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Global Custody Pro - 13 August 2025

Global Custody Pro - 13 August 2025

SGX, Overnight Trading, Paxos, Bakkt, Zodia and more

Global Custody Pro
August 12, 2025 • Reading Time: 10 minutes

📰 Welcome to the Newsletter

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. Have feedback? Just reply to this email or connect with us on LinkedIn.

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🚀 Digital Asset News

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🌏 Global Custody News

WFE Urges Tax Reform for Markets

The World Federation of Exchanges has outlined six key tax policy recommendations aimed at fostering investment and enhancing capital formation in a policy paper dated 12th August 2025. The proposals include eliminating financial transaction taxes, providing tax relief for pension savings and retail investment accounts, and removing taxes on public listings.

The organisation, which represents providers of over 250 market infrastructures globally, argues that current tax policies create unnecessary barriers to market entry and discourage companies from seeking public financing. According to the document, member CCPs and clearing services collectively ensure risk takers post $1.3 trillion in resources to back their positions, whilst exchanges covered by WFE data see approximately $124 trillion in annual trading volume.

The recommendations extend to incentivising clearing activities, simplifying tax reporting processes, and removing cross-border investment barriers. The WFE emphasises that implementing these measures would create an investment-friendly environment that strengthens capital markets, supports sustainable growth, and enhances international competitiveness.

SGX posts record profit, signals dividend growth

Driving the news: SGX reported its highest-ever revenue and net profit for FY2025, with net revenue rising 11.7% to $1,298 million and adjusted net profit climbing 15.9% to $610 million. The exchange benefited from strong growth across all business segments, with equities cash revenue increasing by 19% and OTC FX revenue surging by 25%. The multi-asset strategy, which incorporates derivatives, experienced a 17.2% daily average volume increase across asset classes.
By the Numbers: The proposed final quarterly dividend of 10.5 cents per share represents a 17% year-on-year increase, bringing the full-year dividend to 37.5 cents (+9%). SGX is committed to increasing dividends by 0.25 cents every quarter from FY2026 to FY2028, subject to earnings growth. Operating margins expanded significantly, with the adjusted net profit margin reaching 47.0%, a 1.7 percentage point increase from the previous fiscal year.
Why it matters: OTC FX is emerging as a significant growth driver, with SGX achieving the highest year-on-year average daily volume growth (+28%) among its peer exchanges and now ranking among the top three exchange-backed FX venues globally. The platform expects OTC FX to contribute mid-to-high single-digit percentages to Group EBITDA. This positions SGX as a major player in the $7.5 trillion daily global FX market.
The big picture: SGX is accelerating technology investments with capital expenditure (capex) guidance of $90-95 million for FY2026 to modernise infrastructure, while maintaining cost discipline with expenses rising by just 1.6% in FY2025. The exchange targets 6-8% compound annual revenue growth over the medium term. Management's confidence in sustainable growth is reflected in the three-year dividend commitment, which signals strong expectations for cash generation.

Overnight Trading Costs Higher for Retail

Nasdaq research reveals that retail investors face trading costs three to six times higher during overnight sessions compared to regular market hours, with effective spreads widening substantially when exchanges are closed. According to the analysis by Nasdaq Chief Economist Phil Mackintosh, overnight trading between 8 p.m. and 4 a.m. Eastern accounts for only 0.2% of total equity market volume, yet lacks critical investor protections, including the National Best Bid and Offer (NBBO) and order protection rules.

The research, which analysed multiple academic studies, found that 80% of overnight trading volume originates from the Asia-Pacific region, with Korean investors accounting for half of that activity. During overnight hours, quoted spreads increase by 40% for frequently traded stocks and up to 144% for less liquid names, while market depth drops to 47% of regular hours levels. The data show that most overnight executions occur at or worse than the best quoted price, with almost no orders receiving a price improvement.

As major exchanges including Nasdaq, NYSE, Cboe and the London Stock Exchange advance plans for extended trading hours, the findings raise questions about market structure and investor protection. A European study cited in the research suggests that longer trading days might harm market quality by dispersing liquidity, indicating that concentrating trading hours could improve execution costs for all participants.

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🚀 Digital Asset News

Banks pause tokenised securities in Germany after ECB trials

Major financial institutions have ceased issuing tokenised securities in Germany following the completion of European Central Bank trials, leaving the market to smaller players despite record issuance activity, according to Deka Group's Digital Asset Monitor. The report reveals zero institutional issuances in the first half of 2025, marking a stark reversal from the previous period when banks actively participated in ECB testing programs.

