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The Role of Central Securities Depositories and Custodians

  • Banking Operations
  • Information


    Central securities depositories (CSDs) and custodian organisations play an essential role in both the settlement of equity and bond trades, as well as the secure holding of such securities and (in many cases) the holding of cash, on behalf of financial institutions.


    For a firm that trades in equity and bonds, the efficiency of the Securities Trade Lifecycle (e.g. timely and risk-free settlement) is very heavily reliant upon the quality of services provided by CSDs/custodians.

    For firms that own securities positions, there is a great reliance on CSDs/custodians to hold securities positions in a highly secure fashion, and in general terms the CSD/custodian must protect the interests of the various owners at all times.  Such interests include the collection and crediting of income (e.g. dividends and coupon payments) and the secure management of the broad array of corporate actions (e.g. stock splits, rights issues, takeovers, restructurings).


    Aims of the Course

    The Role of Central Securities Depositories and Custodians training course is designed to provide a thorough insight into the services that CSD/custodian organisations provide to the securities marketplace, to both sell-side firms (i.e. banks and brokers) and to buy-side firms (e.g. investment managers, pension funds, insurance companies). 


    This course provides a 360o outlook, as the perspective of the custodian organisation itself is described, as well as the standpoint of firms that utilise the services of custodians.


    Who Should Attend

    This course is suitable for new joiners to CSD and custodian organisations, and for those existing employees that require a more detailed understanding of the services provided by such organisations.


    Additionally, the course is suitable for new and existing employees of other financial institutions (both sell-side and buy-side) who wish to acquire a greater understanding of the services that CSD and custodian organisations provide.

    The course contains essential concepts that have an all-round impact on buy-side and sell-side firms’ management of trades and positions, for both equity and bonds.  As such, besides those people that are responsible for trade processing, the course is of value to Corporate Actions personnel, Reconciliation staff, Collateral Management personnel and Risk Managers. 




    Delegates should possess a thorough understanding of basic securities operations concepts and the primary aspects of the securities trade lifecycle prior to attending this course; please refer to the Fundamental Securities Operations Concepts course and The Securities Trade Lifecycle course.


    Each topic (see Contents below) will be expanded and explained to the delegates in a structured manner (via linked building blocks), developing their knowledge through diagrams, ‘live’ drawings and on-the-spot explanations. 


    Active participation of the delegates will be encouraged, and exercises will be introduced at frequent and appropriate points.


    Day 1

    1 Introduction

    • Definition of Central Securities Depository
    • Definition of Custodian
    • The CSDs/Custodians’ Role: Overview
    • The CSDs/Custodians’ Clients
    • Holding Securities in Safe Custody
    • Holding Cash in Safe Custody
    • Movements of Securities & Cash

    2 Types of CSD and Custodian

    • Central Securities Depositories
    • National CSDs
    • International CSDs
    • Custodians
    • Local Custodians
    • Global Custodians
    • Sub Custodians
    • CSDs & Custodians: Similarities/Differences

    CSD Account Structures

    • Segregation of Assets
    • Proprietary Assets
    • Clients’ Assets

    CSD Services

    • Fundamental Role & Responsibilities
    • Securities ‘Warehouse’
    • Safe Custody of Securities & Cash
    • Trade Settlement

    Local Custodian Services

    • Fundamental Role & Responsibilities
    • Differences versus CSDs

    Global Custodian Services

    • Fundamental Role & Responsibilities
    • Sub-Custodian Structure
    • Differences versus Local Custodians

    3 Risks and Risk Mitigation

    Areas of Risk
    Validating Settlement Instructions
    Optional & Voluntary Corporate Actions

    4 Securities lending/borrowing services

    Definition of Securities Lending/Borrowing
    Purpose of Securities Lending
    Purpose of Securities Borrowing
    Short Selling
    Technical Short
    Cost versus Benefit
    Securities Lending/Borrowing via ICSDs
    Securities Lending/Borrowing via G/Custodians
    The Role of Collateral in SL&B
    Tri-Party Services
    Role of Tri-Party Agent
    Benefits to Lenders & Borrowers

    Day 2

    5 Income and Corporate Actions

    • Income & Corporate Action Events
    • Definition
    • Purpose
    • Impact
    • Event Processing Lifecycle: Overview
    • Mandatory Events
    • Optional Events
    • Voluntary Events
    • CSD/Custodian Processing
    • Processing Steps
    • Risks & Controls

    6 Treasury Management

    • Treasury Management Overview
    • Single vs Multi-Currency Environment
    • Interest Rates on Debit/Credit Balances
    • Wire Transfers
    • Funds Preadvising
    • Cash Lending Facilities
    • The Role of Collateral
    • Foreign Exchange Services

    7 Tax Reclaim Services

    • Withholding Tax: Overview
    • Example Withholding Tax Regimes
    • Tax Deduction Methods
    • At Source
    • Tax Reclaim
    • Quick Refund

    8 Reporting

    • Typical Reports
    • Settled Securities Positions
    • Cash Balances
    • Settlement Instruction Statuses
    • Income Event Notification
    • Corporate Action Event Notification

    9 Service Charges

    • Types of Service Charge
    • Holdings in Custody
    • Trade Settlement
    • Income & Corporate Actions

    10 Other Services

    • Custodians as ADR Depository Bank

    Register interest

    As every course we run is tailored to meet the specific needs of each client, we can only provide an estimate after fully understanding your specific requirements. Please complete the form below of call +44 (0) 208 894 4977 to discuss how Taylor Associates can help you.

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