insider
The World’s Premier Network Management Conference
Why it Never Rains in Star Wars Page 6
T2S: From Vision to Reality Page 13
The Road Ahead for African Exchanges Page 20
A Global Update
What are some of the key trends and issues playing out CSDR &
AIFM NeMa Africa 2015
T2S T+2
AML
NeMa Americas 2015
FX Liquidity & Contro
Brazil Slowdown
P
t in the network management sector around the globe? CSD consolidation
MD
Russian sanctions
NeMa 2016
Corporate Governance Saudi Market Opening
ols CGT Abolished
Pre Funding Settlement
T+3
RMB Internationalisation Infrastructure Development
Stock Connect
NeMa Asia 2015 Investor Protection
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CONTENTS Title
Author
Page
Welcome
Andrew Barman, NeMa International
5
Why it never rains in Star Wars
Philippe Denis, BNP Paribas Securities Services
7
Independent technology is the answer for a solutions driven industry
MYRIAD Group Technologies
8
The value of partnerships
Neil Frederik Jensen, Deutsche Bank & Justin Chapman, Northern Trust
10
Target2-Securities - From vision to reality
Marc Bayle, European Central Bank
13
Flexibility and local expertise critical for funds’ success
Susanna Scheffold, UniCredit
15
Rebuilding financial markets through harmonisation
Euroclear
17
Regional Fund Passporting in Asia
Mabel Chan, Henderson Global Investors (HK) Ltd
18
The road ahead for African exchanges
John Falk, Bourse Consult
20
Asset Servicing – A new model for a new business reality
Demi Derem, Broadridge
23
NeMa Profiles: Getting to Know You
24
NeMa Gallery
28
NeMa Calendar
30
Special thanks and credits: NeMa Editor in Chief: Andrew Barman NeMa Insider Editor: Lucy Eldred Contributors: Marc Bayle, Mabel Chan, John Falk Sponsors: Deutsche Bank, UniCredit Bank, BNP Paribas, MYRIAD Group Technologies, SEB, EuroClear, Hornby Chapman, London Stock Exchange, Broadridge, Cairo Amman Bank Sponsorship team: Jeffrey Ong Design team: LockOn Productions
If you are interested in submitting content for future NeMa magazines, please email lucy.eldred@informa.com If you are interested in sponsorship options for future NeMa magazines, please contact jeff.ong@informa.com
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NEMA 2015 WORLD TOUR
2015
WELCOME We hope you will enjoy this second edition NeMa magazine, with a focus on global and emerging market developments. After MESF in Abu Dhabi and NeMa Athens, we are delighted to be continuing the NeMa 2015 World Tour which sees us descend on Miami (NeMa Americas), Shanghai (NeMa Asia) and London (NeMa Africa).
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he custody, clearing and settlement landscape is constantly changing and 2015 has brought some seismic shifts. T2S finally went live in June with the first wave, as well as the Saudi Market opening up to the wider world. T+2 in North America and T+3 in South Africa dominate the discussion in their respective regions, and Asia has been fired up with the excitement of Mutual Recognition and Stock Connect, but spooked by the volatility of the China markets. All of these issues and more are thrusting the world of the custodian and infrastructures further into the limelight as investors seek market information on a daily basis.
NeMa Athens saw a record turnout of 500+ attendees, and as we look forward to 2016 with excitement, we also feel privileged to be involved in such a great community around the world. Dubrovnik is now confirmed for the flagship
We are delighted to be bringing such an expert group of industry practitioners together at our world class conferences and networking events, and look forward to hearing your thoughts as we meet many of you on the road. 5
NeMa event next June, so block your diaries and get ready for the networking event of the year! Andrew Barman NeMa Editor in Chief
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WHY IT NEVER RAINS
IN STAR WARS The excitement of 1970s science fiction may explain the military’s keen desire to build laser guns. Yet overcoming the massive power consumption and environmental interference are real impediments to development; if you were to fire such a weapon today, in lightrefracting rain, fog or across ocean waves, you would not feel ‘the force’ was with you. With the maximum 30% energy efficiency – which the best lasers can achieve – the cost and heat of deploying them underwhelms against the wonder of Star Wars.
