Category

Industry Updates

The Asian Asset Management Industry in 2018: Time for an Overhaul

The Asian Asset Management Industry in 2018: Time for an overhaul in Strategy & Technology 

Why is the time ripe for change? 

There has been a gradual awakening in Asia’s asset management industry with institutions increasingly looking at changing their conservative investment mandates and moving beyond the legacy asset classes of government bonds and local fixed income assets that have traditionally dominated portfolios of asset managers in this region. 

Please click on link below for the main article:

Asian Asset Management Industry in 2018- Time for an Overhaul

How Blockchain will disrupt banking: 7 key facts bankers should know

Sam AhmedDeriv AsiaSeptember 15, 2015

Why Blockchain will Disrupt Banking: 7 Questions Banks in Asia are Asking

Over the past 5 years, much has been documented about disruptive technology and the impact on banking. Since 2015, the momentum has increased and disruption has spread to all facets of the industry. There are two recent trends to note:

First, advanced technology is no longer the privilege of a few and nor is it centralised within elite corporations. Technology is now both cheaper and more accessible with recent innovations such as cloud computing and mobile technology. It is interesting that non-banks have been the first to move to take advantage of such disruptive technology by offering alternative streams of banking services at lower prices directly to end users thereby creating an industry phenomenon termed as as ‘disintermediation’. The key question then arises: do we still need to rely on banks for banking services?

On another note, post the Financial Crisis of 2008, the banking system is increasingly complex challenged with pressures from market regulations, the high cost of capital and shrinking margins on business lines. As a result, the Return on Equity (ROE) for most global banks has fallen from an average of ~20% to around 7-10%. Poor returns along with the threat of disruptive technology and disintermediation, are forcing banks to revise their strategies and implement leaner models using smarter and faster technologies.

These two broad based trends in banking have led to the rise in interest in blockchain technology. Deriv Asia has spoken with banks across the region and have compiled some key questions the banks are asking.

What is the relationship between Bitcoin and Blockchain?
Blockchain technology and Bitcoin are not one and the same. Bitcoin is a cryptocurrency and the first of its kind to be developed in a market that now has competing cryptocurrencies. The initial popularity of Bitcoin stemmed from its decentralised concept along with the ability to generate peer-to-peer transactions. It did not require a centralised authority e.g. a central bank to monitor flows nor have any control on the creation or supply of bitcoins.

Blockchain is the technology and infrastructure behind Bitcoin. This provides users with a distributed ledger through which to send, receive and store Bitcoins. A recent trend has emerged in financial markets where users are demanding less of cryptocurrencies and instead focusing on investing in low-cost and efficient infrastructures. This is the precise reason blockchain which was previously used for bitcoin has now been replicated by some companies for alternative banking needs.

How can Blockchain disrupt banking?
Many areas of banking are open to disruption by Blockchain. These include payments; settlements; financing activities; repo markets IPOs and OTC Markets. Take the example of a treasury department within a bank trading derivatives. Activity is supported by a trading desk, a back office settlement infrastructure and a custody network for the respective services of trading, settlement and safekeeping. A purpose-built Blockchain can act as trading instruments, storage instruments and settlement instruments respectively. In addition, this has advantages for audit purposes as the blockchain network keeps a record of all transactions ever done, making it both transparent to all participants.

The fact that Blockchain can replicate a trading, settlement and custody infrastructure at lower costs, significantly faster transfer of assets, and a safe and transparent ownership structure that does not involve expensive intermediaries could have a significant impact on the global financial markets. One of the primary attractions is that it allows smaller funds or buy-side participants to trade market instruments without necessarily paying the high minimal fees that is required when accessing a prime brokerage platform.

Effective implementation of blockchain technology across financial services should result in a disintermediation of the market. This means the end client will no longer need brokers who charge hefty spreads, to access the market.

