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The Post-Trade Evolution

by Infosys Lodestone

How TARGET2-Securities and other market drivers are changing the post-trade world



1

Table of Contents

Summary 2

Post-trading today and tomorrow 3

- The post-trade value chain 3

- Characteristics of the post-trade business 4

- Key market drivers and the changing competitive landscape 4

- TARGET2-Securities is shaking up the industry 4

- Regulatory changes require attention 6

- Clients are becoming more demanding 6

- Competitive pressure is rising 7

Addressing the post-trade imperatives 7

- Time to take action 7

- Focusing on client services 8

- Infosys Lodestone’s service analysis model 8

- Conclusion 11

Glossary 12

About Infosys Lodestone 12

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2

Summary

The post-trade world is evolving. TARGET2-Securities is changing the industry and breaking down bar-

riers to entry. Consequently, both national and international central securities depositories as well as

custodians are finding it easier to get a foothold in local markets. Founding a central securities depos-

itory branch is also becoming an option.

At the same time, market players need to meet ever more regulatory requirements. Moreover, today’s

clients expect more from their post-trade service providers and are becoming more willing to switch

to other firms. Overall, competitive pressure is rising throughout the value chain and the industry is

consolidating. In sum, the post-trade market of the future will look very different from how it looks

today. It will also have new market actors.

In the past, most key market participants were mere providers of infrastructure in their domestic mar-

kets who enjoyed monopolistic status. Today, however, just sitting back is a risky strategy in the post-

trade market. Rather, if market participants are to maintain and gain market dominance, they must act.

In this new competitive landscape, comprehensively defining the client service model is key. Providers

need to be forward thinking when it comes to their service portfolio, service design and their result-

ing positioning in the marketplace. Those who fail to respond to changes in the post-trade environ-

ment are likely to fall behind. The only way to succeed in the new post-trade world will be to embrace

change and find new ways to serve clients.

By investigating client needs and wants, market participants can design a service portfolio that takes

into account the immediate business context – and what competitors are doing. They can also uncover

new business opportunities and establish a holistic post-trade strategy.

The starting point for formulating any strategy is client analytics. From there, one needs both to con-

sider what competitors are doing and to examine one’s own business context. Only by scrutinising

all three aspects of the service portfolio – clients, competitors and the corporate context – can one

achieve a successful post-trade strategy.



3

Post-trading today and tomorrow

“Clearstream expands its ICSD business” 1

“Euroclear shares a collateral pool with DTCC” 2

“LSE acquired Monte Titoli and plans to open a CSD in Luxembourg” 3

“BNY Mellon founds a new CSD” 4

Headlines like these show Europe’s central securities depositories

(CSDs) and custodians are rethinking their strategies.

Why? Because the post-trade world is evolving. To understand

how to succeed in the new post-trade world, one needs to take a

look at the post-trade value chain, the main characteristics of the

business and what exactly is driving the market.

The post-trade value chain

Post-trading is the power behind trading. It facilitates not only

processing of securities as well as clearing and settlement, but has

recently become more and more important as a means of provid-

ing asset services and liquidity to market participants.

Since post-trade processes vary by market, depicting a post-trade

value chain can be quite complex. It is possible to display the dif-

ferent stages of post-trade service at various levels of detail and

asset services can be positioned at different points in the chain.

Therefore, the generic value chain below will be used for the pur-

pose of this paper.

A variety of market participants are active in this value chain,

mostly CSDs, custodians, banks and transaction banks.

n CSDs: CSDs are responsible for settling trades in investors’ ac-

counts, issuing securities in the respective market and exercis-

ing the notary function. Complementary asset services such

as information services, reporting and collateral management

have become an increasingly important way for CSDs to extend

their client base and sources of revenue.

n Custodians: Custodians have many different functions, de-

pending on their business model and the market in which they

originate. Each country has its own comprehensive legislation

custodians must comply with. Custodians manage special as-

sets and provide compliance, custody, issuer, asset services and

back office services.

n Banks: From a post-trade perspective, banks may offer back

office and custodian services to other banks, asset managers,investors and issuers.

n Transaction banks: Transaction banks only exist in selected

markets. They are the result of back office outsourcing into sep-

arate entities.