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he level of excitement surrounding technology initiatives today in finance should also be tempered by reality. A huge amount of investment is pouring into financial technology (fintech) start-up firms, estimated by Accenture to have reached US$12.21 billion globally in 2014, up from US$4.05 billion in 2013. The astonishing jump in investment levels can be attributed in part to technology maturity and in part to investor appetite. Systems developed by fintechs often help improve financial firms’ existing processes, sometimes also resulting in new ways of providing a service. By leveraging 21st century technology this approach allows actors to bypass or provide add on components removing potential inefficiencies that may exist as part of 20th century technology and practices.
For example on the technology side, Google can provide natural language searches across all sorts of documents, which would be impossible using the relational data model, found in most common databases. The basis of Google’s storage and retrieval system has been constructed in the open source Apache Hadoop data search and retrieval system, itself a development from a white paper released in 2004 by Google scientists, detailing the firm’s data management model. On the trade processing side, the checking of both a buyer’s and a seller’s securities transaction records before a trade is settled, could potentially be enhanced thanks to blockchain, the ledger used to record bitcoin transactions. As bitcoin is not supervised by a central authority, the system
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NO CHIEF INFORMATION “ OFFICER WILL HOP INTO THE LATEST MILLENNIUM FALCON WITHOUT CHECKING THE HYPERSPACE DRIVE WORKS. has to check on all buyers and sellers, using an open-source, unhackable mathematical encryption to validate transactions as they happen. Financial institutions can capitalise on the open source nature of these technologies and adapt them to meet their needs. For example, where Google might offer 1.5 million possible answers to a query, a risk manager will only want one, correct answer. Honing the current technology into a tool that meets the quality demanded by the finance industry is a rigorous process. No chief information officer will hop into the latest Millennium Falcon without checking the hyperspace drive works.
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TECHNOLOGY OFFERS TO REVOLUTIONISE THE BUSINESS OF FINANCE, BUT REALITY CAN TRIP UP EVEN THE MOST EXCITING TECHNOLOGIES, WRITES PHILIPPE DENIS, CHIEF DIGITAL OFFICER FOR BNP PARIBAS SECURITIES SERVICES.
STUDY THE TECHNOLOGY NOT THE HYPE The question then is to understand when and how a financial institution can invest or support a technology based on its reality, and not its hype. In a cost conscious environment, there is little room for ‘blue sky’ investment. Analyst firm Gartner has long offered an insight into future growth in new technologies and its ‘hype curve’ tracks the movement of such technologies to the ‘Plateau of Productivity’ where the firm sees mainstream adoption taking off. If one looks at the four stages prior to this: the Technology Trigger; the Peak of Inflated Expectations; the Trough of Disillusionment; and the Slope of Enlightenment one can find a professional estimation of a timeframe and stage of maturity. It is clear that technologies such as blockchain and Apache Hadoop have considerable potential for enhancing post trade service infrastructure, and with an army of entrepreneurs – and internal technologists at financial institutions – attempting to turn
these systems into workable tools there are a range of investment opportunities for financial services firms to pursue. Some will need funding, some will need professional guidance from within the industry. The finance industry must engage with these firms to keep track of the latest developments and invest in systems and providers where they see opportunity. The ability to deploy computing resources virtually means that each project no longer needs its own datacentre, and much of the technology developed today can be repurposed when needed, making experimentation cheaper than ever. The potential exists to enhance and streamline post trade processes, and with careful investment decisions chief information officers can ensure their firms are tracking the curve of development and not hype.
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Philippe Denis Chief Digital Officer, BNP Paribas Securities Services BNP Paribas is the lead sponsor of NeMa Americas, taking place in Miami 27-28 October. BNP Paribas is also a supporting sponsor of NeMa Asia, taking place in Shanghai 9-11 November.
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360 Degree View. Total Control. Complete Conf idence.
Supporting your governance, risk and compliance functions at all levels, both Embus and MYRIAD deliver single, integrated systems that will improve your processes and increase transparency. Our solutions span initial client engagement and the delivery of provider services via the network and vendor management teams. From client onboarding and lifecycle management through to network and cost management, we bring you technology that will improve command and control, mitigate risk, extend your compliance capability and help you reduce costs.