“Blockchain presents a huge opportunity for banks and financial institutions who embrace Blockchain early and are quick to understand it and leverage its full potential. Likewise those who don’t invest in Blockchain may experience a significant loss in revenue and market share.” Marcelo Garcia Casil, CEO of DXMarkets

How are financial instruments created on Blockchain?
Any asset can be replicated on the Blockchain platform in a reliable and transparent manner and then issued. This is termed as the “tokenisation of assets”. Once issued, these assets can be traded freely between parties in a secondary market. Wealth is transferred from the asset holders to investors via the issuance of a token representing the underlying asset. These tokens issued using blockchain technology can be traded electronically on any venue, either via exchange or over the counter, at very low costs and in a transparent way since every blockchain transaction is recorded and made publicly available in real-time to all participants.

Blockchain will also disrupt the primary issuance markets as it can replicate IPO financing by issuing a token that can be backed by its own assets and can be represented by a debt instrument on their balance sheet. The end game of Blockchain is to be able to match investors and issuers directly without the need for a broker or investment bank and hence reduce the cost of funding dramatically.

Is it right for blockchain technology to enter the banking industry given there is so much regulation and compliance today?

The introduction of regulation and compliance controls around surveillance and monitoring are driving costs higher. Much of the compliance monitoring today in banks is still manual thus consuming a significant amount of human resources. Blockchain technology has many features, which are complementary to compliance monitoring and, if applied correctly, could replace the high cost of human capital. Some of the features of Blockchain such as:

(1) A ledger that publicly records the movement of every funds/assets

(2) Proof of ownership and authenticity of assets protected by a coded secure cryptographic framework

(3) A comprehensive audit trail that allows any movement of assets to be traced back to its origin

(4) Confirmations of new trades identifiable by its unique crypto stamp, without the need of elaborate legal documentation, are just some of benefits of adopting this technology for compliance and regulatory use.

Does Blockchain itself require regulation?
Blockchain is a new, cost-effective and smart technology entering a highly-regulated banking industry. Attempts to apply stringent regulations on Blockchain, at this stage of infancy, could result in its progress being stifled. Take the analogy of the Internet bubble in the late 90s and the benefits it accrued from unfettered growth and innovation.

There are some regulators calling for the creation of an independent body to oversee and align blockchain activities to the regulatory compliant guidelines of the banking industry. Unlike banking, where there is a clear division of responsibility between producers (e.g. trading and sales) and support teams (e.g. risk, compliance, audit etc.), for Blockchain, the users themselves are both mining (generating revenue) and authenticating. There may be call for segregation.

How are banks reacting to Blockchain?
Whilst focus in 2013-14 was squarely on the rise of cryptocurrencies, the dominant theme today is blockchain technology. The priority for banks is to develop financial infrastructures that can reduce the cost of support activities ranging from execution to settlement and custody. While banks have already invested in payment infrastructures such as SWIFT or tri-party platforms such as Clearstream or Euroclear, there is room for improvement in the timing of settlements, which currently still sit at T+2 or T+3 across asset classes. This could become instant through Blockchain. Other areas of priority include enhancing security measures and having a foolproof validation method based on sophisticated computer algorithms, which make it extremely challenging for fraud or counterfeit activities.

The leading global banks have, in some form or other, already started initiating and implementing blockchain technology projects. For some, this is at a preliminary stage including feasibility studies and impact analysis. For others, e.g. Santander, UBS and Goldman Sachs, separate divisions have been established to work on developing the technology.

Non banks & infrastructures are also active in the blockchain space. Kevin Johnson Manager of Innotribe Startup Challenge at SWIFT in Singapore mentioned that Blockchain technology will also have a focus in the upcoming SIBOS conference in the fall of 2015: “Blockchain technology is an area that is attracting significant interest from the financial community. Innotribe @ Sibos in Singapore will take delegates on a journey beyond the current conversation. We will bring together banks and startups in the Innotribe space, for an interactive session to understand potential use cases for distributed ledger solutions, for the financial community.”

A report by Santander in June 2015 made a compelling statement announcing that blockchain technology could potential save the bank USD 20 billion a year on infrastructure and operational costs.

