Wall Street Custody Middle Office – A Day In The Life Of A Custody A/C Officer (Part 1)

Having worked in the Back Office and then in the Front Office within the Custodian Space responsible for Domestic and Global Trades, Cash, Income, Corporate Actions and more, I began to reflect on my experiences and decided to start something of a “Day In the Life Of…” series surrounding just “some” of the aspects of the Middle Office.
As you prepare to start your day working for a Custodian bank, it’s critical that you are mindful of the Financial Markets your clients (in my case primarily Investment Managers) are dealing in. If your clients only deal in Domestic Trading and you are in the U.S. then you know that most of your trades will be settling in the U.S. If your clients do Global Trading your trades can settle in various markets.
Because of Global Settlement, while you are sleeping say in the U.S. you may be having a trade issue in Asia. To combat this, remote access to your email and even possibly your settlement system is critical. Often trades have an indicator if they have been “PreMarched” based on the system used by your firm and in some cases if trades are not Pre-Matched, you will be able to tell exactly why “Pre-Matching” has not occured (i.e. Counterparty Short, CounterParty know Different Amount, CounterParty has no instructions, etc.) When you notice these “Pre-Matching” fail indicators early you can closely monitor those trades. If you have certain Markets that have become problematic, you can monitor trades in those markets. (Note if certain trades consistently have issues in certain Markets, you may want to get your Network Management Team involved or if that is you, you may want to yourself look into the possibility of changing Sub Custodians. I think it’s very fortunate that you are not always locked into one Sub Custodian, but may often have a choice.
In dealing with Global Settlements, it’s good to check your Trades due to settle soon are PreMatched if they should be before you leave for the day, maybe later that evening and in the AM before you reach work. It may seem a bit crazy but some markets, the earlier you detect issues the better. You are the key contact your clients have to finding out what’s going on with their Global Trades in their local markets (US, Europe, Asia, Latin America, etc.). At the start of your day, your client’s key questions relate to what can you tell them about the status of their trades. You need to be able to say if a trade is failing, why and what is being done about it. You will rely on your company counterparts in the local markets (settlement teams) for updates and answers.
During this period it is critical that you have reporting in place for yourself and your client so you can know that status of your trade activity, cash activity (will your accounts be long or short at the end of the settlement day), corporate actions, income, etc. Your reporting will help in Dashboard building/Deep Dive Analysis to determine a number of things such as consistency in trades failing done with certain counterparties or done in certain markets, Cash Projections, Corporate Actions, etc.
It can’t be overstressed that your client knows that they are your key priority.  They need to know you are going to bat for them to ensure excellence in client service. If you client is an Investment Manager, when they get new clients and need a Custodian, guess who can be at the top of the list?
When you’re looking for missing client income payments, the paying agent insists they paid, but your client’s account never got paid, Working with The Accountants, Auditors, Compliance and more in the upcoming segments.
Mike Holman

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