what exactly is driving the market.
The post-trade value chain
Post-trading is the power behind trading. It facilitates not only
processing of securities as well as clearing and settlement, but has
recently become more and more important as a means of provid-
ing asset services and liquidity to market participants.
Since post-trade processes vary by market, depicting a post-trade
value chain can be quite complex. It is possible to display the dif-
ferent stages of post-trade service at various levels of detail and
asset services can be positioned at different points in the chain.
Therefore, the generic value chain below will be used for the pur-
pose of this paper.
A variety of market participants are active in this value chain,
mostly CSDs, custodians, banks and transaction banks.
n CSDs: CSDs are responsible for settling trades in investors’ ac-
counts, issuing securities in the respective market and exercis-
ing the notary function. Complementary asset services such
as information services, reporting and collateral management
have become an increasingly important way for CSDs to extend
their client base and sources of revenue.
n Custodians: Custodians have many different functions, de-
pending on their business model and the market in which they
originate. Each country has its own comprehensive legislation
custodians must comply with. Custodians manage special as-
sets and provide compliance, custody, issuer, asset services and
back office services.
n Banks: From a post-trade perspective, banks may offer back
office and custodian services to other banks, asset managers,investors and issuers.
n Transaction banks: Transaction banks only exist in selected
markets. They are the result of back office outsourcing into sep-
arate entities.
The post-trade value chain can be just as complex within an in-
dividual market participant’s business. For instance, a bank might
maintain an extensive international correspondence network con-
sisting of transaction banks, custodians, sub-custodians and CSDs
to facilitate cross-border clearing and settlement. Consequently,
this highly fragmented post-trade value chain slows down the set-
tlement process, increasing both costs and risks.
1 www.clearstream.com, 18 December 20132 www.ft.com, 13 May 20133 www.globalinvestormagazine.com, 17 July 20134 www.bnymellon.com, press releases 2013
Figure 1 - The post-trade value chain, Source: Infosys Lodestone, 2014
Cash and SecuritiesManagement
Securities Processingand Clearing
Trading Clearing Settlement Asset Servicing
Trade/transactioncapturing Trade/transactionvalidation/preclearingand matching
Trade confirmation Trade internalisation/nettling Trade/transactionrouting and flowmanagement
Trade/transactioncapturing Trade/transactionsyntax andstructurevalidation
Counterpartymatching If applicablecentralcounterpartyrisk taking Trade/transactionrouting
Trade/transactioncapturing Final validation Trade/transactionmatching
Settlementoptimisation(technical netting) Liquidity check Settlement of securities inaccounts Settlementconfirmation
Cash/liquidity forsecurities transaction
Collateralmanagement Securities lifecyclemanagement Corporate action
and tax services Reporting andinformation services
Post-trading
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Cash and SecuritiesManagement
Securities Processingand Clearing
Trading Clearing
Settlement Asset Servicing
Banks
Transaction Banks
Custodians
Central Counterparties
Central Securities Depositories
Central Banks
Banks
Post-trading
Figure 2 - Major market participants in the post-trade business, Source: In fosys Lodestone, 2014
Characteristics of the post-trade business
The traditional post-trade market can best be described in eco-
nomic terms.
n Post-trading thrives on economies of scale. The more “traffic” a
CSD has on its settlement engine, the more cost-efficient it is.
Thus, the primary aim of CSDs is to generate volume.
n CSDs have developed as domestic providers of settlement in-
frastructure. Therefore they are – like electricity companies or
telephone providers – natural monopolies. According to Scher-
er (1980, p. 482), “natural monopolies [exist] where economies
of scale are so persistent that a single firm can serve the market
at a lower unit cost than two or more firms.” 5 Also, in a compet-
itive market the initial costs of developing a settlement engine
cannot be monetised quickly at competitive prices.
n Wherever a CSD monopoly exists, the price a CSD charges
does not have much impact on a customer’s decision to buy,
because there are no alternatives in the market. Economists
would say the elasticity of demand is low and customers have a
low propensity to switch service providers.