“We don’t really need a coalition of 50 banks to make it work. We have ten major geographies. Just us connecting our ten major geographies will allow 100 million customers to make instant payments worldwide. If we partner with two or three banks similar to us we’ve got pretty much global coverage.” says Mariano Belinkey, Head of Santander InnoVentures

In Asian, most of the larger regional banks are at initial stages of trying to understand the blockchain concept and how they can apply it to their various work streams. DBS, the largest bank in Singapore, and no stranger to financial technology is watching this space carefully. “Banks need to spend more time really understanding the technology mega-trends that are affecting the way customers work, play and do banking. Taking a pro-active stance, we at DBS future-cast how the important trends around blockchain, machine intelligence and internet of things will change the way we interact with our consumer and corporate customers.” states DBS’ Chief Technology Officer, Neal Cross.

What are the current challenges with Blockchain?
Blockchain is still in its infancy and there is competition from other companies trying to lead the way. Disagreements on standard industry implementation has created a fragmented environment, normal to technologies in the early stages of development. Over the next 12 months, the industry will see players in the space converging consequently leading to unification and consolidation of blockchain platforms.

Blockchain also suffers from a gap in industry expertise. Being new to the banking industry, knowledge about blockchain resides mainly with startup companies responsible for developing the technology. A recent trend has shown banks and startups beginning to work together to embed the technology within various banking services.

“The Financial Industry, is a conservative one, particularly when it comes to disruptive but immature technologies. Initially, I foresee us collaborating with the Blockchain community in evolving this technology and piloting it in small-scale applications. If successful then Blockchain can, indeed, open a new chapter in the evolution of financial services.” mentions George Papp Technology Director for Financial Services at a leading global bank in Singapore.

The greatest challenge will be one of credibility. Initially, there will be two parallel worlds: the blockchain world and the ‘real world’. Skeptics will still wish to execute, settle and safeguard in the ‘real world’. However, in time, as Blockchain is able to iron out shortcomings and replicate faster and more efficient versions of real world movements, in the same way as the Internet and mobile banking, there will be an exodus of migration onto blockchain platforms and the alternative will become a reality.

Sam Ahmed is the Managing Director of Deriv Asia, a Management Consultancy based in Singapore and London

– See more at: http://www.regulationasia.com/article/why-blockchain-will-disrupt-banking-7-questions-banks-asia-are-asking#sthash.VLYj4FtT.dpuf

The above article was written jointly by Deriv Asia and DX Markets  who have collaborated together to answer questions asked by banking clients following the Blockchain event at Jens Hotel Singapore

For further information on developing blockchain technology for banking solutions please contact Sam Ahmed (MD, Deriv Asia) sam.ahmed@derivasia.com.sg and Marcelo Garcia Casil (CEO, DX Markets) marcelo.garciacasil@dxmarkets.com

 

MAS consultation paper: Singapore seeks to subject derivatives trades booked locally to mandatory clearing

Jul 08 2015 Patricia Lee, Regulatory Intelligence

The Monetary Authority of Singapore is seeking to close potential loopholes by proposing to require over-the-counter (OTC) derivatives trades booked in the Singapore-based entities of both transacting counterparties to be subject to mandatory clearing.

The U.S. Commodity Futures Trading Commission (CFTC) is also trying to address similar issue. At the moment the offshore branches of U.S. banks are not yet caught by mandatory clearing obligations, officials said.

In its latest consultation paper on draft regulations for mandatory clearing of derivatives contracts, released on July 1, MAS outlined a number of proposals that covered five main areas: derivatives contracts to be cleared; circumstances under which contracts are to be cleared; specific persons to be subject to clearing obligations; exemptions from clearing obligations; and implementation of clearing obligations.

Extraterritoriality

Andrew Pal, senior consultant at DerivAsia in Singapore, pointed to a MAS’ proposal that subject transactions that are booked in the Singapore-based operations of both transacting counterparties, i.e. a Singapore-incorporated company or a Singapore branch of a foreign entity, to clearing obligations, as significant. He said the CFTC is currently examining a loophole whereby the offshore branches of U.S. banks are not yet required to do mandatory clearing of OTC derivatives trades. He said MAS is trying to address similar concerns.

