Blog · 25 Mar 2020

The irresistible promise of Asia Pac post-trade

The signs look good for the future of Asia's emerging post-trade environment.

Von Angie Yeo
Regional sales director for Radianz in AMEA

Asia Pacific is undoubtedly one of the most exciting regions for anyone in financial services at the moment – and with very good reason.

China alone currently sees five times the volume of trades compared to the US and nearly ten times the trading volumes seen in Europe. Robust growth can also be seen in a number of world-leading financial hubs across Asia Pac, such as Hong Kong, Singapore and Tokyo.

But it’s not all plain sailing.

Why Asia Pac is a promising region for post-trade

In Asia Pac, post-trade complexity remains as much of an issue as elsewhere in the world. Yet a unique combination of factors in the region hold the promise of greatly improved post-trade efficiencies. This includes a favourable regulatory environment, the ability to leverage innovative new technologies and less legacy infrastructure.

A large part of this push is undeniably due to regulatory considerations. European capital markets have encountered significant challenges as they adjust the new requirements brought in by post-crisis regulations. These mandate improved transparency and oversight at the post-trade level.

The most notable of these are the impact of MiFID II and Emir, yet incoming rules in the US, such as the initial margin rules are also set to have a marked impact. In comparison, markets in Asia Pac are relatively unburdened by regulatory demands such as post-trade reporting or capital requirements.

The lack of  ‘spaghetti networks’ in Asia Pac

Furthermore, Asian financial markets don’t tend to suffer from overly complex, ‘spaghetti networks’ in their post- trade infrastructure, which continue to be one of the key challenges facing institutions elsewhere in the world. Instead, there’s a noticeable increase in the willingness between Asia Pac firms and institutions to form strategic partnerships and alliances to solve common problems.

This is most noticeable where ‘sharing platforms’ are created across the region to significantly expand beyond domestic markets. Singapore Exchange CEO, Loh Boon Chye, recently argued that exchanges can learn a lot from airline alliances, which have reaped the benefits of initiatives, such as code-sharing to vastly improve their efficiency. In the same way, he believes exchanges would also find volume growth more sustainable if done through the right strategic partnerships and collaborations.

At BT Radianz, we agree and believe it’s now a priority for capital markets firms to be able to readily connect to any infrastructure, anywhere in the world.

Financial services cloud adoption in Asia Pac ahead of the West

Market-leading technology is key in achieving this as fast and efficiently as possible. In Asia, cloud adoption among financial services is already stronger than in the West and provision from market giants, such as Alibaba Cloud, the largest cloud provider in APAC, means the level of service and coverage available is second to none. This growing use of cloud also means that applications, trading and post-trade processing are no longer defined by geographies.

By deploying cloud and other new technologies, hardware management will soon be a thing of the past. With no need for antennaes or to physically install hardware in data centres, capital markets infrastructure should now be able to change more rapidly with minimal start-up times. Innovations, such as timing synchronisation, available through Hoptroff London on BT Radianz, have created a new enabler to time sync trades and orders applications, cutting costs and improving efficiencies for many firms in post trade.

Asia Pac also head in cryptocurrency and Blockchain adoption

Asia Pac is also leading the way in its rapid adoption of cryptocurrencies and distributed ledger technologies, such as Blockchain. This is mainly being driven by the Asian wealth management industry’s appetite for trading digital assets and a far more favourable attitude from the region’s regulators than has been seen in the West.

Japan was the first country to legalise bitcoin as a form of payment, while the Monetary Authority of Singapore (MAS) launched a consortium of banks and fintech companies to use Blockchain for payments and securities clearing and settlement. This may even pave the way for the Singapore dollar being put on Blockchain.

MAS was in fact one of the first regulators in Asia Pac to embrace fintech, establishing a regulatory sandbox to facilitate the adoption of new solutions within the regulated financial services sector. The Australian Securities and Investments Commission (ASIC) and Hong Kong Monetary Authority also stand out among the banking regulators in the region who’ve been very encouraging of fintech growth.

Can you resist the promise of Asia Pac post-trade?

Regarding post-trade in particular, it’s becoming increasingly necessary to find fintechs, technology vendors and service providers who can partner with businesses to find the right set of solutions for them. We work hard with our clients, not only to provide the connectivity needed across the region and beyond, but also to connect them to our ready-made network of major participants, from the exchanges to the brokers and beyond.

We also work closely with a number of our leading partners who have also been focused on providing tailored services to this region. For example AcadiaSoft, the leading industry provider of risk and collateral management services for the non-cleared derivatives community, has been very focused on serving the needs of the industry in Asia Pac countries. In particular, with regards to solutions to help firms meet the new initial margin requirements, while DTCC is working to alleviate the post-trade burden in the region by leveraging market-leading technology and infrastructure.

The post-trade opportunities for firms already on the ground in the region are obvious. We’re increasingly working with global firms who are at the point where their future growth is dependent on growing the size of their footprint. The growth in volumes, exchanges, fintechs and service providers available in Asia Pac, combined with a very promising post-trade environment, make this region an obvious choice to pursue. 

