COVID-19 update: Global financial market infrastructure stable — with exceptions

U.S. Bank experts give their take on the pandemic’s impact on global financial market infrastructure. Plus, a look at how your custodian can serve as a valuable information resource.

Tags: Custody, International, Securities, Regulations
Published: October 28, 2020

The COVID-19 pandemic has disrupted the global economy and financial markets in ways that were unimaginable less than a year ago. GDP has plummeted, and unemployment has soared in many nations.

“The financial industry has seen a lot this year, with the COVID-19 pandemic forcing the globe into a business continuity planning activation scenario,” says Wally Barys, senior vice president and head of Global Network Management for U.S. Bank. “Despite these disruptions, the infrastructure supporting worldwide financial markets has continued to hum along largely uninterrupted.”

Barys does note a few exceptions to the rosy picture, however:

  • There have been physical account opening and tax documentation processing issues and delays in some markets, including the United States, India, South Korea and Germany.
  • Several stock markets, central securities depositories and clearinghouses have been closed for significant periods of time, including markets in Sri Lanka, the Philippines and Mauritius.
  • South Korea has suspended short selling well into 2021.
  • Schedules and voting protocols for companies’ Annual General Meetings (AGMs) have been disrupted around the globe.

Pandemic tests operational infrastructures

Meanwhile, the pandemic has tested the operational infrastructure of nearly every country, says Joe O’Sullivan, assistant vice president and product manager for U.S. Bank. And in some countries, like Argentina, the pandemic hit while they were taking steps to mitigate existing economic woes.

“Due to its economic crisis, Argentina is enforcing capital controls that impact investors worldwide,” he says. “Rapid changes to the operational environment may have also influenced Argentina’s decision to tighten capital controls. Also, currency liquidity issues are being experienced in Zimbabwe, Nigeria and other frontier markets.”

O’Sullivan says expansions of Argentina’s capital market controls regarding its foreign exchange and securities markets include the following:

  • Foreign investors face new restrictions in selling Argentinian securities. Non-resident investors are prohibited from selling securities versus foreign currency (FCY) in the local market. An exception will apply to sales of securities purchased versus FCY that are made from September 16, 2020, and afterward, subject to a one-year holding period.
  • Some cash flow transactions are still permitted, such as free of payment (FoP) transactions with an offshore cash wire can still be made.
  • Transactions executed FoP OTC and with an international broker will not be settled by the local sub-custodian.
  • Foreign investors also face “holding periods” for certain transactions. A holding period of 15 business days applies to investors who wish to transfer securities from the local market to an international central securities depository (ICSD, Euroclear or Clearstream) that were purchases versus Argentine pesos or on a FoP basis, based on the settlement date of the transaction. Note: Securities purchased in FCY are allowed to be transferred to international depositories with no parking period.

In addition, a holding period of 15 business days applies to investors who wish to transfer securities received from the ICSDs to the local market before the shares are eligible to be sold versus ARS locally.


"Anticipating issues and planning for upcoming operational and regulatory changes is critical to ensuring business continuity and readiness when managing day-to-day investment operations."


“U.S. Bank’s timely coverage of the operational landscape is critical in markets like Argentina that may change quickly when faced with economic crises, especially when impacted by COVID-19,” says O’Sullivan.

Operational and regulatory changes

According to Barys, many countries aren’t letting COVID-19 keep them from pushing through operational or regulatory changes. “China continues to develop the procedures and requirements for access to its capital markets,” he says, “while the EU has kept its schedule for rolling out its Shareholder’s Rights Directive II (SRD II) that impacts the corporate action and proxy voting process.”

SRD II came into force on Sept. 3, 2020. Its aim is to facilitate the right of shareholders to participate and vote in meetings and enable the identification of shareholders upon request by issuers. It applies to all shares, but principally to equity securities, with voting rights that are admitted for trading on a regulated market within the European Economic Area (EEA) and whose issuer has a registered office within the EEA (for example, in-scope securities). 

A trusted source of global financial market information

It’s important to work with a custodian partner that not only offers valuable account management tools, but also provides you with timely and useful information on global markets and trends such as these.

“Anticipating issues and planning for upcoming operational and regulatory changes is critical to ensuring business continuity and readiness when managing day-to-day investment operations,” says O’Sullivan.

U.S. Bank recently introduced Pivot MarketWatch, a new web-based information delivery service that provides market and operational data and global reports for each region of the world where the bank offers custody services.

“As foreign markets evolve or experience issues, Pivot MarketWatch will deliver bulletins to clients via email, making market information easily accessible and available on a timely basis,” says O’Sullivan.

Pivot MarketWatch is accessible via the U.S. Bank Pivot platform. To request a demo, contact or your U.S. Bank relationship manager.