Citi Securities Services Evolution 2025

6 | Securities Services Evolution 2025 The FMI Agenda 2025 sees FMIs at a critical juncture. During an era where resilience in all forms is of paramount importance, the fact that the FMI platforms that support 40% the world’s capitalization are under transition 1 is a major risk factor for the global industry. For the FMIs handling this change, these much-needed transitions pose new questions on how best to implement and deliver market-wide platform transformations, with new best practices emerging around scope and phasing. Continuing growth in retail investments around the world are accentuating these transformation pressures, most notably through ‘neobrokers’ such as Trade Republic and Robinhood. These high-tech, zero-legacy providers are challenging traditional FMI models by demanding round-the-clock, low-cost market access, including access to both cryptocurrencies and traditional securities. In their innovation, these brokers are accelerating FMIs’ development plans across the entire trade cycle. Not only are they driving growth in ‘digital services’ (an expanded definition of DLT-based digitization), they are fueling profound changes that include round-the-clock clearing, ETFmanagement and other key areas. Meanwhile FMIs are also continuing to grow their focus on issuers, as they look to drive innovation across the trade cycle, and secure listing and safe-keeping revenues that offset growing competition in the settlements space (notably in Europe, Latin America and Australia). How FMIs manage this balance of transition and expansion could not be more important in 2025, as the likelihood of true competition in settlements continues to grow. Moves to encourage multiple depositories continue in some markets (such as Brazil and Australia) to provide participants with a choice of settlement venue whilst, in the European Union, new operating models such as the Investor CSDmodel are beginning to unleash true competition in settlements and in asset services across the continent. RFPs for CSDs are becoming an increasingly near-termprospect. Settlement Transformation T+1’s impact is undeniably larger than ever in 2025, as firms contend with multiple phases of T+1 including optimization (for North American markets), preparation (for European and Brazil’s markets) and scoping (for Asian markets). With 76% of respondents to this year’s survey currently running T+1 projects (Figure 6), the cumulative global load is significant for firms across every part of our global industry. One year on, the North American T+1 transitions of May 2024 are still having a notable impact on the industry. 48% of respondents to this year’s survey are still running projects (Figure 8) to optimize their internal processes for North American settlements, largely in response to continuing pressures on trade fails (Figure 9) felt across the world. The impact of T+1 clearly extends well past implementation date. As the baton passes fromNorth and Latin America to Europe, focus in 2025/2026 is growing on T+1 readiness in the 29markets that span the European Union (EU), UK and Switzerland by October 11th, 2027 - and on potential transitions in Asia Pacific at the end of the decade. Whilst similarities withNorth America’s transitions remain (notably the focus on FMI-driven automation), key differences are also presenting themselves across each jurisdiction (including Europe’s CSDR-driven settlement discipline, Asia’s no fails regimes and Brazil’s highly centralizedmarket structure). Although demands for automation and process transformation are universal, T+1 is different in every local market. Digital Assets and DLT Over a decade of experimentation and development is beginning to deliver returns, as the industry’s focus has shifted in 2025 from broad development to a clear focus on live use cases such as tokenized collateral, tokenized funds and private markets. But far from triggering the disruption and disintermediation that was so widely anticipated, it is increasingly clear that firms are looking to traditional market infrastructures and custodians to digitize many of their existing securities activities. With this year’s survey respondents indicating that 10%ofmarket turnover is expected to be conducted using tokens and digital assets by 2030 (Figure 10), the expectation for transformation is not only significant but urgent. For thosemanaging the balance sheets of financial institutions, in particular, the rise of tokenization and digital assets offers an immediate and transformative opportunity to overhaul how theymanage their capital. Leveraging themobility and immediacy of blockchain-based transactions, providers such as Broadridge, and HQLAx aremoving frommanually-driven, overnight funding to aworld of automated, intraday capital management (and repos) –with transformational benefits due as a result. Supporting this increasedmarket liquidity are bank-issued stablecoins and tokenizedmoney market funds, which look set to be the main vehicles for digital money in the near-term. Providing the best balance between automation and regulation, stablecoins look set to continue their growth, enabling real-time mobility to support collateral efficiency, fund tokenization and private market securities as the leading use cases in 2025. Generative AI A new theme in this report, the use of GenAI appears to be entering the mainstream of securities operations with 86% of respondents piloting this technology across their firms in 2025 . With 83% of brokers looking to leverage GenAI to transform their client onboarding, the intent to drive automation across new areas of the financial institution is clear – using GenAI to bring new answers to old problems (Figure 17). Although regulatory and people-related challenges still stand in the way of larger-scale adoption in 2025, investors seem especially keen to proceed at pace with GenAI adoption.