The post-trade value chain can be just as complex within an in-

dividual market participant’s business. For instance, a bank might

maintain an extensive international correspondence network con-

sisting of transaction banks, custodians, sub-custodians and CSDs

to facilitate cross-border clearing and settlement. Consequently,

this highly fragmented post-trade value chain slows down the set-

tlement process, increasing both costs and risks.

1 www.clearstream.com, 18 December 20132 www.ft.com, 13 May 20133 www.globalinvestormagazine.com, 17 July 20134 www.bnymellon.com, press releases 2013

Figure 1 - The post-trade value chain, Source: Infosys Lodestone, 2014

Cash and SecuritiesManagement

Securities Processingand Clearing

Trading Clearing Settlement Asset Servicing

Trade/transactioncapturing Trade/transactionvalidation/preclearingand matching

Trade confirmation Trade internalisation/nettling Trade/transactionrouting and flowmanagement

Trade/transactioncapturing Trade/transactionsyntax andstructurevalidation

Counterpartymatching If applicablecentralcounterpartyrisk taking Trade/transactionrouting

Trade/transactioncapturing Final validation Trade/transactionmatching

Settlementoptimisation(technical netting) Liquidity check Settlement of securities inaccounts Settlementconfirmation

Cash/liquidity forsecurities transaction

Collateralmanagement Securities lifecyclemanagement Corporate action

and tax services Reporting andinformation services

Post-trading



4

Cash and SecuritiesManagement

Securities Processingand Clearing

Trading Clearing

Settlement Asset Servicing

Banks

Transaction Banks

Custodians

Central Counterparties

Central Securities Depositories

Central Banks

Banks

Post-trading

Figure 2 - Major market participants in the post-trade business, Source: In fosys Lodestone, 2014

Characteristics of the post-trade business

The traditional post-trade market can best be described in eco-

nomic terms.

n Post-trading thrives on economies of scale. The more “traffic” a

CSD has on its settlement engine, the more cost-efficient it is.

Thus, the primary aim of CSDs is to generate volume.

n CSDs have developed as domestic providers of settlement in-

frastructure. Therefore they are – like electricity companies or

telephone providers – natural monopolies. According to Scher-

er (1980, p. 482), “natural monopolies [exist] where economies

of scale are so persistent that a single firm can serve the market

at a lower unit cost than two or more firms.” 5 Also, in a compet-

itive market the initial costs of developing a settlement engine

cannot be monetised quickly at competitive prices.

n Wherever a CSD monopoly exists, the price a CSD charges

does not have much impact on a customer’s decision to buy,

because there are no alternatives in the market. Economists

would say the elasticity of demand is low and customers have a

low propensity to switch service providers.

The post-trade value chain is highly fragmented

and usually includes a complex correspondence

network of intermediaries

5 Scherer, F.M. (1980) “Industrial market structure and economic performance”

Key market drivers and the changing

competitive landscape

Infosys Lodestone has identified four key drivers of current chang-

es in the market:

n TARGET2-Securities

n Regulatory requirements

n Changing client demand

n Increased competitive pressure throughout the value chain

TARGET2-Securities is shaking up the industry

TARGET2-Securities (T2S) is one of the most important develop-

ments affecting the post-trade business at the moment. T2S is

a project of the Eurosystem to establish a technical platform for

cross-border settlement in central bank money in Europe.

CSDs will be gateways through which other market participants

access T2S services. This means that CSDs will contract with the

Eurosystem for T2S services, while banks and other market partici-

pants will continue to contract with one or more CSDs.

Post-trading thrives on economies of scale

CSDs used to be pure infrastructure providers

in their domestic markets due to their status as

natural monopolies without competitors

TARGET2-

Securities

Regulatory

Requirements

Client

Demand

Competitive

Pressure

Figure 3 - Post-trade market drivers, Source: Infosys Lodestone, 2014



5

All non-CSD participants can choose between two connectivity

models: either connecting directly to T2S (as a directly connected

participant or DCP), or connecting indirectly by exchanging T2S

instructions, queries and reports via the CSD.

Another important feature of T2S is its connectivity to TARGET2(T2), the euro cash settlement platform, which enables partici-

pants to perform seamless cash and securities settlement using

both Eurosystem platforms.