CLIENT ONBOARDING & LIFECYCLE MANAGEMENT
VENDOR GOVERNANCE & NETWORK MANAGEMENT
Peter Hall, Bea Nagy info@myriadembus.com +44 (0)20 3470 0327
Simon Shepherd, Rupert Booth info@myriadgt.com +44 (0)20 3470 0320
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MYRIAD Group Technologies Limited Innovation Insight Intelligence myriadgt.com
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INDEPENDENT TECHNOLOGY IS THE ANSWER FOR A SOLUTIONS DRIVEN INDUSTRY Among the many takeaways from NeMa 2015 in Athens which can - and should - be carried forwards into NeMa Asia, NeMa Americas and later this year, NeMa Africa in London, there are some major industry priorities which have emerged. Importantly, solutions to these problems exist already. It is clear that these topics are exercising industry participants the most: • • • • • • • • • •
The growing due diligence burden A desire for greater collaboration and mutual support The absence of industry utilities The transition to segregated accounts and associated overhead The desirability (or otherwise) of contingency or ‘parallel’ Networks The need for better governance The rise of the Risk Management function Deepening Regulation Basic Compliance Cost management
These themes are not new but the tenor and flavour of comments around how to address them suggests a growing impatience with inertia in the industry. By way of providing ‘solutions’ to these problems, the cost of doing something is far - far - outweighed by the cost of not doing something. Frustration at the ease and speed of specifying solutions should come as no surprise to people involved in banking, not least where Banks are expected to work with each other. The answer lies in using proven, cost effective technology, developed independently of any one Bank’s agenda, which addresses not just your current capacity requirements but also your future functional needs. Plan for the next ten years, not just the next ten months. Buying a license for an established platform which delivers ten times the functionality of internal solutions, at less than 1/10th of the price, is about as compelling as it gets.
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For yor Client On-boarding needs, look no further than Embus™.
For your Network Management needs, look no further than MYRIAD™.
Both can be implemented in under 6 months; both are provided by MYRIAD Group Technologies Limited. MYRIAD Group Technologies Ltd 2015 www.myriadgt.com
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THE VALUE OF PARTNERSHIPS I
n the build-up to T2S, many people spoke of the challenges and opportunities that securities infrastructure consolidation would bring. The organisations that focused on its potential, rather than the obstacles, swiftly seized the moment to take a deep look at their business and use T2S to make some modifications. Northern Trust, one of the largest global custodians in the world, was among the banks that identified the chance to challenge the status quo. As its T2S strategy took shape, it started to develop a fresh, strategic view on its custody model for the post-T2S world. “Given that T2S takes us a big step forward in creating greater efficiency and integration across Europe’s financial markets, while also reducing counterparty and settlement agent risk, we met this headlong and set out to consolidate our banking relationships,” says Justin Chapman, Global Head of Market Advocacy & Research. Northern Trust established that 90% of its T2S flows will be concentrated in six markets in Europe: Germany, France, the Netherlands, Belgium, Spain and Italy. As harmonisation started to take place, Northern Trust reduced its bank providers to two custody providers who could work with the bank on a new strategic operating model.
A LANDMARK MANDATE As Northern Trust formulated its strategy, it was looking for partners
who could support the new centralised delivery-versus-payment settlement regime in central bank funds across European securities markets on behalf of its clients. The mandate was secured by Deutsche Bank, along with Euroclear France, an investor central securities depositary. It is something of a landmark for the industry in that it underlines how a compelling combination of expertise can be harnessed for the benefit of clients. “Across the teams, the high degree of flexibility and open engagement was instrumental in getting the scope of the project agreed, the objectives in place and, as we moved through the process, the most workable solution,” recalls Chapman. The journey hasn’t been without hurdles, but Northern Trust, Deutsche Bank and Euroclear all have the commitment, from the very top of their organisations, to make the project a template for successful cooperation. “I hope this does prove to be the first of many such collaborative efforts in the industry,” says Chapman. “All three parties in this transaction bring different strengths to the table. It’s a win-win-win scenario.”
