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Asia clearing and settlement roundtable
18 August 2011
Rewriting the rule book - Asian regulators may apply lessons from the US and Europe when developing their clearing and settlement infrastructure. Or they could go their own way, writes Alastair O'Dell
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J. Adam Vine, HSBC: There certainly is some degree of this. Some of the smaller countries, predominantly in South East Asia, benefit from what the other larger markets are doing, not only in the region but also globally.
They’re smaller, more nimble and able to adapt processes and procedures more easily than larger markets. It’s not only in custody and clearing; if you’re small you can potentially be more nimble. However, the regulatory regimes and structures of some countries in Asia are still influenced by a certain degree of legacy securities rule of law.
Barnaby Nelson, BNP Paribas: It’s probably an over-generalisation to say there is just four markets that are moving very fast and then the rest. My sense is that it’s more a multi-speed financial industry in Asia. Some are inherently moving slowly but have a strong desire to move quickly; others are moving slowly and are quite happy to stay that way; and there are those that are moving quickly. India probably had the fastest pace of change in the region across the whole trading landscape in the last 12 months. It’s absolutely multi-speed for me – there are other dimensions worth bearing in mind.
Olivier Grimonpont, Euroclear: I agree that Asia’s a multi-speed region. Each country acts according to its own needs. Internationalisation is not an objective in itself as their interests differ to varying degrees. Some, such as Japan, Australia, China and India, are large enough to impose their own rules, but some smaller countries need an international dimension to support their growth.
It’s a balance between optimising efficiency and protecting the system, so it’s really important to have the right model for each economy. Asian economies are so diverse that you wouldn’t expect them to move at the same speed; the underlying objective is definitely different depending on the country.
Nelson: It’s a really excellent point, when you think how it’s changed post-Lehman’s. There’s a greater distrust of internationalisation than there used to be in a lot of Asian markets, Hong Kong being the exception. Now the attitude is: ‘Just because it comes from overseas doesn’t make it necessarily safer or better.’ Internationalisation isn’t a priority, even if Westerners generally think ‘surely they only exist to open up infrastructures, that’s the natural path’. If you asked regulators around the region what they are there to do they would say safety – protecting their own people first – rather than liberalisation.
Grimonpont: A good example is Korea. It opened up its market a year and a half ago, and then back tracked on January 1 2011. They realised that opening up the Korean market was not necessarily in their immediate best interests. We can argue that observation, but it’s definitely what they did. They went back to a model of reduced foreign access to the market, contrary to what you would expect from a G20 economy.