To understand the impact T2S will have on the post-trade busi-

ness, one must consider its origins, in particular the Lisbon Agen-

da, when EU countries agreed to boost the merging of markets, in-cluding capital markets. The so-called Giovannini Report identified

15 barriers that were inhibiting greater efficiency in cross-border

securities settlement. T2S was initiated to target five of these bar-

riers and to foster cross-border trading and pan-European com-

petition among CSDs and other providers of post-trade services:

1. National differences in information technology and interfaces

2. National clearing and settlement restrictions that require the

use of multiple systems

3. Absence of intra-day settlement finality

4. Practical impediments to remote access to national clearing

and settlement systems5. National differences in operating hours/settlement deadlines

T2S fundamentally affects the post-trade industry and nearly all

market participants. The impact of T2S can be summarised under

the following three headings:

1. T2S leads to harmonisation at a technical and processing level.

Under T2S, CSDs and their market participants need to adhere

to the settlement processing lifecycle and settlement day sched-

ule of T2S. Likewise, ISO20022 will standardise the way financial

T2SSecurities Settlement

Platform

T2(Euro-) Cash Settlement

Platform

CSDs, Payment Banks,

Banks, NCBs

Liquidity

Starting 2017

CSDs, Directly Connected

T2S Parties, CCPs, NCBs

Indirectly Connected

T2S Parties (ICPs)

Instructions,Queries

Responses,Reports

ISO 20022 message format andconnectivity via Value-AddedNetwork (VAN) Provider

T2S ind ependent m essageformat and connectivity mode(e.g. MT messages)

Instructions,Queries

Responses,Reports

Figure 4 - T2S interacting with T2, Source: Infosys Lodestone, 2014

institutions communicate. Thus, T2S imposes minimum harmoni-

sation requirements on the otherwise diverse processing of settle-

ment flows throughout Europe. At the same time, market partici-

pants themselves are gradually taking part in wider harmonisation

activities such as the Europe-wide initiative on standardising cor-

porate actions to increase post-trade efficiency.

2. T2S is a textbook solution for breaking up CSD monopolies.

Classical economists believe there are two ways of regulating mo-

nopolies: regulating prices and opening up markets by providing

a competitive “infrastructure”. T2S targets both, by creating a com-

petitive infrastructure on the one hand and setting baseline prices

for T2S services on the other. T2S lowers barriers to market entry

(such as the cost of developing a settlement engine) by creating a

more efficient network and outsourcing opportunities. The prices

set by T2S are close to local CSD market prices and are based on

T2S having been set up on a non-profit basis.

The loosening of their monopolistic positions gives CSDs an in-

centive to enter the custodian market and expand their service

portfolio. Likewise, custodians see the CSD market as an attractive

playing field and could start offering T2S connectivity and CSD

services.

3. Large and small CSDs can benefit from T2S network effects.

Economists distinguish between two network values: autarky

value and synchronisation value. Autarky value is the value gen-

erated by the product itself even if there are no other users. The

synchronisation value is the additional value derived from beingable to interact with other users of the product. This latter value is

the essence of network effects.6

In the context of T2S, CSDs can be seen as consumers of the T2S

platform. The autarky value of T2S lies in the possibility to out-

source settlement engines. The autarky effect is more relevant for

smaller CSDs than for bigger CSDs with highly used capacity on

their engines. Once the full spectrum of T2S is used, i.e. real-time

settlement in central bank money by more than one CSD, the syn-

chronisation value will come into effect. As a result, T2S bears pos-

itive network externalities for CSDs, such that the benefit of using

the platform rises with the number of CSDs.

T2S introduces harmonisation at a technical and

processing level

T2S addresses both price and infrastructure, as

a means of breaking up CSD monopolies

Larger and smaller CSDs can benefit from T2S

network effects, but in different ways

6 Liebowitz S.J. and Stephen Margolis,1998, “Network Externality” entry in The New Palgrave Dictionary of Economics and the Law, MacMillan.



6

Regulatory changes require attention

The financial crisis has led legislators and regulators to examine

not only front-office activities, but also post-trade processes. The

European legislator has taken a piecemeal approach by introduc-

ing directives and regulations to address specific shortcomings inthe post-trade environment that had contributed to the financial

crisis. As a result of these developments, the era of unregulated

post-trading is coming to an end.

