Target State — Issue 008

Welcome back. This week the industry's second rail stopped being a pilot. On Monday the Eurosystem switched on Pontes, the bridge that settles tokenised wholesale transactions in central bank money. On Tuesday the FCA's chief executive told a City dinner that firms are done with sandboxes and want production. By Wednesday, DWS had said it will offer tokenised versions of its Xtrackers ETF range, capability first and demand second. Meanwhile the traditional rail kept moving: HSBC went live as custodian, depositary and fund administrator on £21 billion of Royal London's Irish funds, taken from State Street, and the T+1 community was told that next-day settlement needs a pit-stop redesign, not a faster car. None of it made front pages. All of it redraws what your operating model owns.

T+1: the pit stop, not the car. Global Custodian's readout of European preparations, published Wednesday, is that progress is real but the gaps now sit in automation and counterparty readiness across the settlement chain, with global custodians increasingly judged on regional provider readiness ahead of the 11 October 2027 deadline. The framing in the title deserves to stick: T+1 will require a Formula One-style pit stop redesign, not simply faster settlement. The EU T+1 Industry Committee's second readiness survey, published in July, adds the number behind the gap: 64% of firms now cite counterparty and vendor dependencies as a core concern, up six percentage points quarter on quarter. The industry has accepted the deadline. What it has not yet built is the choreography around it, and choreography is an operating model problem, not a settlement system problem.

Daily investment data becomes a contracted product at UniSuper. On Tuesday BNP Paribas launched additional capabilities on its Data PRISM360 platform, and UniSuper, one of Australia's largest superannuation funds, became the first client to adopt them: daily investment exposure datasets across its entire fund structure, powered by NeoXam's Investment Data Solution (Global Custodian has the launch note). The trend line matters more than the deal: custodians are now contracting for daily, fund-wide investment data as a product, with a named first client attached. Every contract like this raises the same question for the managers watching: if the custodian can deliver daily exposure data across your entire fund range, what exactly is the in-house data team producing?

The oversight layer starts hiring agents. On Friday 11 September Fund Recs launched Fund Recs AI Ops, extending its no-code data workflow and reconciliation platform into agentic operations, with a managed service attached. The design constraint is the story: the agents run inside the governance model that regulated firms already depend on, rather than replacing it. Oversight teams are being asked to supervise more with fewer people, and the vendor response is agents that inherit the control framework instead of bypassing it.

Tokenisation has been approaching production for five years. This week it arrived, and the shape of the next operating model question became visible.

The settlement layer now has a second rail. On Monday 21 September the Eurosystem went live with Pontes, the bridge connecting distributed ledger platforms to TARGET Services so tokenised wholesale transactions settle in central bank money; an initial group of banks and DLT operators has completed onboarding, with more committed (The Paypers has the plain-English version). The decision is the story: the Eurosystem has concluded that tokenised securities need reliable cash settlement, and it will provide it. The UK's equivalent layer already has a name: HSBC Orion, approved in July as the first entrant cleared to provide live Digital Securities Depository services, and confirmed by the Treasury as the platform for the first DIGIT gilt issuance by Q1 2027, with a planned bilateral link to LSEG's depository so investors can hold the gilt through either infrastructure. Clearstream, meanwhile, is describing its own shift to a digital hybrid CSD and plans to scale tokenisation across the securities value chain.

The regulator has read the room. On Tuesday Nikhil Rathi, the FCA's chief executive, told TheCityUK's Nasdaq-sponsored dinner that the clearest message from more than 120 responses to the joint FCA and Bank of England tokenisation call for input was "a need for speed, and what some firms described as 'pilot fatigue'." Firms want to move from experimentation and sandboxes to full production and permanence. Two commitments to file: a joint tokenisation roadmap with the Bank of England setting a route from today's testing environments to established market infrastructure, and a forthcoming consultation on safeguarding rules for tokenised investment assets, because, as Rathi put it, tokenisation "can't be allowed to leave ambiguity about ownership." The Barclays estimate he cited, around £33 billion of annual GDP uplift and £14 billion in tax revenue, explains why the pace is now a policy priority.

The product shelf follows the rails. On Wednesday DWS's Michael Mohr, global head of Xtrackers products, told Funds Europe the firm "definitely" will offer tokenised products across its ETF range, while conceding that blockchain-based funds are unlikely to claim a large share of assets for the next two to four years. The survey behind the interview is the number that matters for operations: 88% of the 77 asset managers surveyed consider it likely their organisation will offer tokenised versions of its ETFs, and few of them have pilots running today. That is capability-building before demand, and capability-building is an operations budget item. The firms that wait for client demand will be buying the capability from someone else when it arrives.

Architecture Canvas lens: every one of these moves adds a second rail to an operating model designed for one. A tokenised share class has two ownership records, two settlement paths, two custody chains, and one set of investors expecting identical servicing. The question is not whether to build on the digital rail. It is whether the model you draw can show both rails, and the bridges between them, on one canvas.