The post-trade value chain is highly fragmented
and usually includes a complex correspondence
network of intermediaries
5 Scherer, F.M. (1980) “Industrial market structure and economic performance”
Key market drivers and the changing
competitive landscape
Infosys Lodestone has identified four key drivers of current chang-
es in the market:
n TARGET2-Securities
n Regulatory requirements
n Changing client demand
n Increased competitive pressure throughout the value chain
TARGET2-Securities is shaking up the industry
TARGET2-Securities (T2S) is one of the most important develop-
ments affecting the post-trade business at the moment. T2S is
a project of the Eurosystem to establish a technical platform for
cross-border settlement in central bank money in Europe.
CSDs will be gateways through which other market participants
access T2S services. This means that CSDs will contract with the
Eurosystem for T2S services, while banks and other market partici-
pants will continue to contract with one or more CSDs.
Post-trading thrives on economies of scale
CSDs used to be pure infrastructure providers
in their domestic markets due to their status as
natural monopolies without competitors
TARGET2-
Securities
Regulatory
Requirements
Client
Demand
Competitive
Pressure
Figure 3 - Post-trade market drivers, Source: Infosys Lodestone, 2014
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All non-CSD participants can choose between two connectivity
models: either connecting directly to T2S (as a directly connected
participant or DCP), or connecting indirectly by exchanging T2S
instructions, queries and reports via the CSD.
Another important feature of T2S is its connectivity to TARGET2(T2), the euro cash settlement platform, which enables partici-
pants to perform seamless cash and securities settlement using
both Eurosystem platforms.
To understand the impact T2S will have on the post-trade busi-
ness, one must consider its origins, in particular the Lisbon Agen-
da, when EU countries agreed to boost the merging of markets, in-cluding capital markets. The so-called Giovannini Report identified
15 barriers that were inhibiting greater efficiency in cross-border
securities settlement. T2S was initiated to target five of these bar-
riers and to foster cross-border trading and pan-European com-
petition among CSDs and other providers of post-trade services:
1. National differences in information technology and interfaces
2. National clearing and settlement restrictions that require the
use of multiple systems
3. Absence of intra-day settlement finality
4. Practical impediments to remote access to national clearing
and settlement systems5. National differences in operating hours/settlement deadlines
T2S fundamentally affects the post-trade industry and nearly all
market participants. The impact of T2S can be summarised under
the following three headings:
1. T2S leads to harmonisation at a technical and processing level.
Under T2S, CSDs and their market participants need to adhere
to the settlement processing lifecycle and settlement day sched-
ule of T2S. Likewise, ISO20022 will standardise the way financial
T2SSecurities Settlement
Platform
T2(Euro-) Cash Settlement
Platform
CSDs, Payment Banks,
Banks, NCBs
Liquidity
Starting 2017
CSDs, Directly Connected
T2S Parties, CCPs, NCBs
Indirectly Connected
T2S Parties (ICPs)
Instructions,Queries
Responses,Reports
ISO 20022 message format andconnectivity via Value-AddedNetwork (VAN) Provider
T2S ind ependent m essageformat and connectivity mode(e.g. MT messages)
Instructions,Queries
Responses,Reports
Figure 4 - T2S interacting with T2, Source: Infosys Lodestone, 2014
institutions communicate. Thus, T2S imposes minimum harmoni-
sation requirements on the otherwise diverse processing of settle-
ment flows throughout Europe. At the same time, market partici-
pants themselves are gradually taking part in wider harmonisation
activities such as the Europe-wide initiative on standardising cor-
porate actions to increase post-trade efficiency.