Most prominently, services related to exchange-traded products

and major exchanges have been regulated under the Market in Fi-

nancial Instruments Directive (MiFID, which came into force on 31

January 2007) and its subsequent reform (Markets in Financial In-

struments Regulation, MiFIR, and MiFID II).7 The market for non-ex-

change traded financial instruments, on the other hand, remained

unregulated until the European Market Infrastructure Regulation

(EMIR) came into force on 16 August 2012. EMIR particularly ad-

dresses OTC derivatives and prescribes that certain classes of OTC

derivatives need to be exchange traded and cleared via a central

counterparty. Furthermore, information on previously unreported

OTC derivatives trades now needs to be reported to trade reposi-

tories to increase transparency in the OTC derivatives market.

Until recently, CSDs have been essentially unregulated, subject

only to a self-regulatory and non-binding Code of Conduct.8 Given

the systemic importance of their security settlement systems, it is

not surprising that the European legislator has decided to regu-

late this area of the post-trade market. The draft CSD Regulation

(CSDR)9 defines, among other things, the settlement cycle as T+2,

and introduces settlement penalties to strengthen settlement dis-

cipline. Access criteria to – and the fees of – securities settlement

systems need to be transparent and interoperability between in-

frastructures needs to be ensured.

What all these regulations have in common is that they aim to in-

crease transparency, provide a harmonised regulatory framework

and foster domestic and cross-border competition. Therefore

these regulations must be incorporated into market participants’

post-trade strategies and not be seen merely as an unwelcome

burden.

7 At the time of writing, MiFIR and MiFID II were expected to be adopted in Q2 2014.8 European Code of Conduct for Clearing and Settlement, 7 November 2006.9 At the time of writing, agreement was reached between the council of ministers, the European Commission and European Parliament; it remains for the “European Securities

and Markets Authority ” (ESMA) to detail technical standards.10 2013 R & M GlobalCustody.net Survey, July 2013.

The era of unregulated post-trading is over

Every market participant needs to put the regu-

latory requirements of MiFIR/MiFID II, EMIR and

CSDR on their to-do list

Clients are becoming more demanding

What about the client in the post-trade world? One can observe

several interesting changes in the way clients are behaving:

1. Increasingly, clients are demanding solutions to their ownpost-trade challenges.

These challenges include the above-mentioned new regulatory

requirements (such as additional reporting or transparency), de-

creasing margins in their retail businesses and liquidity shortage.

CSDs and custodians have already started responding to these

new client demands in their service offerings. For example, collat-

eral management is now almost a standard part of the offering of

a CSD, and the quality of this service is improving.

2. With T2S, post-trading clients are becoming more sensitive

to prices.

Until now, elasticity of demand has been low. In other words, local

monopolies have meant price has not been a factor in a client’s

decision to choose a particular supplier for post-trade services.

The propensity to switch has been low and client loyalty relatively

high. But elasticity of demand will increase when T2S opens up

markets. When clients can choose from various post-trading pro-

viders and service offerings, they will naturally make price a factor

when selecting a provider.

3. Clients consider unbundling of services.

The opening of the post-trade market leads not only to clientswho are more willing to switch their provider for all of their ser-

vices, but also to clients who prefer to select services from more

than one provider and compose their individual sourcing profile.

These clients will no longer accept entire service bundles from just

one provider. Instead, they will demand details about individual

service offerings and prices so they can compare and combine dif-

ferent offerings from custodians and CSDs.

As a result, clients in the post-trade business are becoming more

demanding when it comes to service and price,10 and the willing-

ness to switch service providers is increasing.

Clients are looking to CSDs and custodians to

help them address their own challenges

Clients will become more sensitive to prices

Clients will consider unbundling services and

will demand details about a CSD’s or custodian’s

services and prices



7

Competitive pressure is rising

Given the different forces acting on the post-trade world, it is no

surprise competition among market participants is fiercer than ever.

Building up and maintaining market dominance is the key tosuccess for a CSD

As mentioned above, CSDs thrive on economies of scale. And as

with any other infrastructure provider, achieving market dom-

inance is key to benefiting from the effects of scale. The recent

changes in the post-trade market have created competitive pres-

sures that threaten those CSDs that have traditionally dominat-

ed the market. Correspondingly, both smaller and larger market

players have gained new opportunities to expand their business.

As a result, competitive pressure is rising for all participants and

each needs to consider how to position itself in the new market

environment. What is more, competitive pressure does not only

come from CSDs, but also from custodians, in particular global

custodians.