The monitor reveals that while 40 new issuances were recorded – the highest number since the introduction of the Electronic Securities Act (eWpG) – the total volume collapsed by 84% to €98 million from €615 million in H2 2024. The report states these companies "successfully tested the current technical capabilities for settling the cash and security legs of tokenised securities", but are now "awaiting further innovations and clarification of the regulatory framework" before proceeding with additional tests or infrastructure development.

Looking ahead, the report highlights regulatory uncertainty as the primary deterrent, with the Basel Committee's proposed "significantly increased capital requirements" for tokenised securities on public blockchains and EIOPA's recommended 100% capital requirement potentially making these investments "highly capital-intensive and therefore unattractive." Only Berlin Hyp AG, among institutional issuers, has issued securities with a maturity beyond January 1, 2026, when new Basel guidelines take effect, notably using a private blockchain to avoid potential capital charges.

Paxos Seeks Federal Trust Charter from OCC

Paxos, the regulated blockchain infrastructure and tokenisation platform, announced today it has applied with the Office of the Comptroller of the Currency to convert its New York state trust charter to a national trust charter. The move would place the company under federal oversight while maintaining its commitment to regulatory compliance standards.

The company has operated under New York Department of Financial Services supervision since 2015, when it became the first blockchain and tokenisation company to receive a limited purpose trust charter. Paxos issued the first regulated stablecoin in 2018 and currently issues multiple regulated digital assets, including PayPal USD (PYUSD), Pax Dollar (USDP) and Pax Gold (PAXG). The platform partners with global enterprises including PayPal, Interactive Brokers, Mastercard, Mercado Libre and Nubank.

Upon approval, Paxos would operate under OCC regulation in the United States alongside existing oversight from FIN-FSA in Europe, MAS in Singapore and FSRA in Abu Dhabi Global Market. CEO Charles Cascarilla stated the national trust bank charter application continues the company's decade-long commitment to regulatory oversight and compliance, positioning the move as essential for offering enterprise partners and consumers trusted blockchain infrastructure.

Bakkt Q2 Revenue Up 13%, Names New CEO

Bakkt Holdings reported second-quarter revenue of $577.9 million, up 13.3% from a year earlier, driven by increased crypto trading activity. The digital asset platform narrowed its net loss to $30.2 million from $35.5 million in the prior year period, while adjusted EBITDA loss improved 29.9% to $12.6 million. The company noted that consensus estimates were not available for comparison.

The company is executing a strategic transformation, having acquired approximately 30% of Tokyo Stock Exchange-listed MarushoHotta Co., which will be renamed bitcoin.jp pending shareholder approval, marking Bakkt's entry into the Japanese market for its Bitcoin treasury strategy. Bakkt also completed a $75 million capital raise to fund Bitcoin purchases and signed agreements to divest non-core assets, including the completed sale of Bakkt Trust to Intercontinental Exchange and a pending sale of its Loyalty business to Roman DBDR Technology Advisors.

Looking ahead, new CEO Akshay Naheta outlined three strategic pillars: enhancing the company's brokerage-in-a-box solution with technology upgrades in the second half of 2025, launching the Bakkt Agent stablecoin payments solution through its partnership with Distributed Technologies Research Global, and expanding the Bitcoin treasury initiative in markets with structural advantages. The company will conduct a comprehensive review of its cost structure in the upcoming quarter to accelerate its path to profitability.

Zodia Custody Partners with Membrane Labs

Zodia Custody, the institutional digital assets platform backed by major global banks, announced a strategic partnership with Membrane Labs to integrate loan management infrastructure into its collateral management workflows. The partnership will see Zodia embed Membrane's technology to power institutional-grade financing workflows for digital assets.

Membrane's infrastructure supports the complete lifecycle of institutional lending transactions from origination to repayment, providing real-time risk visibility, reconciliation, and counterparty coordination. Steven Taylor, Head of Collateral Solutions & Strategic Product Development at Zodia Custody, said the partnership gives clients "the confidence and efficiency they expect, combining secure custody with sophisticated collateral management automation."

The collaboration brings together Zodia's regulated custody framework, with registrations in the UK, Ireland, Luxembourg, and Hong Kong, and Membrane's specialised post-trade applications. Carson Cook, CEO of Membrane Labs, described the partnership as "a meaningful step in bringing traditional finance workflows to the digital asset space."