2. T2S is a textbook solution for breaking up CSD monopolies.
Classical economists believe there are two ways of regulating mo-
nopolies: regulating prices and opening up markets by providing
a competitive “infrastructure”. T2S targets both, by creating a com-
petitive infrastructure on the one hand and setting baseline prices
for T2S services on the other. T2S lowers barriers to market entry
(such as the cost of developing a settlement engine) by creating a
more efficient network and outsourcing opportunities. The prices
set by T2S are close to local CSD market prices and are based on
T2S having been set up on a non-profit basis.
The loosening of their monopolistic positions gives CSDs an in-
centive to enter the custodian market and expand their service
portfolio. Likewise, custodians see the CSD market as an attractive
playing field and could start offering T2S connectivity and CSD
services.
3. Large and small CSDs can benefit from T2S network effects.
Economists distinguish between two network values: autarky
value and synchronisation value. Autarky value is the value gen-
erated by the product itself even if there are no other users. The
synchronisation value is the additional value derived from beingable to interact with other users of the product. This latter value is
the essence of network effects.6
In the context of T2S, CSDs can be seen as consumers of the T2S
platform. The autarky value of T2S lies in the possibility to out-
source settlement engines. The autarky effect is more relevant for
smaller CSDs than for bigger CSDs with highly used capacity on
their engines. Once the full spectrum of T2S is used, i.e. real-time
settlement in central bank money by more than one CSD, the syn-
chronisation value will come into effect. As a result, T2S bears pos-
itive network externalities for CSDs, such that the benefit of using
the platform rises with the number of CSDs.
T2S introduces harmonisation at a technical and
processing level
T2S addresses both price and infrastructure, as
a means of breaking up CSD monopolies
Larger and smaller CSDs can benefit from T2S
network effects, but in different ways
6 Liebowitz S.J. and Stephen Margolis,1998, “Network Externality” entry in The New Palgrave Dictionary of Economics and the Law, MacMillan.
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Regulatory changes require attention
The financial crisis has led legislators and regulators to examine
not only front-office activities, but also post-trade processes. The
European legislator has taken a piecemeal approach by introduc-
ing directives and regulations to address specific shortcomings inthe post-trade environment that had contributed to the financial
crisis. As a result of these developments, the era of unregulated
post-trading is coming to an end.
Most prominently, services related to exchange-traded products
and major exchanges have been regulated under the Market in Fi-
nancial Instruments Directive (MiFID, which came into force on 31
January 2007) and its subsequent reform (Markets in Financial In-
struments Regulation, MiFIR, and MiFID II).7 The market for non-ex-
change traded financial instruments, on the other hand, remained
unregulated until the European Market Infrastructure Regulation
(EMIR) came into force on 16 August 2012. EMIR particularly ad-
dresses OTC derivatives and prescribes that certain classes of OTC
derivatives need to be exchange traded and cleared via a central
counterparty. Furthermore, information on previously unreported
OTC derivatives trades now needs to be reported to trade reposi-
tories to increase transparency in the OTC derivatives market.
Until recently, CSDs have been essentially unregulated, subject
only to a self-regulatory and non-binding Code of Conduct.8 Given
the systemic importance of their security settlement systems, it is
not surprising that the European legislator has decided to regu-
late this area of the post-trade market. The draft CSD Regulation
(CSDR)9 defines, among other things, the settlement cycle as T+2,
and introduces settlement penalties to strengthen settlement dis-
cipline. Access criteria to – and the fees of – securities settlement
systems need to be transparent and interoperability between in-
frastructures needs to be ensured.
What all these regulations have in common is that they aim to in-
crease transparency, provide a harmonised regulatory framework
and foster domestic and cross-border competition. Therefore
these regulations must be incorporated into market participants’
post-trade strategies and not be seen merely as an unwelcome
burden.
7 At the time of writing, MiFIR and MiFID II were expected to be adopted in Q2 2014.8 European Code of Conduct for Clearing and Settlement, 7 November 2006.9 At the time of writing, agreement was reached between the council of ministers, the European Commission and European Parliament; it remains for the “European Securities
and Markets Authority ” (ESMA) to detail technical standards.10 2013 R & M GlobalCustody.net Survey, July 2013.
