State Street Corporation

From Wikipedia, the free encyclopedia
Jump to: navigation, search
State Street Corporation
Type Public
Traded as NYSESTT
S&P 500 Component
Industry Financial services
Founded 1792
Headquarters State Street Financial Center
Boston, Massachusetts, United States
Key people Jay Hooley (President, CEO, and Chairman)
Products Investment management
Revenue Increase USD 9.878 billion (2013)[1]
Net income Increase USD 2.136 billion (2013)[1]
AUM Increase USD 2.345 trillion (2013)[2]
Total assets Increase USD 243.291 billion (2013)[3]
Total equity Increase USD 20.378 billion (2013)[3]
Employees 29,530 (Mar 2014)[4]
Website StateStreet.com

State Street Corporation, known as State Street, is a US-based international financial services holding company. State Street was founded in 1792 and is the second oldest financial institution in the United States. The company’s headquarters are at One Lincoln Street in Boston and it has offices in 25 countries around the world.[5]

State Street is organized into three main divisions. The Global Services business is a custodian bank with $28 trillion (USD) of assets under custody and administration.[6][7] The Global Advisors business provides investment management services and has $2.3 trillion (USD) of assets under management.[2] The Global Markets business offers investment research and trading services to institutional investors.

History[edit]

State Street’s past can be dated back to the founding years of Boston’s banking industry. In 1792 the Union Bank became the third bank to be chartered in Boston and was located at the corner of State and Exchange Streets.[8] State Street was known as the “Great Street to the Sea” as Boston became a flourishing maritime capital. The clipper in State Street’s logo today reflects this period.

In 1865 the Union Bank received a national charter and became the National Union Bank of Boston. State Street Deposit & Trust Co opened alongside National Union in 1891. It became the custodian of the first US mutual fund in 1924, the Massachusetts Investors Trust.[8] State Street and National Union merged in 1925.

State Street’s growth during the mid-1900s was fuelled by mergers and acquisitions. It merged with the Second National Bank in 1955 and with the Rockland-Atlas National Bank in 1961. William Edgerly gained control in 1975 and shifted the company’s strategy from commercial banking to investments and securities processing.[8]

The company began investing heavily in technologies for securities management and custodian processing. It was helped by a partial acquisition of Boston Financial Data Services in 1973.[8] More than 100 top staff from IBM were headhunted by State Street as it set about implementing IBM mainframe systems.

State Street’s new building was completed in 1966 and became the first high-rise office tower in downtown Boston. In 1972 the company opened its first international office in Munich. For much of the 1980s and 1990s it expanded to foreign markets with offices in Montreal, Toronto, London, Paris, Dubai, Sydney, Wellington, Hong Kong, and Tokyo.[8]

It was the early 1990s before State Street brought its technology platform to international markets. By 1992 most of State Street’s revenue came from fees for holding securities, settling trades, keeping records, and performing accounting.[8] It formed a new global asset management business in 1994 and in 1999 divested its retail and commercial banking businesses to Citizens Financial Group.

State Street acquired the Investors Fiduciary Trust Co in 1995. In 2003 it purchased Deutsche Bank’s securities services division for $1.5 billion (USD).[9] State Street purchased Investors Financial Services for $4.5 billion (USD) in 2007.[10] In 2010 it acquired Mourant International Finance Administration and the securities services group of Intesa Sanpaolo.[8]

State Street was named by the G-20 as amongst the world’s 29 systemic banks and must meet all conditions of the Basel III accord.[11] The company now employs 29,530 people around the world.[12] It claims to have funds under management of $2.3 trillion (USD)[2] and assets under custody and administration of $28 trillion (USD),[6][7] second to The Bank of New York Mellon.

Organization[edit]

State Street Global Advisors[edit]

Global Advisors is State Street’s asset management business and dates back to 1978. It provides investment management, research, and advisory services to corporations, mutual funds, insurance companies, and other institutional investors.[13] Global Advisors develops both passive and active management strategies using both quantitative and fundamental approaches.[12]

It created the first exchange-traded fund in 1993, the SPDR S&P 500, and is now one of the world’s largest ETF providers.[14] Global Advisors has staff in 27 global offices[13] and claims to have over $2.3 trillion (USD) of funds under management.[2]

State Street Global Markets[edit]

Global Markets is State Street’s securities business. It offers research, trading, and securities lending services for foreign exchange, equities, fixed income, and derivatives.[15] The company claims to be a trading partner free from conflicted interests as it does not run proprietary trading books.[16] Global Markets maintains trading desks in Boston, London, Sydney, Toronto, and Tokyo.

State Street Global Services[edit]

Global Services is the investment servicing division of State Street, also known as the State Street Bank & Trust Co. It provides asset owners and managers with custodian (safekeeping, corporate actions), fund accounting (pricing and valuation), and administration (financial reporting, tax, compliance, and legal) services.[12][17]

Global Services handles assets from many classes, including equities, derivatives, exchange-traded funds, fixed income assets, private equity, and real estate. State Street now administers 40 percent of the assets under administration in the US mutual fund market.[18] Global Services also provides outsourcing for operations activities and handles $10.2 trillion (USD) of middle-office assets.[19]

Regulation[edit]

State Street is registered with the Board of Governors of the Federal Reserve System as a bank holding company pursuant to the Bank Holding Company Act of 1956.[12] It is a member of the Federal Reserve System and its deposits are insured by the Federal Deposit Insurance Corporation. Certain aspects of State Street’s public disclosure are subject to the requirements of the Sarbanes–Oxley Act of 2002.

