Derivatives regulation is pushing outsourcing of trade processing to custodian banks, finds Dan Barnes.
Custodian banks are seeing a surge of interest in their
outsourcing services from buy-side firms, who are feeling ever greater pressure under
new derivatives rules. Sell-side revenues from outsourcing
service provision are expected to grow by 42% in the next four
years as fund managers push more work out to their partners.
Increasingly custodians are finding that clients are asking
specifically for solutions to deal with the new derivatives
Daron Pearce, head of global financial institutions EMEA at
custodian BNY Mellon, which holds $3tr in assets under
administration (AUA), says: "Companies come to market that
don't want to outsource all their traditional operations, just
the derivatives components. Typically they are satisfied with
their equity and fixed income processing, but they don't want
to make the investment to embrace the full processing of the
A report from analyst firm Aite Group, entitled The
outsourcing services landscape for investment managers,
has recommended that custodians emphasise their outsourced
offerings around regulation, with revenue from provision of
outsourcing services predicted to grow from $9.6bn in 2012 to
$13.7bn in 2016.
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