“There is the whole concept of extra-territoriality and the question of who regulates the transactions carried out by the branches of foreign banks based in Singapore. For example, would it be the MAS or the relevant foreign regulator who would regulate mandatory clearing in Singapore for such an entity? It’s not mutually exclusive. A U.S. bank could be subject to both MAS and U.S. rules,” he said.

MAS was also concerned about cross-border transactions involving a counterparty that resides in a jurisdiction which does not have mandatory clearing requirements, according to Sam Ahmed, managing director at DerivAsia in Singapore. MAS would not have direct supervision over transactions that are executed in Singapore but booked outside the city-state, he said.

“In such instances, MAS would have to work with the regulators in the jurisdictions where the trade is booked,” he said.

There is, however, less of a concern, if cross-border transactions are carried out between counterparties that are based in Singapore and in jurisdictions such as the U.S., Europe or Japan where clearing mandates are consistent with that of MAS, Ahmed said.

Clearing of interest rate swaps a priority

In the consultation paper, MAS has also proposed to commence mandatory clearing by asset class, beginning with interest rate derivative contracts, which the regulator said, made up about 50 percent of all derivatives booked in Singapore by gross notional amount outstanding. MAS has proposed to subject, at a minimum, the Singapore dollar fixed-to-floating swaps based on the Singapore Swap Offer Rate (SOR) and the U.S. dollar fixed-to-floating swaps based on Libor to clearing obligations. MAS is also considering subjecting interest rates swaps (IRS) denominated euros, UK pounds and Japanese yen to mandatory clearing obligations.

Kishore Ramakrishnan, executive director, financial services at EY in Hong Kong, said it made sense for MAS to prioritise interest rates swaps for mandatory clearing because IRS accounted for 50 percent of derivatives activities booked in Singapore.

“If you look at the underlying principles for mandatory clearing of products, it is no different from what Hong Kong and other regulators try to do,” he said.

MAS has also sought views on whether it would be appropriate to make clearing of euros, pounds and yen-denominated IRS mandatory. Ahmed said MAS appeared to have considered that this might facilitate cross-margining should more currencies be in scope for IRS clearing. Cross-margining means market participants would benefit from a reduction in margin requirements as margining can be done across various products rather than having to put up separate margin for each product.

At the moment, market participants have to put up margins for clearing U.S. dollar and Singapore dollar swaps at central counterparties (CCPs). They also have to post margin separately for their bilateral trades such as euros and yen swaps. Ahmed said if MAS were to make euros and yen swaps mandatory for clearing, it would be important for CCPs such as the Singapore Exchange to offer clearing for euros and yen IRS products, and more importantly to provide incentives for clearing members of cross-margining.

“Only then will the rest of the market truly gravitate toward OTC clearing voluntarily,” he said.

Pal said the MAS needs to look into not just the types of derivatives contracts that have to be cleared but also the impact of such requirements on global banks which are clearing brokers as well as local and regional banks. He said clearing brokers that are subject to mandatory clearing would be required to put up more capital and put systems in place to facilitate clearing.

“This could in turn be an opportunity, a positive, for local and regional banks if some large global banks don’t have the additional capital and IT resources to clear derivatives contracts,” he said.

MAS to take the lead in ASEAN

Pal said MAS could also consider taking the lead within ASEAN by further developing the concept of allowing non-cash collateral such as Singapore bonds or other sovereign bonds to be used more extensively in lieu of cash for initial margin.

“The concept of using non-cash collateral as eligible collateral needs to be looked into. Although Singapore is not part of the G20, MAS, in its continued adherence to global best practice, could potentially take the impetus further within ASEAN. Looking ahead, Thai bonds could also be considered [as non-cash collateral],” he said.

