BNY Mellon, an investment services provider, has launched a central securities depository (CSD) in a move to redefine its role as a global custodian and meet the emerging regulatory landscape.
The new Belgium-based CSD will offer issuer, settlement and safekeeping services primarily for European market participants. The new entity will be led by Chris Prior-Willeard, who has held a range of executive positions at the firm.
“In establishing the BNY Mellon CSD, we are redefining what it means to be a global custodian and how our industry will provide investment services. By becoming a CSD, we are responding to the current regulatory imperatives around issuance and settlement services,” said Prior-Willeard. “We will be able to offer our clients access to integrated services across the full spectrum of the securities value chain to allow them to accommodate new requirements mandated by, for example, the European market infrastructure regulation (EMIR).”
Under EMIR, a large portion of OTC derivative instruments will be standardised so they can be trading on exchange-like platforms and centrally cleared. The legislation requires buy-side firms to post initial margin when trading swaps for the first time.
The CSD status enables BNY Mellon to use the assets it holds to further develop its service offering, helping institutional investors access high-quality collateral needed to meet margin obligations. While the exact type of assets eligible for collateral purposes are still being finalised, they are expected to initially comprise cash and sovereign bonds.
According to BNY Mellon, its CSD will also improve interoperability for post-trade activity by linking to cross-border CSDs and offering local market services from a pan-European perspective. The firm also claims clients will benefit from a quicker settlement process if both seller and buyer accounts are maintained within the books of the BNY Mellon CSD.
“We already provide key elements of the CSD offering to the market, it is just that historically we have done so on a separate basis. This new entity enhances our role in the post-trade space and facilitates an internalisation of the securities value chain, which means our clients will benefit from greater efficiency and reduced risk,” added Prior-Willeard.