| | Settlement Speed Turns Custody Into Infrastructure | Market complexity is rising again, but the winners are not always the asset owners. Trades now carry more rules, more data fields, and tighter timing. Private assets add bespoke terms and slow disclosures. Public markets add faster settlement and heavier reporting. The economics often shift toward firms that run the rails. | In this article, we explore how market "plumbing" turns complexity into recurring revenue pools. Our analysis examines custody, fund services, compliance tooling, risk systems, and collateral workflows. It also looks at why product fees can compress while infrastructure revenue still grows. |
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| | | Custody Becomes Workflow, Not Safekeeping | The U.S. moved to T+1 settlement on May 28, 2024, and industry reporting later pointed to same-day affirmation near 95% and a roughly $3 billion drop in the clearing fund. That is a material operational change, not a branding change. It makes timing, matching, and exception handling more valuable. | Custody used to be a balance sheet service with a statement at month-end. Now it is a daily operating system for cash, securities, and messages. Faster settlement tightens the window for breaks and fails. It increases the value of automation, data pipes, and controls that reduce manual work. |
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| | | Collateral Turns Into a Toll Road | ISDA's year-end 2024 margin survey puts initial and variation margin collected under margin rules at $1.5 trillion, up 6.4% year over year. That is an enormous stock of assets moving under strict rules. It expands the need for collateral optimization, eligibility checks, and dispute resolution. | Collateral is often described as "back office," but it behaves like infrastructure revenue. The work repeats every day. Each new rule or clearing change adds fields to track and events to reconcile. Firms that provide collateral platforms, tri-party services, or margin data tooling sit in the middle of that flow. |
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| | | Private Markets Create Admin Gravity | S&P Global estimates private markets AUM at about $15 trillion in 2024, up from $11.87 trillion in 2023. Growth at that scale expands the admin surface area. Capital calls, distributions, and waterfalls do not run themselves. Neither do side letters, co-invest sleeves, and bespoke fees. | Private funds also face a translation problem. Investors want private assets to look "institutional" in reporting terms. That means cleaner data, faster closes, and more standard metrics. Fund administrators, valuation specialists, and private-market operations platforms earn their keep by turning custom terms into repeatable processes. |
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| | | Data Becomes a Product, Then a Platform | BlackRock agreed to acquire Preqin for £2.55 billion (about $3.2 billion) in cash in 2024, then announced completion of the acquisition in March 2025. The purchase price is a signal on its own. It treats data as strategic infrastructure, not as a support function. | Private markets have long had a transparency discount. Data vendors help close that gap by normalizing fund terms, performance histories, and deal attributes. When normalization improves, indexing, risk aggregation, and portfolio construction get easier. The value shifts toward the firms that own the taxonomy and distribute it through workflows. |
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| | | Compliance Moves From Project Spend to Run Rate | The SEC and CFTC extended the compliance date for the February 2024 Form PF amendments to October 1, 2026. A delay does not erase the build. It often stretches it into a longer procurement cycle, with more testing and more vendor dependence. | Reporting rules reward firms that can map data once and reuse it everywhere. That favors compliance software, regtech platforms, and managed services. It also favors incumbents that already sit on core reference data. The harder it is to define a position, the more valuable the definition layer becomes. |
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| | | Fee Compression Can Coexist With Infrastructure Growth | In 2024, the average expense ratio for index equity ETFs was 0.14%, and index bond ETFs averaged 0.10%, according to ICI. Morningstar's 2024 U.S. fund fee study found the average fee investors paid for ETFs was 0.16% in both 2023 and 2024. Those numbers anchor the reality of modern beta: cheap, scaled, and competitive. | Lower wrapper fees can still raise activity. More ETF flows mean more creations and redemptions, more hedging, and more rebalances. Each cycle leans on authorized participants, custodians, pricing, and data vendors. The end product looks simpler, but the machine behind it grows more complex. | Tax-aware indexing shows the same split. The pitch is simple exposure with tax efficiency. The work is constant lot tracking, wash sale controls, and custom restrictions. That pushes dollars toward portfolio accounting systems, data quality, and operational scale. |
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| | | Risks and Limits | Complexity can also compress vendor margins. Large clients negotiate hard and treat many services as interchangeable. Processing can become a scale game with flat pricing. | Regulation can swing both ways. A rule change can create new workflows, then later standardize them. Standardization can turn high-margin services into commodities. | Technology risk scales with volume. Outages, cyber events, and data errors carry real cost when everything is automated. The firms that win on recurring revenue also carry recurring operational exposure. |
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| | | Conclusion | Market complexity tends to produce more intermediaries, not fewer. The strongest revenue pools sit where work repeats: settlement workflow, collateral movement, fund administration, compliance reporting, and data normalization. Product fees may stay under pressure, but the plumbing can still grow. That is not a hype story. It is a map of where the invoices increasingly land. |
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