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only accessible by the authorised people
within a firm. The structures to ensure
this are well known to all, especially those
dealing on a multi-corporate basis across
their firm’s global footprint. But it is im-
portant that the rulebook is clear and the
penalties for malfeasance or mistake are
explicit and draconian.
Client mobility is impacted by back-
to-front solutions. The idea of having a
maximum number of hooks into a client
to raise the barriers for exit has existed
for decades. But the operational and
technological disparity between many of
the back-to-front solutions, as indicated
in the first paragraph of this blog, means
that multiple firms in the space do not
necessarily create easy solutions to any
decision to change provider. This also
impacts contingency arrangements and
there is a risk that buyers are too tied to
a single provider and lack flexibility to
move assets and functions at a time of cri-
sis, either at entity, market or global level.
As the product extends its scope and
connectivity increases, the technological
risks increase. Paradoxically, in some
ways a single application across more
functions will reduce cost but not neces-
sarily risks. The incidence of change man-
agement increases with increased product
coverage and the potential for conflict
between deadlines, especially relating
to infrastructure change, increases with
scope. Standards are also a challenge with
the prevalence of ISO/FIX standards in
the front-office and ISO/SWIFT ones in
the back. The quantum of data expands,
as will the demand for bespoke and mar-
ket standard reports and this will place
different peak demands on processing
capacity, some of which could clash and
need careful scheduling. The contingency
plans of any back-to-front provider need
to be examined as a single hot standby or
BNY Mellon and State Street draw
new battle lines for front-to-back data
B
NY Mellon and State Street
have dethroned each other
throughout the decades for
the crown of top custodian and fund
administrator, and the age-old rivalry
shows no signs of slowing down as
the asset servicers enter a new era of
competition.
Both banking giants are now ampli-
fying their traditional offerings – albeit
through contrasting routes – through
front- and back-office data services in
a bid to resonate with asset managers.
State Street went on the attack in
2017, acquiring trading solutions
and analytics provider Charles River
Development (CRD) for a whop-
ping $2.6 billion. Many thought the
Boston-based custodian had massively
overvalued the front-office software
firm. However, the bank’s vision of
combining the front-office with its
fund accounting and custody services
would open up a whole new world of
revenues.
BNY Mellon has instead taken a
different approach with its open archi-
tecture strategy, and partnered with
order management systems (OMS)
BlackRock Aladdin, Bloomberg AIM
and SimCorp, as well as connecting
to a range of FinTech firms for new
38
Global Custodian
Spring 2020
A trend that defined global custody in 2019 and continues
to spark debate, Global Custodian investigates the front-to-
back data models of the market’s two largest providers.
services, all with the aim of providing
near-real-time data and analytics to buy-
side firms.
Both strategies are unique in their way
of tapping the front-office of asset man-
agers, and both have been commended
by Global Custodian with awards for in-
novation. However, their reception from
industry participants has been mixed.
“State Street made an aggressive push
in acquiring Charles River, and BNY are
now on the defensive with these partner-
ships,” commented Tom Secaur, global
chief operating officer at investment
management consultancy Citisoft.
“Partnerships are one thing, but what
are they [BNY] trying to do/not do? How
do they plan to integrate this data? Those
questions need to be answered,” added
Secaur.
In an interview with the Financial
Times, State Street’s CEO Ron
O’Hanley, explained that before its
takeover of Charles River, it was also
approached by its competitors on the idea
of partnering for a front-to-back offering.
But instead, it placed significant value in
owning the front-office data.
“We are stewards of our clients’ data. In
this capacity we can provide our clients
with advantages regarding the timeliness
and accuracy of that data, as well as the
actionable insights it offers,” said John
Plansky, CEO of State Street’s CRD.
“Until now, these critical considera-
tions have been impacted by a lack of
integration between the front, middle
and back-office from providers across the
industry. With the acquisition of Charles
River Development, and the creation of
State Street Alpha, we are addressing
this by harmonising data, technology and
services across the end-to-end investment
management cycle.
“This will enable improved investment
decisions and optimised returns and help
our clients better manage their business.
Having the breadth of data across all
areas creates a unique opportunity for us
to partner with our clients to feed the in-