The ever increasing demand for investment in technology in the international custody and settlement business was highlighted by Cedel Group's announcement that it was raising more capital.
The Luxembourg-based operation, set up by over 60 major financial institutions, wants to raise up to $300m by means of a rights issue.
In addition to meeting the challenges of the euro, it is to finance the provision of real-time and continuous settlement, and custody services with automated processing and integrated databases, as well as improved customer communications.
Cedel's chief executive officer André Lussi points to increasing competition. This has resulted in reduced margins for market participants. This is particularly evident in clearing and custody where many financial institutions have exited to avoid the high cost of investment in new systems."
Cedel plans a new securities processing subsidiary, which in adition to improving services and products, will result in reduced industry costs and risk. The group says its services will be "at the cutting edge of technology".
With its traditional competitor Euroclear in Brussels, Cedel is facing increased competition from the central securities depositaries, based in local markets, a number of which are determined to increase their settlement activities.
Cedel Bank, which contains the core clearing and settlement business, is one of the five subsidiaries of Cedel International, an unquoted holding company formed in 1995.
Cedel Bank was formed in 1977 by 66 major financial institutions as a clearer to reduce risk in settlement of cross-border securities trading, particularly in the Eurobond market. Trades of up to $100bn are settled in a business day and 1996 turnover was over $13trn."