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Magazine Issues » November 2020

Virtual reality: Tech and innovation at The Network Forum


What opportunities and challenges do you identify in sub-custody and clearing in the Asia-Pacific region?
Asia-Pacific continues to evolve and innovate in order to create new levels of access for investors keen to be a part of its growth story.

Regional giants such as China and India are refining their regulatory frameworks on a broad scale to attract new entrants. Other markets that are built on inflow from international investors like Hong Kong, Singapore, Australia and New Zealand have been quick to embrace change. This approach to innovation has put them on the path to piloting cutting-edge mechanisms, such as distributed ledger technology (DLT), and creating brand new instruments and marketplaces that bring additional value to all stakeholders.

Meanwhile, China continues to grow in stature as a focal point for investors. It’s doing so by introducing several measures geared to providing global investors access to a huge, fast-growing market. One key reform, aimed at the Qualified Foreign Institutional Investor (QFII) programme, will remove investment quotas, broaden its scope, smooth the application process, and ease repatriation requirements. Another seeks to increase daylight trading opportunities between the region and Europe by extending the trading hours of the Interbank Bond Market operating through the CIBM Direct and Bond Connect schemes. A third will allow fund managers to book one trade across multiple underlying accounts with the implementation of the Master SPSA solution for the Stock Connect scheme.

Efforts like these, along with others in the pipeline, will expand opportunities across the Asia-Pacific at a challenging time for the global economy, cementing the region’s status as a go-to investment destination.


What are the key opportunities and challenges for a regional sub-custody and clearing specialist in the Americas?
The Covid-19 pandemic has tested the resilience of infrastructures and market participants like never before. While the region has performed well and proved to be more resilient than expected, the pandemic has exposed gaps and flaws in the system that remain and need to be addressed. This represents both a challenge and an opportunity.

With the exception of Brazil, representation in shareholder meetings has remained largely unchanged and is still a physical process. Most countries adapted in different ways to deal with the challenges that the pandemic posed and implemented short-term solutions which are not sustainable or scalable in the long term. Similarly, rigid account opening and tax documentation requirements have created issues across the region and were dealt with in a less successful way.

It is vital that the authorities and market participants use this window of opportunity to implement a more comprehensive approach and embrace the digitisation of all remaining physical processes. Citi has spent a lot of time engaging with local regulators and financial market infrastructures and it strongly believes that these digital measures are beneficial to all market participants. The remote voting capabilities implemented in Brazil in 2017, as well as the rollout of ‘smart’ account opening forms at Citi Brazil, have been a bright spot and are testament to the benefits of this digital approach.

The advantages of digitisation are well known. Firstly, automated systems and operations were incredibly resilient during the pandemic and we have invested heavily in this area over the years. By making the investment process more straightforward through digitisation and automation, regulators could also play a strategic role in helping to drive foreign investment into the region.


SRD II: how has the industry responded to the September 2020 deadline? What are the priorities in moving ahead with this directive?
SRD II promised the industry greater transparency and efficiency to investor communications – driving higher stewardship standards and improved levels of investor engagement. We have been impressed with the agility that the industry has displayed so far, particularly in the face of ongoing uncertainty. Of course, there were, and continue to be, some challenges to the new regulation, most notably frustrated member state implementations, interpretation and lack of message standardisation across up- and downstream intermediaries.

At Broadridge, we received unprecedented demand ahead of the September deadline for our SRD II solutions, which indicated that many intermediaries were keen to be prepared for the new regulation. While there is more work to do to reap the overall benefits available to the industry, it has prompted many to rethink and invest in their technology which, over time, will lead to higher levels of efficiency and an enhanced end-client experience.

Looking ahead, the upcoming proxy season in 2021 will likely be the most significant test for the industry and the regulators. We look forward to continuing to support our customers, while remaining agile and alert to any changes in the regulation’s data standards.

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