A new study has revealed the disparities in post-trade processes across the Asia Pacific region.
InsightAsia Banking & Finance Consulting carried out a study across Asia Pacific and China on post-trade processes for equity and fixed income trades, which was commissioned by provider Omgeo.
Interviews with 100 senior operations executives from domestic broker-dealers, investment managers, custodian banks and other financial service firms across the region showed that 95 percent participants believe improvements are required in post-trade automation.
Fund flow across the region is increasing, as Asia Pacific cements itself as an important economic hub, according to Matthew Chan, regional director of strategy at Omgeo.
“Yet, according to this landmark study, the region’s financial markets feature varying levels of maturity in post-trade automation, which can have a direct impact on their ability to manage higher trade volumes and satisfy compliance requirements.”
“Managing operational risk associated with the trade matching process is essential to ensuring financial market safety and integrity.”
The survey revealed that overall, middle office automation in the Asia Pacific and China region is rated at 71 percent for equities and 55 percent for fixed income.
There are variations between countries, with Australia exhibiting the highest automation levels at 88 percent for equities and 69 percent for fixed income trades.
India, Hong Kong, Singapore, Japan, Korea and mainland China were among the highly automated markets, which scored around 70 to 80 percent for equities and 50 to 70 percent for fixed income.
The study found that Taiwan, the Philippines and Vietnam have the lowest levels of automation.
Reputational risk, increasing regulation and cost reduction are key factors for lifting automation levels, according to Omgeo.
One in three respondents of the study said reputational risk concerns with trade settlement failure as a reason for increasing middle office automation.
More than half of brokers and 67 percent of investment managers rated regulatory compliance as a key driver for pursuing greater levels of automation in the middle office.
A fifth of investment managers and 42 percent of brokers consider automation was viewed as a way of reducing cost.
Philip King, the author of the InsightAsia report, said: “The key to this study was to get senior operations executives across the 13 APAC countries to describe their automation procedures in a uniform manner that allowed objective benchmarks to be established between countries and firm-types.”
Chan added: “InsightAsia’s research shows market participants are positive about the benefits of automation. The equity markets already demonstrate high automation rates for a growing market. The fixed income market at 55 percent automation follows a similar pattern globally.”
