ECNs and TFMs A Global Custodians Perspective

1
ECNs and TFMsA Global Custodians Perspective

• Dick Taggart
• Managing Director
• Chase Manhattan Bank

2
A Global Custodians view ...

• New Landscape
• Our Clients
• Business Impact
• Transition

3
Plan Sponsors
Current Transaction Flows
Investment Manager
Mutual Funds
Asset Management
Other Investment Managers
MF
AM
ECNs

• Trading
• Portfolio Mgnt
• Client Service

• Bookkeeping
• Ref Data

Global Custodian
Settlement Safekeeping

• Reporting
• Accounting
• MRK
• Perf Meas.
• Ref Data
• Compliance

Broker / Dealers
?
?

• Record Trade
• Sec Instx
• Cash Instx.
• Settle Trade
• Update Positions Balances

• Sequential
• Bilateral
• many standards

• FX
• Cash Mgnt
• Sec Lending

• Asset Services

Securities
Brkr/Dlr
GIS
Cash
Brkr/Dlr
GIS
?
Deal
Allocations to IM Accounts
CSD or Agent Bank
Confirm Net Amounts
Other Market CSDs
Agree on Settlement Details

Settlement
4
Future Transaction Flows
Plan Sponsors
Investment Manager
Mutual Funds
Asset Management
Other Investment Managers
MF
AM

• Trading
• Portfolio Mgnt
• Client Service

ECNs
Global Custodian

• Reporting
• Accounting
• MRK
• Perf Meas
• Ref. Data
• Compliance

Settlement Safekeeping
Broker / Dealers
TFM/GSTPA

• Record Trade
• Sec Instx.
• Cash Instx.
• Settle Trade
• Update Positions Balances

?

• FX
• Cash
• Sec Lending

• Simultaneous
• Multilateral matching
• Open Standard

• Asset Services

?
Securities
Brkr/Dlr
GIS
Cash
Brkr/Dlr
GIS
Deal
Allocations to IM Accounts

Confirm Net Amounts
CSD Network
Other Market CSDs
Agree on Settlement Details
Settlement

5
Whats driving these changes?

• Risk Pressure
• Cost Pressure
• Capacity Constraints
• Enabling Technology

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Implications for our Clients ...

• Real Progress towards Global T1
• Role Transformation
• Performance Focus
• Transition Integration Plans

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Business Impact

• Chase GIS Business Profile
• 1.9 Tril cross-border Assets
• 15,000 cross-border Transactions/day
• Transaction Fees
• Investment Services
• Integration Solutions
• Re-Engineering Investment

8
TFM Open Issues

• Integration Options
• Participants (B/Ds, IMs, GCs, ECNs, CSDs, FSIs)
• Mechanisms (SWIFT, XML, WS?)
• WorkFlow
• Defining cross-border
• Transition Approach
• Governance

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Industry imperatives...

• Recognize the value of achieving efficiency
  standards now common in modern industries
• Understand the building blocks necessary to make
  T 1 happen on a global scale
• Offer industry-wide standards and real-time
  electronic communications
• Active engagement of all market participants