The Role of Custodians in the Share Market: What You Need to Know

Custodians are pivotal in safekeeping and managing assets for institutional investors. They act as guardians, responsible for holding securities, processing transactions, and providing essential reporting services. Custodians play a crucial role in maintaining the integrity and security of financial assets, ensuring compliance with regulations, and facilitating smooth operations within the financial ecosystem. Their role is integral in maintaining trust and confidence among investors and market participants.

At a national level, custodians often include major banks and financial institutions that offer custodial services to institutional investors within a specific country. These custodians ensure compliance with local regulations and provide services tailored to the domestic market. They are known as regional/local custodians, act as primary custodians for the clients from their market and act as a secondary custodian to the global custodians' clients.

On an international scale, there are global custodians who operate across multiple jurisdictions and provide custodial services to institutional investors with investments in various countries. These global custodians offer a wide range of services, including cross-border settlement, asset servicing, and reporting, to facilitate the complexities of international investing and they have presence in all major financial hubs. They act as a primary custodian for their clients in regions where they do not have presence, they offer through regional custodian or sub custodian.

A custodian in finance is like a secure vault for investors assets. They safeguard and manage these assets on behalf of institutional investors, ensuring compliance with regulations and providing essential services. For example, when a pension fund invests in stocks, a custodian bank securely holds these stocks, handles transactions, and manages related paperwork.

Services offered by custodians.

• Safe keeping of assets.

• Manages settlement.

• Ensures cash and securities are funded to carry out the settlement.

• Receive and process settlement instructions.

• Settlement confirmation settlement.

• Manages corporate actions.

• Managing stock warrants and options.

• Managing security lending and borrowings.

• Tri-party collateral arrangement.

• Proxy voting.

• Reporting services.
  

One unique aspect of custodians is their role in proxy voting. Custodian banks often hold shares on behalf of multiple clients, so they're responsible for coordinating and executing voting instructions during shareholder meetings. This ensures that investors' voices are heard in corporate governance matters, adding an extra layer of accountability.

Custodian service is like Night's watch by showing commitment to safeguarding assets with unwavering dedication, even in the face of challenges.