The Future Of Securities Processing: A Roundtable Write-Up

Q3_15_James O'Sullivan

Q3_15_Tim Marsh

The question was raised whether those firms which do still want to offer everything understand their value proposition well enough? Operations itself in Asia has become a commoditised service. If a firm does it right, people say nothing, but if they do it wrong, the company risks getting into serious trouble.

Looking into the crystal ball
By this juncture, the mood among the panel and audience was sombre. If the plan is to move to a bright future, this doesn’t seem like the right place to start from, with under-investment, regulatory overload, a tangle of systems and differentiated platforms in Asian countries ill-disposed to seek joint solutions. Nevertheless, ideas did emerge. The panels’ predictions revolved on the concept that for the future of processing to bear fruit, today’s infrastructure needs to be swept away and replaced in total, rather than patched together and the cracks papered over.

Q3_15_Endre Markos

So, we were told that we must keep our eyes open for disruptive technologies such as Block Chain, which is currently being used by NASDAQ for its grey market business.

Block Chain is a way of recording data in a decentralised way. It was developed originally for bitcoin, clearing and verifying transactions. It is an enabling technology to make settlement real time, rather than T+1 or T+2.

Q3_15_p33The adoption of technologies such as Block Chain would imply replacement of all of today’s technology. It would have a knock on effect on the securities processing industry as we know it, foremost of which would be the apparent need to have lower staff numbers working in the back office.

One panellist speculated that AliBaba might become the world’s biggest financial company if it leverages the power of its payments infrastructure to cross sell other financial products.

In China, payments systems such as that offered by this major online merchandising company have meant that the country is in the process of by-passing the need to have a credit card industry. Their payments are conducted via the internet. If that theme unfolds, it will mean that credit cards, which have never penetrated China, will never do so, being superseded by an entirely new payments’ processing mechanism.

If China is to drive change therefore, Hong Kong is in a good position to participate. Today, the securities processing industry is bedeviled by a maze of systems and complications. Solving these problems with the tools currently at hand seems to be an impossible task. They are insufficient for the job. Therefore, the panel concluded that any leap forward will not be derived from evolutions of today’s processes, but from completely new technology and procedures on the drawing board. They now look for answers from Silicon Valley, rather than Wall Street.

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