Asia Pacific is undoubtedly one of the most exciting regions for anyone in financial services at the moment – and with very good reason.

China alone currently sees five times the volume of trades compared to the US and nearly ten times the trading volumes seen in Europe. Robust growth can also be seen in a number of world-leading financial hubs across Asia Pac, such as Hong Kong, Singapore and Tokyo.

But it’s not all plain sailing.

Why Asia Pac is a promising region for post-trade

In Asia Pac, post-trade complexity remains as much of an issue as elsewhere in the world. Yet a unique combination of factors in the region hold the promise of greatly improved post-trade efficiencies. This includes a favourable regulatory environment, the ability to leverage innovative new technologies and less legacy infrastructure.

A large part of this push is undeniably due to regulatory considerations. European capital markets have encountered significant challenges as they adjust the new requirements brought in by post-crisis regulations. These mandate improved transparency and oversight at the post-trade level.

The most notable of these are the impact of MiFID II and Emir, yet incoming rules in the US, such as the initial margin rules are also set to have a marked impact. In comparison, markets in Asia Pac are relatively unburdened by regulatory demands such as post-trade reporting or capital requirements.

The lack of  ‘spaghetti networks’ in Asia Pac

Furthermore, Asian financial markets don’t tend to suffer from overly complex, ‘spaghetti networks’ in their post- trade infrastructure, which continue to be one of the key challenges facing institutions elsewhere in the world. Instead, there’s a noticeable increase in the willingness between Asia Pac firms and institutions to form strategic partnerships and alliances to solve common problems.

This is most noticeable where ‘sharing platforms’ are created across the region to significantly expand beyond domestic markets. Singapore Exchange CEO, Loh Boon Chye, recently argued that exchanges can learn a lot from airline alliances, which have reaped the benefits of initiatives, such as code-sharing to vastly improve their efficiency. In the same way, he believes exchanges would also find volume growth more sustainable if done through the right strategic partnerships and collaborations.

At BT Radianz, we agree and believe it’s now a priority for capital markets firms to be able to readily connect to any infrastructure, anywhere in the world.

Financial services cloud adoption in Asia Pac ahead of the West

Market-leading technology is key in achieving this as fast and efficiently as possible. In Asia, cloud adoption among financial services is already stronger than in the West and provision from market giants, such as Alibaba Cloud, the largest cloud provider in APAC, means the level of service and coverage available is second to none. This growing use of cloud also means that applications, trading and post-trade processing are no longer defined by geographies.

By deploying cloud and other new technologies, hardware management will soon be a thing of the past. With no need for antennaes or to physically install hardware in data centres, capital markets infrastructure should now be able to change more rapidly with minimal start-up times. Innovations, such as timing synchronisation, available through Hoptroff London on BT Radianz, have created a new enabler to time sync trades and orders applications, cutting costs and improving efficiencies for many firms in post trade.

Asia Pac also head in cryptocurrency and Blockchain adoption

Asia Pac is also leading the way in its rapid adoption of cryptocurrencies and distributed ledger technologies, such as Blockchain. This is mainly being driven by the Asian wealth management industry’s appetite for trading digital assets and a far more favourable attitude from the region’s regulators than has been seen in the West.

Japan was the first country to legalise bitcoin as a form of payment, while the Monetary Authority of Singapore (MAS) launched a consortium of banks and fintech companies to use Blockchain for payments and securities clearing and settlement. This may even pave the way for the Singapore dollar being put on Blockchain.

MAS was in fact one of the first regulators in Asia Pac to embrace fintech, establishing a regulatory sandbox to facilitate the adoption of new solutions within the regulated financial services sector. The Australian Securities and Investments Commission (ASIC) and Hong Kong Monetary Authority also stand out among the banking regulators in the region who’ve been very encouraging of fintech growth.

Can you resist the promise of Asia Pac post-trade?

Regarding post-trade in particular, it’s becoming increasingly necessary to find fintechs, technology vendors and service providers who can partner with businesses to find the right set of solutions for them. We work hard with our clients, not only to provide the connectivity needed across the region and beyond, but also to connect them to our ready-made network of major participants, from the exchanges to the brokers and beyond.

We also work closely with a number of our leading partners who have also been focused on providing tailored services to this region. For example AcadiaSoft, the leading industry provider of risk and collateral management services for the non-cleared derivatives community, has been very focused on serving the needs of the industry in Asia Pac countries. In particular, with regards to solutions to help firms meet the new initial margin requirements, while DTCC is working to alleviate the post-trade burden in the region by leveraging market-leading technology and infrastructure.

The post-trade opportunities for firms already on the ground in the region are obvious. We’re increasingly working with global firms who are at the point where their future growth is dependent on growing the size of their footprint. The growth in volumes, exchanges, fintechs and service providers available in Asia Pac, combined with a very promising post-trade environment, make this region an obvious choice to pursue. 

Kontakt