I think you'll find that much of what you're asking for is not in the
public domain and not therefore readily accessible by a researcher. I
used to be in charge of Operations for various London fund managers,
and the explanation below is based on my own personal knowledge, now
about 3 years out of date. I am not, as you can see, a Researcher, so
of course you will not be charged for this.
Here is a explanation of custodial services. As you will know, a
large proportion of equities and bonds in the world now exist only in
dematerialised form ie not as a physical piece of paper but only as an
entry on an electronic register. Obviously a lot of security measures
are necessary to ensure that the electronic register is accurate. If
you are a fund (say an insurance, pension or mutal fund) with holdings
in many different stocks, it would be very expensive to communicate
with all the different registrars of these stocks. So instead you
employ a custodian. The custodian will have one nominee entry in the
books of the registrar, which represents the total holdings of all its
customers; this is known as an omnibus account. It will keep records
in its own books of exactly how much of the holding in the omnibus
acccount belongs to each customer. It will therefore also have to
liase between its customers and the registrar (and a broker, usually
through some market-speciifc mechanism) to settle purchases and
sales, to pass on dividend and interest payments made into its omnibus
account, to communicate corporate actions such as rights issues to its
customers and pass back any decisions or rights payments to the
registrar, and to ensure that the customer can vote its stock at
meetings of the stock-issuing company.
In the days before computers, the same activities were carrried on but
a lot more paper was involved. Instead of IT security, the custodian
provided physical security of share certs in its vaults.
Here is State Street, a major global custodian, talking about its role
http://www.statestreet.com/capabilities/investment_servicing/products/is_229_custody.html
Fees charged by custodians are very much dependent on negotiation,
with, as you might expect, large clients getting better fees. They
typically tend to be quoted as a price per trade plus a price per
holding plus a (small) number of basis points on the total value of
the fund/portfolio being negotiated. A global custodian will probably
quote these figures separately for each of the markets in which the
fund/portfolio is invested. These prices will vary depending on the
difficulty of settlement. So, for instance, the price per trade for a
UK gilt (government bond) holding will be very low, because the market
is very automated and there are very few trade failures or queries.
The price for the equity markets of some emerging countries will be
much higher, because the custodian finds it much more difficult to
settle trades cleanly on market settlement date.
Custody itself has become very commoditised and not very profitable
for banks. The large custody banks are now all trying to sell their
clients valued-added services, which are not normally considered to be
part of custody, such as fund accounting and valuation, performance
measurement calcualtions, general administration of collective
investment schemes including trustee/depositary work and so on.
Terms and conditions are usually full of detail about the exact way
that a fund should instruct the custodian about a trade; in paricular,
for each security type in each market, there will be a cut-off time by
which the person doing the trade (fund or fund manager) must instruct
the custodian for settlement for the custodian to guarantee that the
trade will settle in accordance with market practice (which will be
the terms under which the trade was made). Of course, the customer
wants the cut-off to be as late as possible. For example, normal
market settlement for UK gilts is T+1, which means trade date +1 ie if
you deal on Monday, the trade settles on Tuesday. You as customer
want your instruction cut-off to be well after market hours on T
(Monday) or early on T+1, so that your fund manager can make deals as
late as he likes. For instance, if instruction cut-off was 3pm on T,
your fund manager would have about two hours of market open time when
he couldn't deal for normal settlement.
Another important issue is contractual settlement. This relates to
whether the custodian bank will settle all trades in its own books on
contractual settlement day, and worry about trade failures afterwards
in a way which is invisible to the customer. This is important to the
customer because it makes cash-flow, and therefore full investibility
of the fund, much more certain. The custodian will normally reserve
the right to reverse the trade in its own books eventually if the
failure cannot be resolved, but only with notice to its customer so
that the cash-flow results can be dealt with smoothly.
I'm sorry, I have no experience of custody in Africa. When I was
dealing with custodians, I don't think any of them offered a custodial
service in respects of stocks issued in any African country except
perhaps South Africa. In terms of custody for locally-domiciled
funds, the services obviously exist (see for example
http://corporateandinvestment.standardbank.co.za/custodyandsecurities/overview.html)
but I don't know how, if at all, it differs from custody in other
countries/markets.
I hope this is helpful. I am happy to answer any other specific q's
you have, to the best of my ability. |
