ISDA, HMT, CCPs, Standard Chartered and more

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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

  • ISDA backs BoE CCP rules, seeks stronger capital b …

  • ISDA backs UK CCP reforms with cautions

• 🚀 Digital Asset News

  • Standard Chartered custodian for 21shares crypto E …

  • Mayer Brown analyses FCA tokenisation proposals

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🌏 Global Custody News

ISDA backs BoE CCP rules, seeks stronger capital buffers

ISDA has broadly endorsed the Bank of England's consultation proposals to establish a UK rulebook for central counterparty clearing houses, whilst calling for significantly stronger capital buffers and expanded collateral eligibility. The trade body, representing over 1,000 member institutions across 76 countries, supported the majority of the proposals but raised concerns about implementation timelines and capital sizing methodologies.

ISDA argued the second tranche of skin in the game—capital that CCPs must contribute to cover losses—should be calibrated at a minimum of 8-10% of the default fund rather than simply matching the first tranche as proposed. The association presented data showing UK CCPs maintain substantially lower capital ratios than international peers, with skin in the game representing just 1-7% of default funds at major UK CCPs compared to ratios exceeding 200% at some overseas counterparties. ISDA questioned whether the proposed two-year implementation period for the measure was necessary, noting the change does not involve IT system development.

The response advocated for regulatory changes to permit tokenised assets, exchange-traded funds and money market funds as eligible collateral, subject to robust risk management standards including appropriate haircuts and concentration limits. ISDA recommended a phased sandbox approach for testing tokenised collateral and called for enabling cross-CCP portfolio margining arrangements to support broader gilt repo market resilience. The association emphasised that any cost increases from regulatory changes should be subject to rigorous transparency frameworks to avoid general clearing cost increases in the UK.

ISDA backs UK CCP reforms with cautions

ISDA has endorsed His Majesty's Treasury's proposed reforms to the UK's central counterparty regulatory framework, according to feedback submitted on two draft statutory instruments. The association, representing over 1,000 member institutions from 78 countries, supports the shift from equivalence-based assessments towards a deference-based approach for overseas CCPs, though it notes the draft regulations do not reflect CCP views and many CCPs disagree with the positions.

ISDA welcomed the simplification whilst raising concerns about specific provisions in the CCPs (Amendment) Regulations 2025. The association questioned whether the Bank of England should be able to revoke CCP recognition where "desirable" rather than "necessary" for financial stability, and sought clarification on requirements for overseas CCPs to provide unconditional consent for information sharing. The feedback acknowledged that shorter time-to-market for CCPs benefits the industry but emphasised the importance of adequate supervision given clearing members' limited insight into CCP operations.

The association proposed an alternative approach to Qualifying CCP status that would allow firms to determine QCCP eligibility based on their own analysis of compliance with Principles for Financial Market Infrastructures, removing the Bank from the critical path. ISDA noted uncertainty about whether the new overseas CCP regime will replace or supplement the current framework, with further HMT publications expected to bring the changes into force alongside wider reforms.

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🚀 Digital Asset News

Standard Chartered custodian for 21shares crypto ETPs

Standard Chartered announced its appointment as digital asset custodian for 21shares, one of the world's largest issuers of crypto Exchange Traded Products, the company said in a statement. The partnership will utilise Standard Chartered's newly established digital asset custody service based in Luxembourg and registered with The Commission de Surveillance du Secteur Financier (CSSF).

The collaboration addresses institutional client demand for secure digital asset market participation. 21shares, which listed the world's first physically-backed crypto ETP in 2018 and offers one of the largest suites of crypto ETPs globally, will leverage Standard Chartered's global expertise as a leading international cross-border bank. 21shares is a subsidiary of FalconX, one of the world's largest digital asset prime brokers.

Margaret Harwood-Jones, Global Head of Financing and Securities Services at Standard Chartered, said the bank is excited to offer digital asset custody services to ETP providers and other institutions. Mandy Chiu, Global Head of Product Development at 21shares, described the partnership as an important milestone in bringing institutional-grade infrastructure to the digital asset ecosystem, noting Standard Chartered's expertise in cross-border banking, risk management and custody.

Mayer Brown analyses FCA tokenisation proposals

Law firm Mayer Brown has published a detailed analysis of the UK Financial Conduct Authority's consultation paper on fund tokenisation and direct-to-fund dealing, which was issued on 14 October. The analysis, authored by partners Musonda Kapotwe, Tim Nosworthy and Oliver Yaros, outlines 10 key implications for UCITS management companies, UK Alternative Investment Fund Managers managing authorised funds, and their depositaries. The regulator confirms that existing collective investment schemes rules in its Handbook and the open ended investment company regime remain sufficient to support tokenised unitholder registers for authorised funds, Mayer Brown noted.

The consultation introduces an optional direct-to-fund dealing regime that removes the AIFM's principal intermediation for unit dealing, instead allowing the fund or depositary to issue and cancel units directly with investors through a dedicated issues and cancellations bank account, according to Mayer Brown's analysis. This approach aligns the UK with models used in Ireland and Luxembourg, reducing AIFM capital and client money complexity whilst dovetailing with tokenised dealing. The regime requires robust controls including smart contract whitelisting, aggregate position monitoring across multiple wallets, and enhanced anti-money laundering verification processes, the law firm said.

Mayer Brown highlights that the FCA is considering interim waivers or sandbox routes to permit usage of qualifying stablecoins or tokenised deposits for on-chain cash settlement whilst broader stablecoin regulation is finalised. The regulator is also contemplating rule changes to create narrowly scoped permissions for holding ancillary digital assets strictly for operational purposes, with tokenised money market fund units as collateral identified as a near-term use case, the analysis states.

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