The era of unregulated post-trading is over
Every market participant needs to put the regu-
latory requirements of MiFIR/MiFID II, EMIR and
CSDR on their to-do list
Clients are becoming more demanding
What about the client in the post-trade world? One can observe
several interesting changes in the way clients are behaving:
1. Increasingly, clients are demanding solutions to their ownpost-trade challenges.
These challenges include the above-mentioned new regulatory
requirements (such as additional reporting or transparency), de-
creasing margins in their retail businesses and liquidity shortage.
CSDs and custodians have already started responding to these
new client demands in their service offerings. For example, collat-
eral management is now almost a standard part of the offering of
a CSD, and the quality of this service is improving.
2. With T2S, post-trading clients are becoming more sensitive
to prices.
Until now, elasticity of demand has been low. In other words, local
monopolies have meant price has not been a factor in a client’s
decision to choose a particular supplier for post-trade services.
The propensity to switch has been low and client loyalty relatively
high. But elasticity of demand will increase when T2S opens up
markets. When clients can choose from various post-trading pro-
viders and service offerings, they will naturally make price a factor
when selecting a provider.
3. Clients consider unbundling of services.
The opening of the post-trade market leads not only to clientswho are more willing to switch their provider for all of their ser-
vices, but also to clients who prefer to select services from more
than one provider and compose their individual sourcing profile.
These clients will no longer accept entire service bundles from just
one provider. Instead, they will demand details about individual
service offerings and prices so they can compare and combine dif-
ferent offerings from custodians and CSDs.
As a result, clients in the post-trade business are becoming more
demanding when it comes to service and price,10 and the willing-
ness to switch service providers is increasing.
Clients are looking to CSDs and custodians to
help them address their own challenges
Clients will become more sensitive to prices
Clients will consider unbundling services and
will demand details about a CSD’s or custodian’s
services and prices
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Competitive pressure is rising
Given the different forces acting on the post-trade world, it is no
surprise competition among market participants is fiercer than ever.
Building up and maintaining market dominance is the key tosuccess for a CSD
As mentioned above, CSDs thrive on economies of scale. And as
with any other infrastructure provider, achieving market dom-
inance is key to benefiting from the effects of scale. The recent
changes in the post-trade market have created competitive pres-
sures that threaten those CSDs that have traditionally dominat-
ed the market. Correspondingly, both smaller and larger market
players have gained new opportunities to expand their business.
As a result, competitive pressure is rising for all participants and
each needs to consider how to position itself in the new market
environment. What is more, competitive pressure does not only
come from CSDs, but also from custodians, in particular global
custodians.
The race for market dominance is having some interesting effects:
1. CSDs are no longer pure infrastructure providers.
Traditionally, custodians and CSDs had different business models:
CSDs focused on settlement and safekeeping as traditional provid-
ers of this infrastructure while custodians took care of other mar-
ket-specific and value-added services. However, CSDs are forced
to rethink and expand their service offering to remain competitive.
2. Exchange-driven organisations are using their CSD branch to
gain domestic and cross-border market share.
Some CSDs are part of a larger corporation, in which an exchange
is an important part of the business or the holding company.
Similarly, there have been reports of exchanges acquiring CSDs.
For these exchange-driven organisations, the CSD business is a
means to bind existing clients to the exchange business and cre-
ate cross-selling opportunities. In addition, it can be used to enter
new markets and thereby extend the overall reach of the corpo-
ration.
3. The post-trade value chain is no longer stable.
Just as CSDs are increasingly encroaching on the domain of custo-
dians, so custodians are starting to see the advantage in accessing
T2S and offering CSD services. For them, this is an opportunity to
extend their existing client base.
4. Mergers and acquisitions are valid strategic options.
Mergers and acquisitions (including joint ventures) are a way for a
market player to expand either its service offering or client base.