The race for market dominance is having some interesting effects:

1. CSDs are no longer pure infrastructure providers.

Traditionally, custodians and CSDs had different business models:

CSDs focused on settlement and safekeeping as traditional provid-

ers of this infrastructure while custodians took care of other mar-

ket-specific and value-added services. However, CSDs are forced

to rethink and expand their service offering to remain competitive.

2. Exchange-driven organisations are using their CSD branch to

gain domestic and cross-border market share.

Some CSDs are part of a larger corporation, in which an exchange

is an important part of the business or the holding company.

Similarly, there have been reports of exchanges acquiring CSDs.

For these exchange-driven organisations, the CSD business is a

means to bind existing clients to the exchange business and cre-

ate cross-selling opportunities. In addition, it can be used to enter

new markets and thereby extend the overall reach of the corpo-

ration.

3. The post-trade value chain is no longer stable.

Just as CSDs are increasingly encroaching on the domain of custo-

dians, so custodians are starting to see the advantage in accessing

T2S and offering CSD services. For them, this is an opportunity to

extend their existing client base.

4. Mergers and acquisitions are valid strategic options.

Mergers and acquisitions (including joint ventures) are a way for a

market player to expand either its service offering or client base.

This option allows for a relatively quick but radical adaptation of

the business model and rapid geographic expansion. It can there-

fore offer potential “first-mover” advantage in the marketplace.

Similarly, it is a valid option for a market participant who wishes to

exit the post-trade business or establish itself as a niche provider

by focusing on a particular segment of the post-trade value chain.

Building up and maintaining market dominanceis the key to success for a CSD

Exchange-driven organisations are using their

CSD branch to gain domestic and cross-border

market share

CSDs are no longer pure infrastructure

providers

The value chain is no longer stable

Mergers and acquisitions, as well as exiting the

market, are strategic options for some market

participants

Addressing the post-trade imperatives

Time to take action

T2S was launched more than five years ago, so by now most mar-

ket participants should have completed their strategic analysis

and determined the way forward. In fact, when it comes to market

participants’ strategies, one can already see a number of trends. These include strategies for market dominance as well as shifts in

the value chain. For instance, two custodians are becoming CSDs,

a stock exchange has acquired a CSD and some CSDs are establish-

ing partnerships outside Europe (see p. 3).

Market participants who have not yet defined their strategy

should make it a priority to develop a view on their strategic direc-

tion. Watching the market evolve without taking action is likely to

lead to a situation where the competition has gained a significant

head start and is even starting to pull ahead.

Market participants who have a defined strategy need to estab-lish the roadmap towards its implementation: they need to de-

termine their service model, service offering and pricing. Ideally,

this should include potential service bundles and corresponding

pricing models.

Market participants urgently need to identify

their strategy and define their roadmap towards

its implementation

Watching the market evolve without taking

action is likely to give the competition a

significant head start such that it pulls ahead



8

Focusing on client services

The need for action is a given. But where to start?

Organisations without a post-trade strategy need to develop one

as a matter of urgency. For those that do have a strategy, the nextstep is to create a roadmap for implementing it.

Infosys Lodestone takes the approach that implementing any

post-trade strategy requires looking at client services as a whole.

By applying the “client first” principle, already common in many

other industries, a company can not only survive the turbulence in

the post-trade world, but also detect new business opportunities

and exploit competitive advantage.

Client focus manifests itself in product design – i.e. the services

a company offers to clients. Any provider of post-trade services

needs to ask itself two questions:

n Which services should be offered? This is known as “service

portfolio definition”.

n How should these services be designed? This refers to the con-

crete attributes of the service.

An organisation should try to answer both questions at the same

time, after comprehensively analysing all relevant decision fac-

tors. In client-focused product design, the value proposition of an

organisation manifests itself not only in the range of services of-

fered, but also the quality and method of execution.

In competitive markets, the client pays for core products as well as

intangible values such as service quality, user interfaces, customi-

sation, customer care, brand and corporate responsibility. Some

of these values (for example, corporate responsibility or brand)

are perhaps more relevant to retail businesses than the post-trade

business. However, they should not be neglected. Additional ser-

vices such as a client’s ability to customise products and fees, or

to work with an online user interface as well as real-time trans-

action transparency, can enhance the client experience of post-

trade users. By considering client experience as part of its service,

an organisation may depart from its status as a mere infrastructure

provider and re-position itself as a client-focused niche provider or

even a margin master.

