Global Custody Pro - 03 October 2025

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Welcome to Global Custody Pro, read by custody professionals like you. I'm Brennan McDonald, Managing Editor. I write about the global custody industry, having spent over 12 years in financial services, including working at a global custody bank. An AI voice reads the audio version of this newsletter. Reply to this email with feedback or connect with us on LinkedIn.

Table of Contents

• 🌏 Global Custody News

  • European CSDs Cost 65% More Than US Peers

  • Asia-Pacific Markets Target 2028 for T+1 Settlemen …

  • ISDA Explores Tokenised Collateral for Derivatives

  • Citi Rolls Out Single Event Processing Technology

• 🚀 Digital Asset News

  • Bullish launches US digital asset trading

  • Aleo and Paxos launch privacy stablecoin

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🌏 Global Custody News

European CSDs Cost 65% More Than US Peers

European Central Securities Depositories impose significantly higher costs than international peers, undermining competition and investor returns, according to research published by AFME on 1 October. The study, conducted with consultancy The ValueExchange, found that European settlement fees average 65% higher than in North America, with investors paying €0.38 per instruction compared to approximately €0.23 in the United States. Safekeeping charges, often the single largest invoice item, are between 19% to 650% higher than American equivalents.

Despite the TARGET2-Securities platform's aim to reduce settlement costs, CSDs continue adding processing fees that keep costs well above targeted levels. The study revealed that larger CSDs do not pass scale efficiencies to users, with some of the largest operators charging higher fees than smaller peers. Fee schedules lack standardisation, with invoices ranging from 38 to 242 line items, making costs difficult to compare and reconcile. Adam Farkas, CEO of AFME, stated that the current situation erodes investor returns and makes Europe less attractive for issuers and investors.

AFME identified seven near-term measures to improve transparency and reduce costs, including harmonising fee schedules, requiring transparent invoices with clear separation of T2S charges, ensuring fair treatment of all participants, and providing at least three months' notice for fee changes. The organisation calculated that applying North American pricing models could save market participants up to €1 billion annually, with safekeeping savings potentially reaching 96%. The study highlighted a major challenge in tracking cost evolution due to lack of publicly available historical data.

Asia-Pacific Markets Target 2028 for T+1 Settlement

Global financial firms are significantly more prepared for Asia-Pacific's transition to next-day settlement than comparable markets were at similar stages, according to The ValueExchange survey released in September 2025. The research found 74% of 244 market participants actively engaged in T+1 preparations, compared to 57% readiness in the UK and 41% in the US at equivalent pre-transition timeframes. However, the survey revealed that approximately half of North American and European allocation processes would require acceleration, whilst 70% of Asia's settlement instructions currently operate on timelines incompatible with T+1.

The research identified foreign exchange management as the primary transition risk, with 88% of respondents citing T+0 currency availability as essential. The ValueExchange found timing challenges dominate concerns for freely-traded currencies, whilst regulatory restrictions on currency movements present the biggest obstacle for controlled currencies like the Indonesian rupiah, Malaysian ringgit, and Vietnamese dong. Europeans face the most acute FX timing risks, though 37% of North American respondents already outsource currency management to global custodians.

Survey participants indicated 2028 as the median preferred transition year, with investors pushing for earlier implementation whilst custodians favour phased migrations through 2030. The ValueExchange found 80% of Asia-Pacific respondents expect financial market infrastructures to lead the initiative, whilst 94% of international respondents look to trade associations for coordination. Despite short-term concerns about increased trade fails and operating costs, expectations for T+1's long-term impact remain strongly positive across capital efficiency, fund performance, and market access metrics.

ISDA Explores Tokenised Collateral for Derivatives

The ISDA is working to enable tokenisation of assets for use as derivatives collateral, aiming to address liquidity challenges exposed during recent market volatility. ISDA Chief Executive Officer Scott O'Malia said the initiative responds to lessons from the 2020 dash for cash and the 2022 UK gilt market crisis, when variation margin spikes caused liquidity to drain rapidly from markets. According to the ISDA Margin Survey, cash as variation margin collateral declined from 80.0% in 2020 to 68.3% in 2024, while government securities rose from 12.7% to 17.8% over the same period.

