In a discussion about how settlement infrastructural is improving in the region, representatives from three large CSDs said progress was being made in reducing the reliance on proprietary networks for pre- and post-settlement of securities but that progress was slow.
They said that while individual depositories in Asia were following their own advances in infrastructure, by dematerialising the physical exchange of securities and introducing matching services, links between exchanges in the region to cater for cross-border activity were lacking.
The Sibos session was moderated by Elizabeth Chia who runs the custody business of DBS Bank in Singapore. Voicing the frustrations of custodians who must forge proprietary links with each CSD in the region, Chia said straight-through-processing necessities like pre-settlement matching and delivery-versus-payment are not a reality in Asian markets, even in the more developed ones.
ôCustodians are constantly putting pressure on CSDs to improve efficiencies so that we can provide better and cheaper services to end investors,ö says Chia. ôThere is so much duplication in the different markets, with CSDs and custodians competing with each other rather than complementing each other.ö
Chia raised the long-standing topic of a single securities depository for the region called Asiaclear and asked the panel whether the market was any closer to achieving this ultimate goal.
Terry Gibson, who is charged with improving STP for the Singapore Exchange, said the prospect of a single regional platform was still a long way off. ôA realistic approach is for each market to pursue its own infrastructure improvements and apply best practices along the way so that systems are advanced over time.ö By way of example, Gibson pointed to SingaporeÆs own key initiative, the introduction of a secure open access gateway for post-trade messaging called SGX Prime which is due for launch next year.
He discussed a recent pronouncement by the CEO of the Singapore Exchange, Hsieh Fu-Hua, that ASEAN countries should form a common clearing and settlement facility. Gibson says while there were many bridges to cross before such a facility would be operational, the message behind HsiehÆs vision was to ensure that Asian CSDs remained relevant and were able to speak with a single voice rather than operate in a vacuum.
Another panelist, Colin Scully, who is deputy CEO of the Australian Stock Exchange, says any collaboration initiatives must offer tangible benefits to end users and also be commercially viable. ôPeople forget that entities like the ASX have shareholders and that we have to justify new initiatives to these shareholders. It doesnÆt matter how good a proposal sounds, if it doesnÆt make business sense, we will be reluctant to implement it.ö
The ASX recently severed a five-year-old securities trading link with the SGX because the arrangement wasnÆt a commercial success.
Scully says the real way to harmonisation is to adopt universal standards across countries. ôA lot of homogeny can be achieved by making standards-based improvements,ö he says, such as the adoption of message protocols offered by organisations like SWIFT.
Yoshinobu Takeuchi, president and chief executive office of JapanÆs securities depository (Jasdec), says while it is difficult to predict how the industry will develop in Asia and how securities will be settled in a decadeÆs time, there is no doubt that progress is being made. ôInstitutional investors and custodians are very demanding clients and as the economic fortunes of the region improve, so too do the systems to support these clients.ö
The panel agreed that it was difficult to draw comparisons between consolidation steps being made in Europe and the future direction in Asia. ôThe challenges posed by fragmentation in Asia are more real than they are in Europe, so there is no way you can take a consolidation plan created in Europe and apply it here, it just wonÆt work,ö says Gibson.
Sibos 2006 continues in Sydney.
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