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DURING THE HEIGHT OF THE CRISIS, WE SAW A HUGE INFLUX OF CASH AS PEOPLE LOOKED FOR STABILITY AND REASSURANCE 10
Chapman adds that the commitment of all parties to make the collaboration a success clinched the appointment of Deutsche Bank and Euroclear. “There was a strong underlying feeling from everyone involved that, from a strategic perspective, there were mutual benefits to be derived from the partnership. It was a very pragmatic arrangement,” he says. Pragmatism is, in many ways, a substantial characteristic of Northern Trust. Historically known as a stable organisation, it started planning for T2S in 2012. “It is a huge investment for us, and our due diligence around T2S included looking at providers who could partner with us in the long term. For example, for this important mandate, the selection process was rigorous, involving many of the pre-eminent names in the market over a period of some 18 months.” It was an intensive process, working through strategic objectives and, ultimately, developing an innovative structure. Northern Trust was quick to unveil its strategy, mainly because it was not hampered in any way by legacy infrastructure issues.
FOLLOWING THE SUN Northern Trust’s own legacy is a 125year history that has seen the bank come through the Great Crash of the 1920s and the most recent global economic crisis relatively unscathed. Its reputation as a conservative institution served the bank well in 1933, when the banks reopened after President Franklin D Roosevelt closed them at the peak of the crisis.
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In 2014, Northern Trust mandated Deutsche Bank and Euroclear to support its TARGET2-Securities (T2S) strategy. The solution that was developed positions the US bank for future growth and underlines the importance of collaboration in a complex environment. Neil Fredrik Jensen talks to Justin Chapman, Global Head of Market Advocacy & Research at Northern Trust, about the journey.
People were queuing up outside, to deposit money with Northern Trust. The sentiment was similar in 2008. “During the height of the crisis, we saw a huge influx of cash as people looked for stability and reassurance,” says Chapman. “Our performance during the crisis has reinforced our position as a safe, strong organisation to work with.” This perhaps also explains why 20% of the wealthiest families in the US are Northern Trust clients. And according to Fortune Magazine, Northern Trust is among the World’s Most Admired Companies, an accolade it has picked up for nine years in a row. Although its heritage is firmly in the US – the bank was founded in Chicago, Illinois – Northern Trust works on a global basis and applies the same ethos to its business in every part of the world. “We take a holistic view of the market and acknowledge that the world is interconnected. Many of our clients are global in their outlook, so we operate on the basis that there are no borders around our business,” insists Chapman. “It’s one model, one service.” The bank proudly states that it continues to pursue a ‘follow the sun’ approach. The crisis taught financial services that ‘strong banks’ should no longer be taken for granted, but the evolving regulatory environment in its aftermath is designed to protect banks, investors and, equally important, markets. When surveying the current climate, Chapman sees regulation continuing to dominate the landscape for some years to come. Northern Trust, like all major
banks, works closely with regulators to ensure its clients can “get closer to the market”. Indeed, after announcing its T2S strategy, Northern Trust was successful in attracting T2S-related business, a sure sign that clients acknowledged that the bank was meeting the market’s needs. Chapman is an advocate of regulation as the catalyst for bringing greater transparency to the markets. “Naturally, asset safety and enhanced liquidity have to be prerequisites for the shape and integrity of our industry in the years to come, but the need to demonstrate transparency around transaction reporting, positions and where assets are held is of paramount importance.”
need to navigate a more harmonised market for Europe.” He concludes: “It bodes well for the future, not just for the success of Northern Trust and its clients, but also for the way we can effectively partner with our bank providers.”