Exemptions

MAS has proposed a number of exemptions from clearing obligations. For instance, it has proposed to exempt all banks from clearing obligations as long as they do not exceed a maximum threshold of S$20 billion gross notional outstanding derivatives contracts booked in Singapore for each of the last four calendar quarters.

MAS has also proposed to exempt intra-group transactions from clearing obligations, as will public bodies, including all central banks and governments, international multilateral organisations such as the Bank for International Settlements, the International Monetary Fund and the World Bank.

MAS plans to issue the mandatory clearing regulations by end of this year, with a six-month transition period before mandatory clearing takes effect.

 

  • Patricia Leeis South-East Asia editor at Thomson Reuters Regulatory Intelligence in Singapore. She also has responsibility for covering wider G20 regulatory policy initiatives as they affect Asia.

 

Copyright © Thomson Reuters 2015. All rights reserved.

Margin requirements for bilateral OTC derivatives will drive collateral demand, officials say

Jun 29 2015 Patricia Lee, Regulatory Intelligence

Demand for collateral is expected to increase following the introduction of initial margin requirements for non-centrally cleared over-the-counter derivatives trades, and this will in turn have implications for the international economy, sources said.

The new margin requirements recommended by the Basel Committee on Banking Supervision and the International Organisation of Securities Commissions are likely to present considerable challenges for financial institutions.

Tom Jenkins, partner at KPMG China, said market participants would increasingly find their collateral management process under pressure once the margin requirements are implemented.

“This is because under these regulations they will have to calculate the amount of margin required and post this margin to their counterparty within a very short time frame,” he said.

Initial margin

Sam Ahmed, managing director at DerivAsia in Singapore, said the mandatory introduction of initial margin for bilateral derivatives trades from September 1, 2016 onwards has emerged as the single most important concern for market participants because initial margin is a Value at Risk- (VaR) based calculation methodology and is being introduced for the first time as a mandatory regulation in the bilateral OTC markets. Variation margin, on the other hand, uses mark-to-market calculation.

“This makes the amount of initial margin which market participants have to post for bilateral trades significantly higher. In addition, given that rehypothecation will not be allowed, the initial margin received from a counterparty has to be locked away in segregated accounts indefinitely which may be detrimental to the supply of high quality liquid assets in the economy,” he said.

Market participants are concerned about the implications of having to post initial margin for non-centrally cleared derivatives trades. They would need a lot more collateral to keep trading the same amount of derivatives that they have been trading. The implication on the economy is a potential shortfall in the amount of eligible collateral, they said.

Variation margin

Ahmed said the requirement to post variation margin for bilateral derivatives trades presents a second challenge to market participants. Under the BCBS/IOSCO recommendations, collateral posted as variation margin must be consistent with the currency of the underlying instrument. This recommendation, according to Ahmed, has raised concerns among market participants because the market could potentially be “squeezed” if there is a financial crisis in one jurisdiction.

“Today if an Australian bank is trading with a Hong Kong bank in Hong Kong underlying swaps and the Hong Kong bank is given a margin call, it can deliver the margin call in any eligible collateral that is agreed bilaterally. This could be Singapore dollar bonds or Australian dollar government bonds. However, under the new proposed margin rules, the currency of the underlying trade and collateral must be consistent,” he said.

Using the same example, Ahmed said if there is a crisis in Hong Kong, the Hong Kong bank receiving the margin call will be forced to source Hong Kong dollar collateral even under stressed local market conditions where liquidity may have dried up totally.

Removal of threshold

BCBS/IOSCO’s recommendations to remove the thresholds for margin call under the guidelines on margin requirements for non-centrally cleared derivatives trades has emerged as a further challenge to market participants. According to Ahmed, under current practice, market participants put threshold amounts in their collateral agreement below which, there would not be a need to post any margin. But BCBS/IOSCO has recommended the removal of such thresholds.

“BCBS/IOSCO rules are calling for no threshold collateral agreements. This means that even if there is a small margin call, BCBS/IOSCO want to ensure that market participants adopt best practices and exchange collateral to account for the credit risk arising from the negative mark-to-market even if the amount is minimal,” he said.