Infosys Lodestone’s service analysis model

Infosys Lodestone has developed a service analysis model that en-

ables market participants to gain a comprehensive view of their

service portfolio. Based on this understanding, providers can then

Client focus, as manifested in an organisation’s

service portfolio and service design, is likely to

be the key to success in the post-trade world of

the future

create a roadmap for implementing their target business model. In

principle, the service analysis model assumes a business strategy

already exists. However, organisations without a defined business

strategy can also apply the principles of this model while defining

their strategy.

According to the service analysis model, an organisation’s service

portfolio should be evaluated in relation to three dimensions:

1. Clients

2. Competition

3. Context

l

l

l

l

I

IlI

c lient s

c o mpet i t i o n

c onte x t

serviceportfolio

clients. Analysis of clients‘ service requirements and expectations

using business analytics tools for categorisation of services.

competition. Analysis of the competitive environment in which

the company operates including vertical and horizontal

competitors and their service offering.

context. Analysis of the company‘s corporate and organisational

context including fit with the corporate strategy and existing

project portfolio.

service portfolio. Based on the analysis of all three layers,

an organisation’s target service portfolio can be derived.

Figure 5 - Infosys Lodestone’s service analysis model, Source: Infosys Lodestone, 2014

Clients

Starting with the outside layer of the model, client needs and

demands are the first things that need to be analysed. Taking a

client-focused approach when defining an offering is increasingly

important in the post-trade market. Indeed, information gleaned

from customer surveys is becoming more vital than ever, particu-

larly among CSDs. But it is crucial to rely not only on external sur-

veys, but also internal resources, such as insights from relationship



9

managers, bilateral meetings and clients’ use of existing services.

The analysis should be conducted in such a way that client insights

can be mapped to the service. Providers need to ask:

n Which services are essential to clients? (i.e. necessary services)

n Which services are valued most – and how do they rate against

comparable services by competitors? (i.e. unique services)

n Which services could potentially be dropped or purchased

from an agent or custodian? (i.e. add-on services)

n When are services used and by whom? (e.g. use of collateral

management)

Client analytics as an investment in long-term

post-trade success

While the above analysis can be conducted as a one-off,

Infosys Lodestone recommends using business analytics

tools to evaluate client demand on a continuous basis.

The first step in analysing client data involves scanning the

database. This allows a provider to see how susceptible its

data is to analysis – and to define the objectives of the analy-sis. This stage is essential for defining the scope of the analy-

sis – for example, deciding which client groups, systems,

services, business units or departments will be considered.

To minimise the impact on other parts of the project, the

analysis can be rolled out sequentially, from one depart-

ment to another. A market participant can start by analysing

customer relationship management and extend the analysis

to product designs, business development and operations.

In addition, such an analytical tool does not only support

the market participant’s own organisation, but can also be

adapted and offered to clients as well.

Key aspects of a complementary client

analytics project:

n Analyse existing database to establish its potential

for analysis

n Define goals and decide which parts of the busi-

ness need to be analysed

n Identify the scope of the analysis: departments,

services, systems, client groups

n Specify analytical approach and tools: users, data,

results, graphical user interface

Competition

The second layer involves analysing the competitive environment.

Questions every market participant should ask include:

n Who are the competitors?

n Which services do the competitors offer? What makes these

services attractive to clients?

n Which services have the competitors announced they are

going to offer in the future?

n What is the broader impact of a competitor’s organisation and

network (e.g. connectivity with exchanges, CCPs etc.)?

The competitive environment for post-trading market participants

can be grouped into vertical and horizontal competitors. Vertical

competitors are the direct competitors (e.g. other CSDs, other cus-

todians). Horizontal competitors are competitors along the valuechain (i.e. custodians, CSDs, banks and exchanges). Both types of

competitors should be analysed with respect to their service offer-

ing. The results should be mapped against the organisation’s own

service portfolio.

Context

The third layer of the model is the context, which can have a strong

influence on a provider’s decision-making process. The context

can be divided into three areas:

Corporate and strategic contextn What role does a particular area of the business play in the con-

text of the group? For example, is it part of an exchange-driven

organisation?

n What is the corporate strategy? How does it affect the service

portfolio?

n Has a business strategy or a T2S strategy already been defined?

How does it affect the service portfolio?

