Thomas Murray’s Ana Giraldo reports on post-trade infrastructure developments in the Eurasia region and highlights issues to watch in evaluating Capital Markets Infrastructure risk

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The financial crisis has damaged the revenues, profits, share price, and reputation of banks of all kinds. And, it has left global custodian banks facing a particularly awkward dilemma – one largely of their own making.

The original attraction of the custody business to the management and shareholders of commercial banks was its annuity fee based revenue stream where investors paid them to safekeep and service their assets, rather than net interest margin on lending which is the normal commercial banking model. As well, the low level of capital consumption (because the assets belong to the investors they are held off the balance sheet) was another attraction.

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The foreign exchange market is commonly described as the most liquid financial market in the world. Indeed, it is often portrayed as the closest approximation in real market conditions to perfect competition, in which the barriers to entry are negligible, the products being exchanged are indistinguishable, and no one provider is large enough to set the price.

Since the 1990s, trading of the major currency pairs has moved on to electronic platforms, which are also thought to have contributed to the surge in liquidity, by broadening participation in the markets by non-banks, and especially mutual funds, money market funds, insurance companies, pension funds, hedge funds and even retail investors and traders.

Thomas Murray analyse capital markets infrastructure risk in the Americas and review changes to regulation and market infrastructure.

The Americas region can be split into three sub-regions: the more developed English speaking north with larger economies and very sophisticated markets; the Spanish speaking south, Latin America, with emerging but dynamic economies; and the mixed English-Spanish speaking Caribbean with very small countries and markets. Despite having some cultural and background similarities, the markets in each of these sub-regions have remained separate, with their own trading locations, capital market infrastructures and regulations.

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