Ahmed said while BCBS/IOSCO realised that this may be operationally demanding, they wanted to ensure that counterparties put in place adequate risk mitigation measures.

 

  • Patricia Leeis South-East Asia editor at Thomson Reuters Regulatory Intelligence in Singapore. She also has responsibility for covering wider G20 regulatory policy initiatives as they affect Asia. 

This story first appeared on Thomson Reuters Accelus Regulatory Intelligence.

Copyright © Thomson Reuters 2015. All rights reserved.

Industry associations support ISDA reporting principles to be harmonized across borders

NEW YORK, June 15, 2015 – A group of 11 industry Associations has published a letter supporting a set of principles developed by the International Swaps and Derivatives Association, Inc. (ISDA) aimed at improving consistency in regulatory reporting standards for derivatives.

The Associations signing the letter are: the Australian Financial Market Association (AFMA), the Alternative Investment Management Association (AIMA), the British Bankers’ Association (BBA), the German Investment Funds Association (BVI), the European Fund and Asset Management Association (EFAMA), the Futures Industry Association (FIA Global), the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association (GFMA), ISDA, the Managed Funds Association (MFA), the Securities Industry and Financial Markets Association (SIFMA) and its Asset Management Group (SIFMA AMG), and The Investment Association.

The ISDA principles call for derivatives reporting requirements to be harmonized across borders, and for the further development and adoption of global data standards, among other things. The principles were developed to address challenges that have emerged in the cross-border implementation of derivatives reporting rules.

Significant progress has been made in meeting a G-20 requirement for all derivatives to be reported to trade repositories to increase regulatory transparency, an objective the Associations fully support. However, a lack of standardization and consistency in reporting requirements within and across jurisdictions has led to concerns about the quality of the data being reported. Poor data quality reduces the value of the data for regulators and limits their ability to fulfill supervisory responsibilities. Differences in reporting requirements also increase the cost and complexity for firms that have reporting obligations in multiple jurisdictions.

The Associations believe adherence to the ISDA data reporting principles will result in greater consistency in the content and format of the data being reported, further improving regulatory transparency. Market participants will also benefit from greater specificity and harmonization in their reporting across multiple regimes.

The Associations also believe similar principles will benefit global trade reporting requirements beyond derivatives, and lessons learned from derivatives reporting should be applied more broadly.

The principles are:

Regulatory reporting requirements for derivatives transactions should be harmonized within and across borders. Toward this end, regulators around the world should identify and agree on the trade data they need to fulfill their supervisory responsibilities, and then issue consistent reporting requirements across jurisdictions.

Policy-makers should embrace and adopt the use of open standards – such as legal entity identifiers (LEIs), unique trade identifiers (UTIs), unique product identifiers (UPIs) and existing messaging standards (eg, FpML, ISO, FIX) – to drive improved quality and consistency in meeting reporting requirements. Unique global identifiers for legal entities conducting a trade (LEIs), for product types (UPIs) and for trades (UTIs/unique swap identifiers) have been developed. They should be expanded as necessary and their use should be adopted across reporting regimes. The governance of such standards should be transparent and allow for input and review by market participants, infrastructure providers and regulators. Access to the standards, licensing and cost factors should be carefully considered.

Where global standards do not yet exist, market participants and regulators can collaborate and secure agreement on common solutions to improve consistency and cross-border harmonization. Market participants can, in an open and transparent process, establish a central source (a data dictionary) that defines and clarifies derivatives trade and reference data and workflow requirements for each reporting field required by regulators globally. Direction and support from regulators is critical. Regulators need to  be clear and consistent  regarding their priorities and set timetables for reform, and we believe it is critical that regulators work in conjunction with the industry to pursue specific standards in the most effective and efficient manner. They should also regularly review this work and facilitate its adoption on a cross-border basis.

