The global reach of clearing and custody services

What are clearing and custody services?

As an investor, you will regularly come across the term clearing and custody services. While many people will have a broad understanding of these services, what role do they play, and how important are they?
 

Clearing services

There are two sides to every transaction, the buyer and the seller. Clearing services relate to the process of transferring funds to the seller and securities to the buyer. The final part of the clearing service is the settlement of the transaction. Over the last 20 years or so, we have seen a considerable improvement in clearing services which are now mainly electronic. Consequently, funds and securities are available to investors much quicker than they were in years gone by.
 

Back-to-back clearing

While the term back-to-back clearing can mean something slightly different in varied settings, on this occasion, it means the ability to settle multiple trades in the same or different securities on the same settlement date. Back-to-back clearing is essential for day traders, who may be in and out of numerous securities many times each day. The term can also relate to over-the-counter transactions with counterparties replicating the same transaction through a clearinghouse to reduce settlement risk.
 

Custody services

Clearing and custody services go hand in hand, but both systems need to be in sync to work efficiently. In reality, the quality of clearing and custody services will determine investor confidence and the integrity of individual markets. If clearing and custody services are inefficient, this may mean delays in delivering securities and funds and a lack of confidence. Not a good look for any investment market!
 

Global custodians

Here at GIS UK Ltd, we run highly efficient clearing and custody services utilising the latest technology and long-term relationships with global Tier-1 custodians. The ability to trade international stocks has been a godsend for many investors, but there were initial challenges connecting clearing and custodian services. Thankfully, these challenges are long gone, and it is now possible to clear international stocks as if you were dealing in the UK.
 

Transparency is the key

Obviously, the security of client assets via Tier-1 custodians is crucial. Over the years, we have built up some extremely close relationships with trusted global custodians. This allows us to settle international and domestic transactions in a similar manner and timeframe. We also appreciate clients require a high degree of transparency in their transaction history and account activity. Consequently, we provide clients with 24/7 online access to current and historic account activity and have a helpdesk available if there are any questions.
 

Extending our global reach

We continue to extend our global reach regarding clearing and custody services, all within domestic and international regulatory frameworks. The protection of client assets is always front and centre with regular tweaks and changes to regulations tightening this protective cloak. Our role is to monitor regulatory changes, adjust our systems accordingly and ensure that clients are kept up-to-date at all times. We only deal with Tier-1 global custodians, ensuring client assets are protected and settlement completed as quickly and efficiently as possible. 

We continually invest in the latest technology to accommodate different regulatory frameworks and global relationships while maintaining an extremely high degree of transparency for clients. From low latency execution services to clearing and custody services, trading platforms to settlement procedures, and direct client services, we are constantly looking at ways to improve our services.
 

Summary

Clearing and custody services are integral to the investment process, linking trade execution and settlement. The fact that many clients are unaware of the complexity of these services epitomises our often unseen work and investment in these areas. While the investment process is a well-oiled machine, it is a constantly changing animal with regard to technology and regulations. It is our responsibility to keep up with these changes.
 

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