Société Générale Securities Services Egypt

Wider.Closer.

Simpler.

Société Générale Securities ServicesEgypt

Custodians – CSDs: working together

SGSS CairoAMEDA APRIL 2012

Plumbing and FinanceIronically post-trading services are called the “plumbing of the building”.

Provides the infrastructure for the financial markets to operate smoothly & effectively

A well regulated and effective clearing and settlement system brings all forces

working together for the ultimate goal:

• the service of the end-client (retail investor / broker-dealer /

investment bank, etc)

POST-TRADING SERVICESAn industry in the shadow

P. 1


Securities Depository

Central Securities Depository

(CSD) is an organization holding securities on behalf of issuers

(safekeeping) and offering notary

functions, typically in a dematerialized

environment,

that enables book entry transfers of

securities positions (settlements).

Many CSD’s also carry-out pre-settlement

operations (clearing).

Finally CSD’s offer corporate actions

services to participants, issuers and

occasionally to end-investors (Investor

CSDs).

Custodian

Financial Institution with main

goal to protect and safeguard the assets of its

clients.

Within its main responsibilities are

clearing & settlement of clients’

transactions,

safekeeping of assets,

handling of corporate actions, collection of

income.

When the same bank holds assets for

their clients in many countries / markets

then this institution can be considered as

Global Custodian.

THE TWO MAIN ACTORSSimilar but…

P. 2


CustodiansClientele basis: Broker-Dealers, Mutual

Funds, Insurance Companies, Investment Companies, Global Custodians, …

Strict selection procedures Tailor-made solutions depending on

client’s needsHeavily regulated & auditedBanking Status

CSDs Clientele basis: participants to the

CSDs.• Typically local brokers, custodian banks

and local issuer companies

Monopoly / Centralized Functions Strict one-size procedures for all

participants Regulatory Authority Non-banking institution

THE TWO MAIN ACTORS…so different

P. 3


Clearing and Settlement

Registration of issues

Corporate Actions Treatment

Securities Lending & Borrowing

Services to end-investors

Linkages with other CSD’s

Services to Issuers

Administration of market risk

Trustee (Occasionally)

LET US GO DEEPER!CSDs

P. 4


Trade / Execution Services

Clearing & Settlement Services Clearing Services Settlement Services Margin Calls

Custody Services Global Custody Corporate Actions Treatment Tax Services Ad-hoc Cases Tailor Made Reporting

Distinct services Outsourcing services White label services Valuation services (e.g. OTC derivatives)

Trustee Services Investments ControlRegulatory ControlsNAV checking

Fund Distribution ServicesCentral/local or sub TA servicesPaying agent servicesTransfer Agent Services

Liquidity ServicesSecurities Lending and Borrowing Cash Reinvestment Intraday Liquidity Foreign ExchangeCollateral management services

LET US GO DEEPER!Custodians

One custodian settling in many domestic markets

P. 5


Each Actor plays a discrete role in the market

A strong interconnection that combined, serves the investment communityvertical and horizontal array of

services offeredefficient mitigation of Risksynchronization between

business & regulatory actors

Post trading services reach end-clients through the mediation of the two key actors

Service Portrait

Service to participants

Service to Institutionals

Service to end clients

Service to issuers

“TOGETHER”

CSDs

CustodiansP. 6


Clearing

participant LevelSettlement

Participant Level

Corporate

Actions, Issuers

level

Corporate

Actions, Client

Level

Tax Services

Client Level

COMPOSING THE PUZZLECSDs - Custodians

Reporting,

Client LevelReporting

Participant Level

Cash

Management

Client Level

Linkages with

other CSDs

Global Custody

ServicesF/X Services

Treasury

Services Client

Level

Risk

Management

Participant LevelRisk monitoring

per Client

P. 7


Reporting,

Client Level

Tax Services

Client Level

Cash

Management

Client Level

Treasury Services

Client Level

Corporate

Actions,

Client Level

Clearing &

Settlement

Client

Level

Risk monitoring

Client level

Risk Management

Participant Level

Clearing

Settlement

Participant Level

Corporate

Actions,

Participants

Level

Corporate

Actions

Issuers

level

Reporting

Participant Level

CSDs Custodians

COMPOSING THE PUZZLEThe Classical landscape

P. 8


Tax Services

Client Level

Reporting,

Client Level

Treasury Services

Client Level

Cash

Management

Client Level

Risk monitoring

Client level

Clearing &

Settlement

Client

Level

Corporate

Actions,

Client Level

Clearing

Settlement

Participant Level

Corporate

Actions,

Participants

Level

Corporate

Actions

Issuers

level

Risk Management

Participant Level

Reporting

Participant LevelEnhanced IT Infrastructure

Lobbying

Efforts

Visibility of

domestic market

Homogeny across

Global Markets

Single window for

many markets

Transfer of Knowledge

and know-how

Increase

Business

innovation

Introduction of new products /

best practices

CSDs Custodians Custodians’ plus

COMPOSING THE PUZZLEThe enhanced landscape

P. 9


Introduction

of new products

Corporate

Actions,

Client Level

Clearing

Settlement

Participant Level

Corporate

Actions

Issuers

level

Reporting,

Client Level

Tax Services

Client Level

Cash

Management

Client Level

Risk Management

Participant Level

Treasury Services

Client Level

Risk monitoring

Client level

Clearing &

Settlement

Client

Level

Corporate

Actions,

Participants

Level

Reporting

Participant LevelEnhanced IT Infrastructure

Lobbying

Efforts

Visibility of

domestic market

Homogeny across

Global Markets

Single window for

many markets

Transfer of

Knowledge

and know-how

Increase

Business

innovation

Foreign

Indirect

Investments

/ liquidity

Introduction of

best practices

Automated

Linkages with CSDs

STP Processes

Standardization

in

market messaging

Important side market effects: new IPOs

Automation

of Corporate

Actions

Risk

Mitigation

Market

liberalization

CSDs Custodians Custodians’ plus Market Effect

COMPOSING THE PUZZLEThe overall market effect

Cost

EfficiencyOperational Efficiency

P. 11


Emerging markets primarily: GCs may use their lobbying power to trigger market

developments

Turnaround

Auto-repo capabilities

Derivative products

Novation techniques

Swift reporting services

WORKING TOGETHERinfluencing decisions

P. 12


It is vital for the close collaboration between the two main actors of the post-trading

environment. With cooperative effort they need to:

Resolve any obstacle in the securities services industry

Undertake public initiatives to reduce cost for end-investors

Increase the efficiency for domestic settlement

Promote new products and post-trading mechanisms

Under our view CSDs

Should perform centralized clearance / settlement / notary function, encompassing the role

of the core market infrastructure, while Custodians

should actively represent the market forces that thrive competition

WORKING TOGETHERLooking ahead

P. 13

Documents

Société Générale Securities Services Egypt