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emerging and frontier markets, there are still many
countries that do not yet qualify according to the cri-
teria of economic development, market size, liquidi-
ty, and accessibility, despite having stock exchanges.
“There would indeed be cases where we would not
yet enter a given market,” she says. “This is due to
factors such as smaller market cap, low liquidity, low
volume, very little or nascent market infrastructure.
These markets would also pose higher risk of post
trade inefficiencies”. Even with the benefit of scala-
ble and highly market-adaptable custody platforms,
she says, “The cost of entry can still be prohibitive
against the business case and limited client demand,
when considering the capital costs of setting up local
branches or subsidiaries, together with onshore
“You can have a market which operationally is not in
good shape, but where there are a few hidden gems
that are worth buying.”
MARK MOBIUS, CO-FOUNDER, MOBIUS CAPITAL PARTNERS
operations and infrastructure.”
For Harwood-Jones, there are instances where a
local market and regulatory environment, “may not
meet our strict internal standards in terms of asset
safety protection, financial crime compliance, an-
ti-money laundering, or ensuring that local regula-
34
Global Custodian
Winter 2018
tions do not have unnecessary barriers for cross-bor-
der flows.”
As countries move through the stages of devel-
opment, she suggests, “They would become more
transparent and attractive to foreign investors and
their service providers, such as Standard Chartered,
who can share their expertise in international best
practices via their thought leadership and advocacy
activities.”
Engagement in a particular market may not be
an all-or-nothing proposition. “Given the level of
international regulations to protect the investor,
if I’m not happy with a market infrastructure and
capability to start active investor services, I may
nevertheless establish some presence as I see things
moving,” says Bruyns. “But I’ve also had demands for
a market where I’ve said, ‘I can’t provide the desired
level of service in this market for these reasons, so if
you come into this market, there is a risk on you that
you have to make sure is properly documented and
contracted with your investors.”
“As a custodian, I don’t necessarily see the end-cli-
ent,” says Bruyns. “I may not know if it’s a big private
investor with a large portfolio who wants to be first
into the market or if it’s an alternative investment
fund or a pension fund, unless the bank tells me.
If they’re a long-term investor and all they want is
custody and coupon collection on government secu-
rities, we may be able to provide that.”