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The Future of Securities Services On top of that, global geopolitical uncertainties increase The analysis of the working group,
supplemented by research from Oliver Wyman
the risk that the global Securities Services industry
becomes regionally fractured. This might disadvantage and a survey of ISSA member institutions,
Colin Parry William Hodash firms that consequentially need to scale back their global all conducted for the report, identified ten
Chief Executive Officer, ISSA Managing Director, Enterprise Data Management, DTCC business models. As a counterpoint, the firms that manage important trends in Capital Markets and
to retain global business models or which have a deep concludes that changes in investor behaviour, as
regional franchise in growing markets, may be able to well as changes in technology and technology-
The Securities Services industry has generated relatively Looking forward, our analysis suggests that increase their business. enabled competition, are likely to have the
stable revenues driven by accumulation of Assets under developments in the broader Capital Markets biggest impact on the industry:
Custody (AUC) or Administration (AUA) and underlying ecosystem will create continued top-line pressure for With the knowledge that the Securities Services industry
trading volumes, even during substantial market swings the Securities Services industry as we know it, which — as we know it — will undergo significant change over Investor behaviour: A continuation of flows into
witnessed over the last decade. However, the last cycle will make it difficult for some players to fund required the next decade, but given the uncertainty of when and alternative and digital assets, as well as further
has also seen continued fee compression and decreasing investments and fend off the threat of potential how this change will happen, we have taken a scenario- shifts towards passive/ETF structures combined
net interest margins at the core of the industry. Even the disruption. For firms that can afford the required based approach to identify the drivers of change that are with further globalisation of the asset flows and
introduction of value-adding adjacent services has not investment, there is a significant future growth expected to have the largest impact on the industry. higher investor digital service expectations.
sustainably offset fee pressure on core business models, opportunity arising from the servicing of new (digital)
since new services have typically been included in existing asset classes and leveraging of new technologies within
service offerings and have thus become subject to the Capital Markets, with higher margin for associated Exhibit 2: Change in investor behaviour theme*
same pricing challenges. products and services.
Average ratings of disruption potential and relevance for the industry from the perspective of Custodians and CSDs
* Includes the following relevant forces from Section 3: increased adoption of new technology, financial deepening and globalisation, shift into digital and alternative assets and shifat to passive and ESG.
Custodian CSD
Exhibit 1: Impact of Capital Markets ecosystem trends on key drivers for the Underlying drivers of change Disruption potential Relevance Disruption potential Relevance
Securities Services industry from the ISSA Working Group analysis
Continued flows into alternatives and Digital Assets

Margins/ Required Investor demand for digital service delivery
Force AYA/AUC Interest rates Trading volumes
Profitability investment
Continued flows into passive funds and ETFs
Shift to passive and ESG
Rise of “Generation Z” investor type
Shift into digital and alternative assets
Growing importance of retal over inst. investors
Financial deepening and globalisation
Growing self-direction of investment decisions
Increased adoption of new technology
Accelerating technology adoption
Industry disruption by Big Tech
Growing demand for personalised services
Increased data and associated use cases
Growing demand for data solutions
Emerging new risks Accelerating trust in technology solutions
Increased sourcing and partnerships Globalisation of asset flows

Loose monetary and expansionary fiscal policy Relaxation of data sharing and privacy rules
Uncertain regulation Relaxation of suitability rules

Positive impact Neutral impact Negative impact No impact Source: Oliver Wyman Positive impact Neutral impact Negative impact No impact Source: ISSA Member survey
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