“Custody concentration is the risk nobody wants to price”
You have been vocal about custody concentration. Why now?
Because the concentration has crossed a threshold where a single operational failure becomes a market event rather than a firm event. That was not true three years ago. It is true now, and the market has not repriced for it.
Is multi-custodian arrangement a real answer?
Partially. It removes the single point of failure, which is worth a great deal. It does not remove correlated risk, because the providers share infrastructure and in some cases share sub-custodians. Allocators asking for multi-custodian arrangements should also be asking what sits underneath.
What would regulation look like here?
Honestly, it would look like the qualified custodian regime that already exists for securities. There is no need to invent something. The obligations around segregation, reconciliation, and insolvency treatment map across almost directly.