This option allows for a relatively quick but radical adaptation of
the business model and rapid geographic expansion. It can there-
fore offer potential “first-mover” advantage in the marketplace.
Similarly, it is a valid option for a market participant who wishes to
exit the post-trade business or establish itself as a niche provider
by focusing on a particular segment of the post-trade value chain.
Building up and maintaining market dominanceis the key to success for a CSD
Exchange-driven organisations are using their
CSD branch to gain domestic and cross-border
market share
CSDs are no longer pure infrastructure
providers
The value chain is no longer stable
Mergers and acquisitions, as well as exiting the
market, are strategic options for some market
participants
Addressing the post-trade imperatives
Time to take action
T2S was launched more than five years ago, so by now most mar-
ket participants should have completed their strategic analysis
and determined the way forward. In fact, when it comes to market
participants’ strategies, one can already see a number of trends. These include strategies for market dominance as well as shifts in
the value chain. For instance, two custodians are becoming CSDs,
a stock exchange has acquired a CSD and some CSDs are establish-
ing partnerships outside Europe (see p. 3).
Market participants who have not yet defined their strategy
should make it a priority to develop a view on their strategic direc-
tion. Watching the market evolve without taking action is likely to
lead to a situation where the competition has gained a significant
head start and is even starting to pull ahead.
Market participants who have a defined strategy need to estab-lish the roadmap towards its implementation: they need to de-
termine their service model, service offering and pricing. Ideally,
this should include potential service bundles and corresponding
pricing models.
Market participants urgently need to identify
their strategy and define their roadmap towards
its implementation
Watching the market evolve without taking
action is likely to give the competition a
significant head start such that it pulls ahead
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Focusing on client services
The need for action is a given. But where to start?
Organisations without a post-trade strategy need to develop one
as a matter of urgency. For those that do have a strategy, the nextstep is to create a roadmap for implementing it.
Infosys Lodestone takes the approach that implementing any
post-trade strategy requires looking at client services as a whole.
By applying the “client first” principle, already common in many
other industries, a company can not only survive the turbulence in
the post-trade world, but also detect new business opportunities
and exploit competitive advantage.
Client focus manifests itself in product design – i.e. the services
a company offers to clients. Any provider of post-trade services
needs to ask itself two questions:
n Which services should be offered? This is known as “service
portfolio definition”.
n How should these services be designed? This refers to the con-
crete attributes of the service.
An organisation should try to answer both questions at the same
time, after comprehensively analysing all relevant decision fac-
tors. In client-focused product design, the value proposition of an
organisation manifests itself not only in the range of services of-
fered, but also the quality and method of execution.
In competitive markets, the client pays for core products as well as
intangible values such as service quality, user interfaces, customi-
sation, customer care, brand and corporate responsibility. Some
of these values (for example, corporate responsibility or brand)
are perhaps more relevant to retail businesses than the post-trade
business. However, they should not be neglected. Additional ser-
vices such as a client’s ability to customise products and fees, or
to work with an online user interface as well as real-time trans-
action transparency, can enhance the client experience of post-
trade users. By considering client experience as part of its service,
an organisation may depart from its status as a mere infrastructure
provider and re-position itself as a client-focused niche provider or
even a margin master.
Infosys Lodestone’s service analysis model
Infosys Lodestone has developed a service analysis model that en-
ables market participants to gain a comprehensive view of their
service portfolio. Based on this understanding, providers can then
Client focus, as manifested in an organisation’s
service portfolio and service design, is likely to
be the key to success in the post-trade world of
the future
create a roadmap for implementing their target business model. In
principle, the service analysis model assumes a business strategy
already exists. However, organisations without a defined business
strategy can also apply the principles of this model while defining
their strategy.
