Custodians: what has changed since the 17th century?

Auteur
Thijs van der Valk
Categorieën
Publiceer datum

In 1602 the Dutch East India Company was the first company to offer its shares to the general public. This turned out to be a huge step in financial history as it was the world’s first Initial Public Offering, or in short: IPO. The buyers of shares themselves had no proof of ownership until in 1606 the city messenger of Enkhuizen, Pieter Harmensz, bought a share of the VOC. As proof of this transaction, he received a piece of paper, a receipt which, although technically not a proof of ownership, will be regarded as the world’s oldest share certificate. Actual ownership was recorded by the bookkeeper in the company’s ledger and contained all accounts of the shareholders. If a share was bought or sold, the buyer and seller had to appear before the bookkeeper and their accounts were credited or debited for the amount concerned.

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As we all know, many more companies followed the footsteps of the VOC. Publicly traded shares became the standard for investors, just as other detrimental ingredients of public investing came to see daylight. Many of these, in some way or another, are still around today. The relevance of this all? Well, many of our clients still deal with the challenges that arose in the 17th century. Let’s focus on one specific group of clients that VI Company services today: custodians.

Although the concept of physical shares publicly trading hands, has not changed since the VOC, the infrastructure that supports did change. Nowadays, all kinds of middlemen are involved. One of them is the custodian who has the duty of safeguarding your shares from being stolen or lost. In addition, the custodian relieves the customer by offering all kinds of services like account administration, transaction settlements, and FX hedging. You can imagine that the custodian plays an important role in making investing as frictionless as possible.

Over time, with the rise of modern-day investing, the role of technology has increased tremendously. Where the 17th-century ledger was a paper book, nowadays security holdings are stored digitally in data lakes running in the cloud. Customers of custodians want direct access to their data and set requirements for data security. This presents custodians with major challenges but can also be an opportunity to differentiate themselves from competitors. By providing customers with great reporting and data analysis tools, custodians are more than old-fashioned vaults.

We at VI Company believe it is our role to help our customers find the right tools to help them meet these challenges. This starts with our Strategy and Consultancy team understanding what our clients try to achieve. It is the most important step towards strategic advice and a good solution. Only then follows a useful advice. Sometimes this comprises of an extensive journey, in which we design, build and maintain a specific service for an organization or business team. We do this, for example, for custodian BNP Paribas Securities Services. And sometimes it is more specific, for example when our UX designers and data engineers create a new prototype dashboard or smart performance attribution module, as we do for other clients.

Want to know more about what we did for custodian BNP Paribas Securities Services? Check our reference case here or contact Nick Verschoor.

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