Laws or regulations that prevent policy-makers from appropriately accessing and sharing data across borders must be amended or repealed. Regulators need to continue to work collaboratively to develop a framework that enables appropriate sharing of derivatives trade data across geographic boundaries. Such a framework should contain robust confidentiality safeguards for the secure transmission and maintenance of trade data that prevent data leakage of sensitive trading information such as counterparty information. Roadblocks to the appropriate sharing of data should be removed either by regulatory or legislative action.

Reporting progress should be benchmarked. The quality, completeness and consistency of data provided to repositories should be tracked, measured and shared with market participants and regulators in order to benchmark, monitor and incentivize progress in reporting.

NUS Business school address: The Future of Banking & Finance & how Singaporeans can stay competitive

Sam Ahmed was invited by NUS MBA school to give a 3 hour session workshop on the “Future of Banking and Finance in Asia & how Singaporeans can remain competitive”. The talk was given by Sam Ahmed and attended also by Simon Lacey who was involved in the Q&A.

During this session, he covered the following topics:

  1. How banking had evolved from traditional banking to capital markets
  2. How a global market for OTC derivatives was created catering to both banking and the buyside companies and the benefits it inherently bought to the overall economy by creating better hedging mechanisms as well as the instruments to help institutions with term funding
  3. The transformation of the OTC derivatives market: how the instruments were eventually being created whose value was less related to fundamentals but more to mathematical assumptions e.g. CDO’s
  4. The financial crises: what really caused it? The relationship that was formed between the real economy and financial markets through instruments such as mortgage back securities that helped spread the virus from the housing markets to capital markets and then back to the real economy.
  5. The financial crises: prevailing conditions that added to it. Case Study of Lehman Brothers.   Over leveraged strategy with a lack of emphasis on controls and risk management and with an overly ambitious agenda to capture market share in securitized products & FICC business. Finally a lack of ethical and compliance related culture was apparent in the DNA of the company. This was not only characteristic of Lehman Brothers but also many of the banks in that era
  6. The aftermath: post crises environment and regulations. Dodd Frank, EMIR and Basel 3 and the affects on global markets. How new regulations of clearing, stringent capital rules, SEFs & regulatory reporting is making it very challenging for small players and buy side institutions to carry on with their OTC trading programs. Compliance strategy and how banks are over hiring in the compliance field to satisfy regulators. Compliance today is an unsustainable model which should be transformed by compliance technology in the next 3 years as IT replaces the bulk of the newly hired compliance personnel
  7. How China is Rising:  Case study of the offshore Renminbi and how China strategically built offshore hubs and internationalised the currency from 20th place to the 5th most utilised currency globally.  Also focused on Xi Jinping’s policy of deliberatly slowing growth in order to undertake much needed reforms.  Finally asked the students if China will emerge as the Asia’s de facto leader and the case of the Asian Infrastructure Investment Bank
  8. The rise of disruptive technology which will threaten full service banks and the subsequent drive for banks to invest in mobile and digital platforms.    The advantage of smaller and more nimble players to change strategy to seize opportunities in this changing environment
  9. The rise of shadow banking and how unregulated alternative means of funding can destabilize the markets
  10. The future of Banking and Asia: Sector by sector analysis on where the jobs are and in which countries. Example: 1. M&A: watch for cross border acquisitions of Chinese Banks as they try and expand their presence by buying up foreign banks that are closing its businesses in the region or 2. HR: continued offshoring to Philippines & India of generalist HR roles and etc
  11. Finally he spoke about the need for Singaporeans to be more aware of macro trends outside its borders both from a regional and global perspective. He referred to Straits Times interview of Victor Mills who claimed that Singaporeans do have a “sense of entitlement” and mentioned that while this statement is rather stereotypical and does not cover everyone, it is important to take feedback gracefully and with the objective of self reflection.  He further stated that very strategic government policies in the 70’s and 80’s focused on education, transport, health, housing and building a business friendly global hub had given Singaporeans today an advantage of living in a first world country with all the perks that it has to offer. But I did mention that all of this hard work can be unwound and disappear at any stage. He drew a parallel with the SARS crises in 2003 and how quick the foreign investors and companies had pulled out of Singapore. He concluded to the students by telling them that there is a huge middle class growth of educated and skilled workers that is emerging in Asia and therefore in order to compete with them for jobs in the next 10-20 years, Singaporeans cannot only rely on education but also need to enhance their drive & hunger as well as learn to react with humility and wisdom when given feedback

