You have just signed a new agreement with the Hong Kong Monetary Authority for a clearing and settlement linkage between BondsinHongKong and the Central Moneymarkets Unit (CMU). What will the agreement allow?
Cobetto: It will allow for straight through processing (STP) û the day of the paperless trade, when a buyer of a security on our system can take it all the way to the CMU for settlement and custody. With this initiative, we can start to see the way towards paperless transactions in the Hong Kong bond market.
What is the wider significance of this agreement? What will it add to the market?
It really enhances the efficiency of the market. This linkage will help banks and investors to control their operational risk. There's a lot of paper moving through present settlement procedures that if done electronically, will make the process a lot more efficient. This is very big thing for investors, financial institutions and especially central banks - all the parties that want to ensure that operational risks are reduced in the trade process.
Have paper based trading systems hindered the development of the bond markets in the region?
Throughout the Asian region, you are talking about many markets at various stages of development. It wasn't too long ago in some of these markets that this paper would be delivered by motor scooter from the seller to the bank. That was the early stages of development. However governments in the region have come a long way in a relatively short period. Each time you automate the process a little bit more, that helps the development of the market, which in turn helps liquidity.
Hong Kong has always been at the forefront when it comes to developing leading infrastructure. Our collaboration with the HKMA adds another dimension to this infrastructure for trading and settling bonds. This makes it easier for the investors, the banks and the whole market. It also reduces operational risk.
How has business been for BondsInAsia this year?
Since we started trading close to the beginning of January, we have grown very nicely and exceeded our plans. More than $20 billion has been traded through the platform to date. Although every day can be something of a struggle, we would not have thought at the beginning of the year that we would be where we are today.
The volume is not being helped by the volatility we've had in the market. Huge swings in volatility do not help us, as people are reluctant to put live prices on the web. But it's been a good year. We keep on adding new members to our various businesses; four or five new banks will join our Hong Kong platform, three new banks will join in Singapore. The interbank market is also growing nicely. In addition, a lot of end clients are also starting to sign up and so the dealer-to-client business is starting to take off.
What will the deal with the CMU do for your business?
It adds a lot of efficiency for the banks dealing with our system. We don't have any projections per se, but it will enhance the experience for them.
How has the merger with Asiabondportal gone?
The banks that transferred their position with that deal û JPMorgan Chase, ABN AMRO and Bank of America û are just starting to trade. They were the shareholders of Asiabondportal who came over to our platform and we have focused on integrating them into our trading system. We are very excited about this as they add further depth to our current shareholder base.
How is the regional roll out going?
We are just beginning to lay the foundations for some of the other markets and in the next few months we will need to make the decision on which markets we will go to next. Progress is slower than I originally anticipated, partly because of the Asiabondportal transaction.
It is very important to get as many banks as possible integrated into our system as we roll out the local country specific businesses, so we have focused on fully implementing JPMorgan, ABN Amro and Bank of America into the BIA trading platform.
Also I think the whole environment for financial services has been difficult and so we are being very prudent in terms of going to new markets. The consolidation of the banks in various local markets, like Singapore, has slowed the decision-making processes down as well. However there exists strong positive momentum and a keen desire by governments to improve the markets.