According to the service analysis model, an organisation’s service
portfolio should be evaluated in relation to three dimensions:
1. Clients
2. Competition
3. Context
l
l
l
l
I
IlI
c lient s
c o mpet i t i o n
c onte x t
serviceportfolio
clients. Analysis of clients‘ service requirements and expectations
using business analytics tools for categorisation of services.
competition. Analysis of the competitive environment in which
the company operates including vertical and horizontal
competitors and their service offering.
context. Analysis of the company‘s corporate and organisational
context including fit with the corporate strategy and existing
project portfolio.
service portfolio. Based on the analysis of all three layers,
an organisation’s target service portfolio can be derived.
Figure 5 - Infosys Lodestone’s service analysis model, Source: Infosys Lodestone, 2014
Clients
Starting with the outside layer of the model, client needs and
demands are the first things that need to be analysed. Taking a
client-focused approach when defining an offering is increasingly
important in the post-trade market. Indeed, information gleaned
from customer surveys is becoming more vital than ever, particu-
larly among CSDs. But it is crucial to rely not only on external sur-
veys, but also internal resources, such as insights from relationship
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managers, bilateral meetings and clients’ use of existing services.
The analysis should be conducted in such a way that client insights
can be mapped to the service. Providers need to ask:
n Which services are essential to clients? (i.e. necessary services)
n Which services are valued most – and how do they rate against
comparable services by competitors? (i.e. unique services)
n Which services could potentially be dropped or purchased
from an agent or custodian? (i.e. add-on services)
n When are services used and by whom? (e.g. use of collateral
management)
Client analytics as an investment in long-term
post-trade success
While the above analysis can be conducted as a one-off,
Infosys Lodestone recommends using business analytics
tools to evaluate client demand on a continuous basis.
The first step in analysing client data involves scanning the
database. This allows a provider to see how susceptible its
data is to analysis – and to define the objectives of the analy-sis. This stage is essential for defining the scope of the analy-
sis – for example, deciding which client groups, systems,
services, business units or departments will be considered.
To minimise the impact on other parts of the project, the
analysis can be rolled out sequentially, from one depart-
ment to another. A market participant can start by analysing
customer relationship management and extend the analysis
to product designs, business development and operations.
In addition, such an analytical tool does not only support
the market participant’s own organisation, but can also be
adapted and offered to clients as well.
Key aspects of a complementary client
analytics project:
n Analyse existing database to establish its potential
for analysis
n Define goals and decide which parts of the busi-
ness need to be analysed
n Identify the scope of the analysis: departments,
services, systems, client groups
n Specify analytical approach and tools: users, data,
results, graphical user interface
Competition
The second layer involves analysing the competitive environment.
Questions every market participant should ask include:
n Who are the competitors?
n Which services do the competitors offer? What makes these
services attractive to clients?
n Which services have the competitors announced they are
going to offer in the future?
n What is the broader impact of a competitor’s organisation and
network (e.g. connectivity with exchanges, CCPs etc.)?
The competitive environment for post-trading market participants
can be grouped into vertical and horizontal competitors. Vertical
competitors are the direct competitors (e.g. other CSDs, other cus-
todians). Horizontal competitors are competitors along the valuechain (i.e. custodians, CSDs, banks and exchanges). Both types of
competitors should be analysed with respect to their service offer-
ing. The results should be mapped against the organisation’s own
service portfolio.
Context
The third layer of the model is the context, which can have a strong
influence on a provider’s decision-making process. The context
can be divided into three areas:
Corporate and strategic contextn What role does a particular area of the business play in the con-
text of the group? For example, is it part of an exchange-driven
organisation?
n What is the corporate strategy? How does it affect the service
portfolio?
n Has a business strategy or a T2S strategy already been defined?
How does it affect the service portfolio?
Operational context
n What capabilities does the organisation have? What expertise,
resources, IT systems?
n What are the constraints – e.g. in terms of time or resources?
How quickly can new services be developed or brought in?
Project portfolio
n What is the existing project portfolio? What services are affect-
ed by other projects?
n What is the implementation timeline for these projects?
n Where can synergies between projects be exploited and dupli-
cating work avoided?