The association said progress in expanding collateral types has been limited by economic, capital and operational constraints, with some counterparties reluctant to accept anything beyond cash and government securities. O'Malia noted that money market funds offer a potentially stable collateral source, but current workflows require assets to be posted as cash and then transformed by custodians, increasing liquidity and operational risks. Tokenisation could enable money market fund shares to be directly posted and returned without liquidation, while also overcoming physical delivery challenges for gold.

ISDA said it will focus on two areas: establishing clear legal and regulatory frameworks to enable cross-border adoption and institutional deployment, and working with industry participants to establish interoperability through common data models and smart contract standards. The association said several ISDA working groups are exploring tokenized assets as collateral, with the Common Domain Model playing a role in establishing data standards to mitigate technological fragmentation.

Citi Rolls Out Single Event Processing Technology

Citi Investor Services announced it has launched Single Event Processing technology, which consolidates the bank's global and direct custody infrastructure into a single processing platform across its network of over 100 markets, including more than 63 proprietary direct custody markets. The company said the platform processes asset servicing transactions through a unified flow.

The technology represents a shift from processes that have traditionally been manual and fragmented. According to the company, event creation now takes minutes compared to hours, whilst payments are processed in under five minutes. Chris Cox, Head of Investor Services at Citi, said the bank is augmenting its global network to deliver real-time cash, liquidity and asset servicing. Amit Agarwal, Head of Custody at Citi Investor Services, said the company is making investments to transform infrastructure and modernise applications.

SEP was introduced in select European markets and with International Central Securities Depositories before the North America rollout. The company said it plans to extend the technology to the rest of its custody network by 2026, with the majority of custody flows expected to be processed using SEP by that date. The technology also supports tighter cut-off instruction deadlines, including same-day processing.

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🚀 Digital Asset News

Bullish launches US digital asset trading

Bullish launched US spot digital asset trading on 1 October 2025 in 20 states after receiving regulatory approval from the New York State Department of Financial Services. The exchange enters a market where competitors including Coinbase, Kraken, and Gemini already hold established positions with US institutions and retail traders.

The platform reports $1.5 trillion in cumulative trading volume since late 2021 and ranks in the top ten exchanges globally for Bitcoin and Ether volume, according to CoinMetrics data cited by the company. Bullish did not disclose projected US trading volumes or current market share. The exchange combines a central limit order book with automated market maker technology and offers zero maker fees for institutional accounts and zero fees for retail accounts, a pricing model that foregoes near-term revenue to build market share.

Initial institutional partners include Nonco and BitGo. The exchange is available in 20 states including New York, California, and Florida, with access in remaining states pending additional regulatory approvals. The company did not specify a timeline for nationwide availability.

Aleo and Paxos launch privacy stablecoin

The Aleo Network Foundation announced a partnership with Paxos Labs to launch USAD, the first privacy-preserving US dollar stablecoin. The stablecoin combines smart contract programmability with end-to-end encryption, ensuring sensitive information including participant identities and transaction amounts remains confidential whilst operating on a layer 1 blockchain.

The partnership brings together Aleo's zero-knowledge cryptography infrastructure with Paxos Labs' enterprise stablecoin issuance capabilities, backed by regulated institutional-grade assets. Stablecoin adoption has surged, with transaction volume reaching $27.6 trillion in 2024, exceeding the combined annual volumes of Visa and Mastercard by over 7%. Regulatory momentum increased following passage of the Genius Act in July 2025, which established a framework for stablecoin oversight in the United States.

The USAD launch builds on the Foundation's participation in the Global Dollar Network, a Paxos-founded consortium, and follows recent partnership announcements with Binance Alpha, Revolut, Worldpay, and Request Finance. The Aleo Network is backed by investors including Andreessen Horowitz, Softbank, and Coinbase Ventures, whilst Paxos Labs brings a track record of over $120 billion in tokenisation.

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