Global Custody Pro - 18 June 2025

ASIC, ASX, Euronext, Clearstream, ECB, DTCC and more

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Global Custody Pro
June 17, 2025 • Reading Time: 10 minutes

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📰 Welcome to the Newsletter

Welcome to Global Custody Pro! I'm Brennan McDonald, Managing Editor. I write about the global custody industry after 12+ years in financial services, including working at a global custodian. An AI voice reads the audio version of this newsletter. Have feedback? Just reply to this email or connect with us on LinkedIn.

📠 Editor’s Comment

Post-trade infrastructure is serious business. Australia’s regulator, ASIC, has turned up the heat on ASX following “repeated and serious failures.” Australia has a complex and layered regulatory environment, but that’s a call to resource appropriately and not repeatedly fumble.

When you consider global stakeholder expectations on matters like the Principles for Financial Markets Infrastructure and the expectations of multiple regulators, it’s challenging to get it right. Unfortunately for the ASX, they have become a political risk for ASIC, the RBA, the wider industry, and the government.

Table of Contents

🌏 Global Custody News

ASIC probes ASX governance and risk management frameworks

  • Driving the news: The Australian Securities and Investments Commission (ASIC) has launched an inquiry into the Australian Securities Exchange (ASX) group, focusing on its governance, capability, and risk management frameworks following what the regulator described as "repeated and serious failures". ASIC Chair Joe Longo stated, "Investors and market participants deserve to have absolute confidence that ASX is operating soundly, securely and effectively."

  • Go deeper: The inquiry will subsume ASIC's investigation into the 20 December 2024 CHESS Batch Settlement failure. It will be integrated into a broader assessment of ASX's compliance with its market and Clearing and Settlement (CS) facility licence obligations. The action follows a joint letter from ASIC and the Reserve Bank of Australia (RBA) in March 2025 expressing "increasing concern over the management of operational risk".

  • On the Radar: While the inquiry proceeds, ASIC has mandated that ASX continue to prioritise the operational safety of its current infrastructure and maintain progress on the CHESS replacement project, which targets a mid-2026 launch for Release 1. An expert panel will lead the inquiry, and a public report will be published to inform ASIC's next steps.

ASX flags higher FY26 costs for tech and risk overhaul

  • Driving the news: ASX is guiding to total expense growth of 8-11% and capital expenditure between $170 million and $180 million for FY26, driven by increased technology costs for major projects and its 'Accelerate' programme for operational risk uplift.

  • The sustained investment targets modernising core platforms and addressing operational resilience shortfalls. CEO Helen Lofthouse said at an investor event last week before the announcement of the expanded ASIC inquiry, in this area, "We're not where we want to be," following the Reserve Bank of Australia's downgrade of ASX's clearing and settlement entities' operational risk rating. The CHESS replacement project timeline was reaffirmed, targeting go-live for Release 1 in Q4 FY26 and Release 2 in 2029.

  • To manage the financial impact, ASX targets EBITDA margin expansion over the medium term, supported by an efficiency programme delivering approximately $17 million in annualised savings for FY26. A new cash equity clearing and settlement pricing policy based on a building-block model will begin on 1 July, but fee levels are not expected to change for at least two years.

Euronext engages Clearstream for clearing collateral management

  • Key Move: Euronext has partnered with Clearstream to enhance Euronext Clearing’s collateral management services, appointing Clearstream as a triparty agent for its repo and other asset class offerings, with the service scheduled to go live in November 2025.

  • The arrangement is designed to provide clients with automated and streamlined collateral management. Clearstream will handle collateral selection, valuation, substitution, settlement, and custody services to optimise margin and balance sheet.

  • This partnership supports the initial phase of Euronext Clearing’s Repo Expansion Initiative, which will start in June 2025. It is part of its 'Innovate for Growth 2027' strategy to expand its repo clearing franchise into a unified, pan-European model.