Operational context

n What capabilities does the organisation have? What expertise,

resources, IT systems?

n What are the constraints – e.g. in terms of time or resources?

How quickly can new services be developed or brought in?

Project portfolio

n What is the existing project portfolio? What services are affect-

ed by other projects?

n What is the implementation timeline for these projects?

n Where can synergies between projects be exploited and dupli-

cating work avoided?

By analysing all three layers an organisation can comprehensively

evaluate its service portfolio and identify new business opportu-

nities. Infosys Lodestone recommends conducting this three-part



10

analysis for each service offered to get a service-based view for

all three layers. When analysing cross-border services, many ques-

tions need to be repeated for every market. Once the analysis is

complete, the service map can be used to define the future service

portfolio and thus the target positioning in the marketplace.

Definition of a roadmap

Before implementing any strategy, it is important for an organisa-

tion to draw up a roadmap showing how it wants its service port-

folio to eventually look. The roadmap should also include informa-

tion about the larger context. Creating the roadmap – and putting

it into practice – has its own challenges. Here is what every market

participant needs to do:

n List what needs to be done – and when. Consider, too, how to

exploit synergies and avoid duplicating work.

n Include in the timeline milestones such as T2S go-live and mi-

gration waves, implementation dates for regulatory initiatives

and other (internal) deadlines.

n Consider operational constraints, such as resources and howthese will be addressed (e.g. by hiring and training staff ).

n Include the deadlines and resources needed for developing

and testing the necessary IT, and assess any operational risks.

n Make clear the business benefits of the whole project portfo-

lio (not just one-off projects). A holistic approach will ensure

funding is secured for the whole project and will prevent gaps

emerging between projects.

n Actively manage stakeholders throughout the implementation

phase.

n

Work with a business partner who understands the complexi-ties of the European post-trade business. Such a partner should

have experience of managing a project from beginning to end

(initial analysis to IT and operational implementation).

Infosys Lodestone’s service analysis model

provides a comprehensive view of a market

participant’s service portfolio, allowing it to

identify business opportunities and define how

it wants to be positioned in the marketplace



12

Glossary

CCP Central Counterparty

CSD Central Securities Depository

CSDR Central Securities Depository Regulation

DCP Directly Connected Party

EMIR European Market Infrastructure Regulation

Eurosystem The Eurosystem is made up of the central banks of the eurozone

ICP Indirectly Connected Party

MiFID Markets in Financial Instruments Directive

MiFIR Markets in Financial Instruments Regulation

NCB National Central Bank

T2 TARGET2

T2S TARGET2-Securities

About Infosys Lodestone

Infosys Lodestone is a wholly owned subsidiary of Infosys, a global leader in consulting, technology

and outsourcing solutions, with over 158,000 employees serving clients in more than 30 countries.

Infosys Lodestone forms the global management consulting arm of Infosys. A pioneer in breaking down

the barriers between strategy and execution, Infosys Lodestone delivers superior business value to its

clients by advising them on strategy and process optimisation as well as IT-enabled transformation.

In the area of financial services, German, Swiss and international clients have benefitted from InfosysLodestone’s extensive expertise and experience. Infosys Lodestone provides holistic support to clients

in all project phases from analysis to design, all the way to implementation and testing.

Authors

Julia Petry, Senior Principal

Julia Petry holds a master’s degree in economics and has overall experience of more than ten years in

the international financial services industry. Before joining Infosys Lodestone in 2013 she worked for a

leading IT and consultancy provider as well as for an American asset manager. Since the beginning of her

career her area of interest has been post-trading and asset servicing. She specialises in business model-ling and IT visioning projects for international and domestic operating CSDs, custodians and banks.

At Infosys Lodestone she is responsible for post-trading topics, such as TARGET2-Securities, CSDR and

asset servicing, in the financial services industry.

Sylvia Rosenzweig, Principal

Sylvia Rosenzweig has more than five years of experience in advising German and international clients in

the financial services sector. She successfully leads projects and teams of business analysts, mainly in the

areas of process analysis and design, operational readiness and cross-border post-trade harmonisation.

At Infosys Lodestone she is recognised as an expert on TARGET2-Securities and related post-trade topics.



March2014

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[email protected], www.infosyslodestone.com

© 2014 Infosys Limited, Bangalore, India. All Rights Reserved. Infosys believes the information in this document is accurate as of its publication date; such

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