HSBC takes £21 billion of Royal London's Irish funds from State Street. On Thursday 17 September Global Custodian reported that HSBC had gone live as custodian, depositary and fund administrator for Royal London Asset Management's two Ireland-domiciled fund umbrellas, roughly £21 billion (US$28 billion) of assets, extending a UK servicing relationship that dates back to 2006. Scrip Issue's account adds the detail: HSBC has provided RLAM with global custody and middle-office services since then, and the Irish win carries the relationship onto the continent's fund rails. Two readings. First, incumbency is not a moat: the mandate left State Street despite the depth of the incumbents' Irish franchises. Second, the mutuals are consolidating servicing relationships across domiciles, and the provider that holds the UK book now has a clear route to the Irish one.

CACEIS picks up the family name. From Thursday 1 October CACEIS becomes Crédit Agricole CACEIS, aligning the asset servicer with its parent group as part of Crédit Agricole's ACT 2028 plan and, per Asset Servicing Times, reinforcing its international growth ambitions through the group's global footprint. Rebrands are rarely news. This one is a positioning statement: the servicer is leaning into the group's balance sheet and distribution reach at exactly the moment the bank-bundled operating model is becoming the mid-market template (the Automic story in issue 007 runs on the same logic).

SGSS industrialises its ETF plumbing with Ultumus. On Wednesday Global Custodian reported that Societe Generale Securities Services had tapped Ultumus to streamline ETF operations, pairing SGSS's transfer agency, fund administration and custody scale with Ultumus's ETF data and technology. The trend to watch: ETF-specific operational layers, basket composition data, create-redeem processing, primary market plumbing, are being productised by specialists and bolted onto generalist servicing stacks. The specialists own the hard bit. The generalists own the client.

The FCA sketches the next market infrastructure, and the boundary questions that come with it. Rathi's TheCityUK speech, covered above, is the week's regulatory centrepiece for operations teams. Two commitments to file: the joint FCA and Bank of England tokenisation roadmap, and the consultation on safeguarding rules for tokenised investment assets. One warning to note: with tokenised and decentralised markets moving toward continuous, potentially 24/7 trading, Rathi said the FCA must work through how disclosures, closed periods and market abuse monitoring function in that environment, and revealed the FCA is already exploring agentic AI as its "first responder" for wholesale market monitoring across more than 9,000 firms and a billion rows of data a day. The supervisor is building the surveillance operating model for the market you will be asked to operate in.

The SEC proposes to scrap Rule 14a-8 and modernise proxy solicitation. On Wednesday 16 September the SEC proposed rescinding Rule 14a-8, the federal shareholder proposal rule, handing the framework for shareholder proposals back to state corporate law, alongside amendments to Rule 14a-4(c) on discretionary voting and a package to modernise the proxy solicitation process; Mayer Brown's summary is the clearest plain-English guide. For asset management operations this lands on two desks. Proxy voting: the rulebook that determines which proposals appear on which ballots is the raw material of the voting season, and if adopted, the process fragments across states and corporate charters. Investor servicing and transfer agency: the machinery that distributes proxy materials and tabulates votes will need to handle a wider, less standardised set of ballot configurations. Comment periods of 60 days apply once the proposals are published in the Federal Register, which is the working window for the operations assessment.

Moves from the past two months.

This week's operating model insight: The Two-Rail Model.

For a decade, the practical question about tokenisation was whether it would happen. This week settled it: the Eurosystem switched on Pontes, the UK's first live digital securities depository was name-checked from a City dinner podium, and Europe's ETF managers started committing to tokenised product ranges. The question left standing is not about the technology. It is about the operating model, and it fits in one sentence: your firm is about to run on two rails at once.

Every asset management operating model in production today was drawn for one rail: the CSD chain, the registrar, the custodian ledger, the batch reconciliation cycles that grew up around them. The digital rail does not replace that. It runs alongside it. A tokenised share class has an on-chain ownership record and a traditional register. It settles in central bank money through a bridge (Pontes) or through a depository (Orion). The investor sees one fund. The operations team sees two of everything, connected by bridges that did not exist in last year's target operating model.

The Architecture Canvas methodology has a way of exposing what happens next. When a model is drawn honestly, at process, system and data level, the bridges appear as what they are: hand-offs with no owner. The digital rail tends to get built by enthusiasts in a corner, the bridges get owned by nobody, and the first incident is how the firm discovers the documentation does not exist. That is the failure mode to design against, and it is entirely avoidable.

Three things to do:

The firms that draw both rails before they build will find tokenisation is just another part of the model, governed like the rest. The firms that treat it as a side project will discover, in the first settlement break, that the second rail was already running, unowned, underneath them.

This week's companion piece on opmodal's Insights page goes deeper: The two-rail operating model: what tokenisation in production means for asset management operations.

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Architecture Canvas is a central component of the methodology developed by opmodal for capturing, governing, and improving operating models in complex organisations.