State Street’s broker-dealer operation, known as Global Markets, is registered with and regulated by the Securities and Exchange Commission and the New York Stock Exchange in the United States.[12] The Prudential Regulation Authority and the London Stock Exchange regulate State Street in the United Kingdom.

Controversies[edit]

In 2009 the State of California alleged on behalf of its pension funds CalPERS and CalSTRS that State Street had committed fraud on currency trades handled by the custodian bank. Two executives from State Street Global Markets left the company in October 2011 following enquiries over the pricing of a fixed income transaction.[20]

State Street in December 2010 announced that it would be retrenching 5% of its workforce and effectively reducing the wages of remaining employees by 10%.[21] In March 2011 it reversed its wage-reduction decision but declared that it would still require all employees to work a longer 40 hour week.

On 28 February 2012, State Street Global Advisors entered into a consent order with the Massachusetts Securities Division. The Division was investigating SSGA’s role as the investment manager of a $1.65 billion (USD) hybrid collateralized debt obligation. The investigation resulted in a fine of $5 million (USD) for the non-disclosure of certain initial investors taking a short position on portions of the CDO.[22]

State Street has been criticized for using an outsourcing firm named Syntel to move jobs from its headquarters and elsewhere to “campuses in India”. Former employees argue that State Street is relocating jobs “in very small increments” to avoid wider attention.[23] These allegations have arisen despite State Street being the recipient of tax breaks in Boston for its status as a major employer.

Shouting protestors disrupted State Street’s annual meeting in 2012 and accused the company of dodging taxes, outsourcing jobs, investing in a private prison, and defrauding pension fund clients.[24] Jay Hooley, the Chairman and Chief Executive, denied these assertions.

See also[edit]

State Street Bank v. Signature Financial Group is the landmark case in which the Court of Appeals for the Federal Circuit ruled (23 July 1998) that a computer algorithm can be patented to the extent that it produces "a useful, concrete and tangible result".

References[edit]

  1. ^ a b Bloomberg Businessweek, 2014, State Street Corp income statement, retrieved 22 June 2014
  2. ^ a b c d State Street, 2014, Corporate Overview, retrieved 22 June 2014
  3. ^ a b Bloomberg Businessweek, 2014, State Street Corp balance sheet, retrieved 22 June 2014
  4. ^ Securities and Exchange Commission, 2014, Form 10-Q, Quarterly Report, For the Quarterly Period Ended March 31, 2014, retrieved 16 August 2014
  5. ^ State Street, 2014, Office Locations, retrieved 22 June 2014
  6. ^ a b GlobalCustody.net, 2014, Assets under custody, retrieved 22 June 2014
  7. ^ a b GlobalCustody.net, 2014, Assets under administration, retrieved 22 June 2014
  8. ^ a b c d e f g FundingUniverse, 2014, History of State Street Corporation, retrieved 22 June 2014
  9. ^ USATODAY.com, 2002, State Street will become largest securities services firm, retrieved 22 June 2014
  10. ^ State Street, 2007, Press Release, retrieved 22 June 2014
  11. ^ Smith, Geoffrey, 2011, "Bucket List: G20 Panel Names Top Global Banks", The Wall Street Journal, retrieved 22 June 2014
  12. ^ a b c d e Bloomberg Businessweek, 2014, State Street Corp snapshot, retrieved 22 June 2014
  13. ^ a b State Street, 2014, About SSgA, retrieved 22 June 2014
  14. ^ Ryan, Jen, 2007, "Spyders Widen Web", TheStreet, retrieved 22 June 2014
  15. ^ State Street, 2014, About SSGM, retrieved 22 June 2014
  16. ^ State Street, 2014, Equities Trading, retrieved 22 June 2014
  17. ^ State Street, 2014, About SSGS, retrieved 22 June 2014
  18. ^ State Street, 2014, Fund Administration, retrieved 22 June 2014
  19. ^ State Street, 2014, Investment Operations, retrieved 22 June 2014
  20. ^ McDaniel, Kip, 2011, "State Street's McLellan, Pennings Depart Amidst Question Over Transition Cost", aiCIO, retrieved 12 December 2013
  21. ^ Van Sack, Jessica, 2010, "Days to get longer at State Street", BostonHerald.com, retrieved 4 October 2012
  22. ^ Galvin, William, 2012, "Secretary Galvin Fines State Street Global Advisors $5 Million For Role In Mortgage-Backed CDO", Securities Division, retrieved 1 March 2012
  23. ^ Reilly, Adam, 2012, "Stealth Outsourcing at State Street?", WGBH, retrieved 16 August 2014
  24. ^ McLaughlin, Tim, 2012, "Protestor shouts disrupt State Street annual meeting", Reuters, retrieved 16 August 2014

External links[edit]

Media[edit]