By analysing all three layers an organisation can comprehensively
evaluate its service portfolio and identify new business opportu-
nities. Infosys Lodestone recommends conducting this three-part
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analysis for each service offered to get a service-based view for
all three layers. When analysing cross-border services, many ques-
tions need to be repeated for every market. Once the analysis is
complete, the service map can be used to define the future service
portfolio and thus the target positioning in the marketplace.
Definition of a roadmap
Before implementing any strategy, it is important for an organisa-
tion to draw up a roadmap showing how it wants its service port-
folio to eventually look. The roadmap should also include informa-
tion about the larger context. Creating the roadmap – and putting
it into practice – has its own challenges. Here is what every market
participant needs to do:
n List what needs to be done – and when. Consider, too, how to
exploit synergies and avoid duplicating work.
n Include in the timeline milestones such as T2S go-live and mi-
gration waves, implementation dates for regulatory initiatives
and other (internal) deadlines.
n Consider operational constraints, such as resources and howthese will be addressed (e.g. by hiring and training staff ).
n Include the deadlines and resources needed for developing
and testing the necessary IT, and assess any operational risks.
n Make clear the business benefits of the whole project portfo-
lio (not just one-off projects). A holistic approach will ensure
funding is secured for the whole project and will prevent gaps
emerging between projects.
n Actively manage stakeholders throughout the implementation
phase.
n
Work with a business partner who understands the complexi-ties of the European post-trade business. Such a partner should
have experience of managing a project from beginning to end
(initial analysis to IT and operational implementation).
Infosys Lodestone’s service analysis model
provides a comprehensive view of a market
participant’s service portfolio, allowing it to
identify business opportunities and define how
it wants to be positioned in the marketplace
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Glossary
CCP Central Counterparty
CSD Central Securities Depository
CSDR Central Securities Depository Regulation
DCP Directly Connected Party
EMIR European Market Infrastructure Regulation
Eurosystem The Eurosystem is made up of the central banks of the eurozone
ICP Indirectly Connected Party
MiFID Markets in Financial Instruments Directive
MiFIR Markets in Financial Instruments Regulation
NCB National Central Bank
T2 TARGET2
T2S TARGET2-Securities
About Infosys Lodestone
Infosys Lodestone is a wholly owned subsidiary of Infosys, a global leader in consulting, technology
and outsourcing solutions, with over 158,000 employees serving clients in more than 30 countries.
Infosys Lodestone forms the global management consulting arm of Infosys. A pioneer in breaking down
the barriers between strategy and execution, Infosys Lodestone delivers superior business value to its
clients by advising them on strategy and process optimisation as well as IT-enabled transformation.
In the area of financial services, German, Swiss and international clients have benefitted from InfosysLodestone’s extensive expertise and experience. Infosys Lodestone provides holistic support to clients
in all project phases from analysis to design, all the way to implementation and testing.
Authors
Julia Petry, Senior Principal
Julia Petry holds a master’s degree in economics and has overall experience of more than ten years in
the international financial services industry. Before joining Infosys Lodestone in 2013 she worked for a
leading IT and consultancy provider as well as for an American asset manager. Since the beginning of her
career her area of interest has been post-trading and asset servicing. She specialises in business model-ling and IT visioning projects for international and domestic operating CSDs, custodians and banks.
At Infosys Lodestone she is responsible for post-trading topics, such as TARGET2-Securities, CSDR and
asset servicing, in the financial services industry.
Sylvia Rosenzweig, Principal
Sylvia Rosenzweig has more than five years of experience in advising German and international clients in
the financial services sector. She successfully leads projects and teams of business analysts, mainly in the
areas of process analysis and design, operational readiness and cross-border post-trade harmonisation.
At Infosys Lodestone she is recognised as an expert on TARGET2-Securities and related post-trade topics.
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March2014
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[email protected], www.infosyslodestone.com
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