 

Overall, Deriv Asia was pleased with the level of interest from the students as well as the questions we were asked, all of which to me demonstrated both their maturity and a deep understanding of global and regional economic-political developments and what they need to do today to stay ahead of the race in the Asian continent

INTEDELTA AND DERIV ASIA ANNOUNCE ASIA PAC PARTNERSHIP

INTEDELTA AND DERIV ASIA ANNOUNCE ASIA PAC PARTNERSHIP

 

November 24th 2014   |  Source: Asia E-Trading Press Release

November 24th 2014: UK based risk and collateral consultancy InteDelta and Singapore based Collateral, Clearing and Post Trade consultancy Deriv Asia are partnering to provide a joint service offering to their clients.InteDelta’s core service offering in risk and collateral management covers market intelligence, organizational change, business reengineering, risk modeling, technology architecture design and systems implementation. Deriv Asia’s offerings are largely similar covering Collateral Management, Clearing, Liquidity and Operational solutions around OTC services but with an expertise on Asian markets.

This partnership will allow InteDelta to bring their expertise and working knowledge of European best practices with infrastructures, banks and buy side clients to Asian markets, complementing Deriv Asia’s current advisory model and offerings.

Nicholas Newport, MD of InteDelta mentions “This is certainly a very strategic partnership that has immediate benefits for our Asian clients as InteDelta’s advanced offerings can be immediately supported by Deriv Asia’s onsite presence in the region”.

Sam Ahmed, Founder and MD of Deriv Asia further adds: “There is certainly a lot of demand in the region for technical solutions around OTC reforms as well as cost effective operational models and we feel partnering up with InteDelta, who bring tried and tested models from European markets can only really enhance our service levels and bring a wider range of highly developed offerings to our existing platform”.

Deriv Asia and InteDelta will operate in the region from their office at Six Battery Rd in Singapore.

Sungard seminar: Cross Asset Margining

Invited over to the Sungard office to broadcast a panel that was organized by Steven Edge from Asia E Trading. The panel included TK Yap, Exec Director, from DBS Securities, Matthew Pang, CEO of UOB Bullion & Chris Rojek, Head of Pre-Sales at Sungard.

We had a very interesting discussion on having a single platform that provides margin for both exchange traded and OTC derivatives. We moved on from there to discussing who should be responsible for a enterprise wide margining platform, whether it’s the clearing broker, executing broker or the CCP. TK Yap mentioned how on the securities side SGX was already building a platform to cater to the end user of brokers. I mentioned that from the OTC perspective, a CCP cannot be relied on for providing an enterprise wide margining system simply because it does not have an ability to view a clearing member’s bi-lateral trading portfolio. Hence an enterprise wide margining system should be built in house for every market participant.

We also discussed the benefits of pledged collateral versus title transfer as well as the costs of technology in the near future for providing margining solutions.

You can capture the whole session on youtube on:

Moderated Panel at FX Week, Fullerton Hotel Singapore

Had an excellent discussion with David Ngai, MD of Global Financial Markets association, HK, Siddharth Roy, CRO of CCIL, India and Rick Lakhiani, Head of Regulatory Reform APAC at Citi.
We discussed whether it was feasible for Asia to have multiple CCPs across all jurisdictions and debated on the pros and cons of a single Pan Asian CCP.  Mr. Roy also made an interesting point that CCP build need not be as expensive and cited CCIL’s example which gradually enhanced its services over the years.  Another important point was made by all the panelists on how Asian CCPs perhaps should be given a window to operate freely for a few years and not be pressured into DCO and EMIR recognition.  Overall a fascinating panel.