Citigroup’s Global Transaction Services (GTS) business has launched Direct Custody and Clearing (DCC) services for its clients in South Africa. This new offering expands Citi’s proprietary DCC network to 60 markets globally and 34 markets across EMEA. The business now offers DCC services in four countries in Africa, in addition to Egypt, Morocco and Nigeria.
Strate, the local CSD, approved the new business as a CSD participant on November 10. The South African Reserve Bank also approved Citi’s payment stream for securities transactions in equities, bonds and money markets.
DCC provides clearing and settlement services for broker dealers as well as offering local market sub-custody services to banks and global custodians. Citi is looking to go live with its first client for DCC services in South Africa in the first quarter of 2012.
Lee Waite, global head of Direct Custody and Clearing, Citi Global Transaction Services told Global Custodian the decision to enter a new market usually follows the development of the capital markets in that country, in addition to client demand. “During robust trading environments, hedge funds typically look for us to invest in frontier markets.”
Waite noted the South African custody and clearing market is highly competitive, with established local incumbents. “This is not a stand-alone business for Citi. This launch complements our local franchise: we already have a substantial market share in South Africa (6th largest commercial bank by assets) and we were able to leverage Citi’s existing infrastructure. There is a lot of interest from clients due to the fact that there are no international custodians currently providing international service standards in the market. We believe the competition will be focused on service levels rather than pricing.”
Citi first established a commercial bank presence in South Africa in 1958 and re-entered the country with a representative office that was converted to a full branch in July 1995. Services offered include securities and fund services, treasury and trade solutions, foreign exchange and hedging.
Irma Calitz, who joined Citi South Africa in April 2011 as the securities manager, heads up the DCC business. She reports into Lizelle Pienaar, head of Global Transaction Services for South Africa and Matt Brown, head of Securities and Fund Services team for Africa.
Donna Oosthuyse, Citi Country Officer for South Africa said: “We are delighted to offer Direct Custody and Clearing services in South Africa, the leading economy and largest securities exchange in Africa. Citi has a long-standing presence in the country and we look forward to leveraging our local expertise and proactive engagement with customers, regulators as well as market infrastructures to generate new growth opportunities for our clients.”
Monica Singer, Strate’s CEO, said: “Citi has a long established relationship with Strate as one of the founding shareholders back in 1998. We are pleased to welcome them as a new CSD Participant in South Africa, providing custody and settlement services across all three of our markets, namely for equities, bonds and money market securities.”
Waite said Citi is likely to be reasonably cautious in 2012 and open further DCC offices where demand warrants it. The next step could be new markets in the Middle East region, he added, but not until 2012/13. The bank currently offers DCC services in the UAE, Bahrain and Kuwait. Future plans may include Jordan, Qatar and Saudi Arabia.
Reporting by: Janet Du Chenne, Global Custodian, an Asset International publication