ECB: Market fragmentation demands urgent progress

  • Driving the news: The European Central Bank calls for decisive progress on completing the Banking Union and Capital Markets Union. In a speech last week, Vice-President Luis de Guindos stated that the current level of integration is "insufficient to facilitate cross-border lending, reduce intermediation costs, foster cross-border consolidation and significantly enhance financing capacity."

  • The speech identified the persistence of national-level deposit insurance as a critical failure, meaning the "link between banks and sovereigns [is] impossible to sever." This fragmentation is directly linked to varied confidence in bank deposit safety across the EU and diverging outcomes in bank resolution processes.

  • To counter the risk of European firms listing or relocating operations elsewhere, the ECB argues for harmonising regulations, removing national obstacles in tax and insolvency law, and working towards integrated supervision of EU capital markets.

SEC approves DTCC framework for substantive margin inputs

Regulatory Beat: The U.S. Securities and Exchange Commission (SEC) has approved rule changes for DTCC's clearing agencies (DTC, FICC, NSCC) to update their Securities Valuation Framework. The update formalises the governance of non-price "substantive inputs" used in margin models, aligning the framework with amended SEC Rule 17ad-22(e)(6)(iv).

  • The change introduces a formal process for FICC and NSCC to identify margin inputs as "Substantive Inputs" if they are deemed "necessary" and "consequential" to the calculation of margin requirements. The framework now mandates maintaining an inventory of these inputs and having clear procedures to address their unavailability or unreliability, including using alternative sources or different margin methodologies.

  • This enhancement is designed to strengthen the clearing agencies' ability to manage risk by ensuring margin calculations remain robust even when key data inputs are compromised. The SEC finds that the changes help assure the safeguarding of securities and funds by improving the CCPs' capacity to collect sufficient margin and limit non-defaulting members' exposure to mutualised losses.

  • Under the approved framework, any alternative risk-based margin system used as a fallback must adhere to the primary system's validation, review, and testing requirements. The framework also assigns specific responsibilities to DTCC personnel for reviewing the input inventory, implementing data quality rules, and monitoring the ongoing reliability of each substantive input.

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🚀 Digital Asset News

Copper partners with Yuma for institutional TAO staking

  • Key Move: Digital asset service provider Copper has partnered strategically with validator Yuma to provide institutional clients with staking services for the TAO token directly on the Copper platform. The collaboration aims to offer institutional investors staking with what is described as robust digital asset protection.

  • The integration of Yuma with Copper’s multi-party computation (MPC) technology and settlement infrastructure is stated to ensure enhanced accessibility to staking rewards and provide advanced security for participating institutions.

  • The partnership aims to facilitate institutional investor participation in the TAO ecosystem. It combines Yuma’s institutional-grade validator infrastructure with Copper’s established custody and settlement network. Staking services are not available in the United Kingdom through Copper.

Deutsche Bank, Axelar, Memento unveil tokenisation blueprint

  • Driving the news: Deutsche Bank, Memento Blockchain, and Axelar Network developer Interop Labs have released a litepaper detailing their Digital Asset Management Access (DAMA) 2 project, a blueprint for a next-generation institutional asset tokenisation and servicing platform. The design proposes a Blockchain-as-a-Service model using a privacy-enabled Layer 2 smart contract environment from Memento, built with ZK Chain technology, and managed multi-chain token issuance via the Axelar Network.

  • The platform is designed to provide asset and wealth managers with user-friendly tools for token issuance, compliance, and asset servicing without requiring in-house blockchain development expertise. By simplifying workflows, it aims to lower upfront investment and accelerate the adoption of tokenised funds, stablecoins, and other real-world assets.

  • The DAMA 2 platform's minimum viable product (MVP) launch is targeted for the second half of 2025. The project aims to provide financial institutions with a framework to access the significant global wealth expected to shift towards digital-native generations.

The Intelligence Network

Most firms are a disconnected brain - AI is the connective tissue

www.brennanmcdonald.com/p/the-intelligence-network

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