Q+A: New Technology, New Markets For Global Custody

Peter Cherecwich, head of global fund services and executive vice president of Northern Trust in Chicago, says securities services providers are partnering up to meet growing demand worldwide.

Global Finance: What are some of the challenges that securities services providers face in the current market environment?

Peter Cherecwich: We have a lot of challenges, honestly. Let’s start with technology. All of us need to figure out how to make investments in things like blockchain that are coming down the path, and what it may do to the industry, while continuing to invest in things that are here right now, like Big Data solutions.

GF: What is the potential impact of blockchain going forward and when do you envision its promise being turned into practical solutions?

Cherecwich: We believe that in the near term, blockchain will come to things like securities lending, bank loans, over-the-counter [derivatives], and other types of activities that are more peer-to-peer [than other finance functions]. It will be a good long while before it really disrupts equity markets and things like that. We just think it will go in stages, and we need to be ready.

GF: What are you doing to develop new offerings that make use of Big Data or otherwise leverage new technologies?

Cherecwich: What we are trying to do is come up with new products that can allow our clients to ask better questions, smarter questions. We’re taking data from our clients and pairing it up with the data that’s available in the universe so clients can not only ask better questions, but find better answers.

GF: How should companies like yours address these challenges? What’s new besides technology?

Cherecwich: What is new for us, and this goes back to the technology piece, is that we have had an epiphany that you don’t have to invent in order to innovate. The reality is that we will never be able to have the speed to get all the products that we need to get out to our clients.

We have to figure out what we want to build, who to partner with, and then integrate. We can bring innovative solutions to our clients via partnerships versus trying to build everything. And more importantly, we can actually share revenue, so that our partners are motivated as well. That is a big sea change in terms of how custodians have acted in the past.

GF: Do you see more demand among corporate entities for global platforms than there used to be?

Cherecwich: Absolutely. As organizations are investing globally more and more, they travel, they know each other, and they want to make sure [to make the most of current opportunities].

Going back to blockchain—if you are investing in a particular technology, can they take advantage of it? Who is going to be first in line, and who is going to be last in line? For us, if we are going to implement something, everybody gets it.

GF: Do you see an opportunity in new sovereign wealth funds that are being formed, like the one that Saudi Arabia announced in January?

Cherecwich: It’s a big opportunity for all of us. They really need all of the services that custodians provide today.

GF: What other opportunities do you see for securities services providers, and how are you adapting to new regulatory and governance rulings?

Cherecwich: Governments around the globe are taking asset management in-house. It’s an evolution of the market, to be honest. But they are also realizing that they need infrastructure to support that.

That is where we come in, because building that infrastructure is hard. It takes scale and it takes time and money. And we can do it much faster and cheaper than they can.