GETTING TO THE STARTING LINE The full benefits of Northern Trust’s T2S strategy will take time to realise, but the implementation of the Deutsche BankEuroclear solution means Northern Trust is well placed. Chapman believes this is partly attributable to the success of a relationship that has strengthened as time has passed. “T2S is a solution for the market, so we felt that we had to move quickly to send a message to our clients and to the wider market,” he says. “Getting to the starting line was an achievement in itself within the timeframe, but by introducing a set of complementary skill sets and expertise, and a code of collaboration, we have worked together to show how we can meet the challenges of market change and give our clients what they
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Justin Chapman Global Head of Market Advocacy & Research at Northern Trust Deutsche Bank is lead sponsor of NeMa Asia taking place in Shanghai 9th – 11th November 2015. Deutsche Bank are also a supporting sponsor of NeMa Americas taking place in Miami 27th – 28th October 2015.
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NEMA 2015 WORLD TOUR
€
£
€
€
£ £
2015
TARGET2-SECURITIES
FROM VISION TO REALITY
€
The shared vision of TARGET2-Securities (T2S) became a successful European reality on 22 June 2015. An important milestone regarding further financial integration in Europe was reached by replacing fragmentation with a simplified, universal platform for real-time securities settlement in central bank money.
C
ross-border settlement of both debt securities and equities is now treated in the same way as domestic settlement, with harmonised conditions, making it easier and more cost-effective for investors and companies to buy and sell shares in other countries, for example. With T2S, issuances – which previously had been largely restricted to the national level – are now available on a European scale, making it easier to attract foreign investors. Securities depositories can provide safer and more efficient services to their clients at a lower cost. T2S also allows market participants to manage their collateral and liquidity needs more effectively, as it is now much easier to move collateral to wherever it needs to be in Europe. So far, five securities depositories from Greece, Malta, Romania, Switzerland and Italy have migrated to the platform. The migration of all five markets went smoothly and was completed well ahead of schedule. As is common with large technical projects, there were a few minor teething problems at the very beginning, but these were quickly rectified and the platform is now functioning well. It settles more than 80,000 transactions on average per day, a figure which will increase substantially with the upcoming migration waves.
Over the course of the next two years the platform will evolve and grow as the full T2S Community joins it. By 6 February 2017 all 21 markets and the CSDs that have signed up to join T2S will have migrated and will be settling transactions on the platform. T2S has been designed as a multicurrency platform that allows transactions to be processed in currencies other than the euro. In this respect, Danmarks Nationalbank will bring the Danish krone to T2S in 2018. Over the next few years, we expect to see more markets join the platform and, perhaps, transactions will be settled in even more currencies in the future. The Eurosystem, the market and the more than 100 institutions that make up the governance structure worked together from the very start of the project. We actively sought and responded to the views of all stakeholders, which greatly enriched the whole process and led to a better final outcome than we could ever have achieved alone. There is a saying that “teamwork divides the task and multiplies the success” – this is certainly the case for T2S.
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[T2S] SETTLES MORE THAN 80,000 TRANSACTIONS ON AVERAGE PER DAY, A FIGURE WHICH WILL INCREASE SUBSTANTIALLY WITH THE UPCOMING MIGRATION WAVES.
Marc Bayle Marc Bayle, Director of General Market Infrastructure and Payments, European Central Bank.
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FLEXIBILITY AND LOCAL EXPERTISE
CRITICAL FOR FUNDS’ SUCCESS Regulation is bringing about change in the investment markets. In particular, the Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for Collective Investment in Transferable Securities V (UCITS V) are prompting funds to put more of an emphasis on the quality of their securities services. And while the prospect of implementing new compliance processes makes it easy to see these latest regulations as a burden, this challenge offers forward-thinking funds the chance to carve themselves an edge by being better prepared than their peers.
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hose that choose this route will mark themselves out by demonstrating flexibility and local expertise – qualities which firms will want reflected in their securities services provider. Indeed, the introduction of AIFMD and UCITS V makes the quality of securities services more important than ever. And consequently, we are seeing service providers move away from competition through pricing to focus on improving the quality of their services. Funds can capitalise on this shift in attitudes to secure a provider with strong local expertise in their core geographies. This is a critical advantage, as operating in different regions often requires very different approaches, and a wrong step can slow down procedures or even bring them to a halt. This is true even for operations that fall under regulations which aim at harmonisation, such as AIFMD and UCITS V. The difficulty is that these rules are often applied differently in different jurisdictions. Central and Eastern Europe is a case in point. Though classified as a region, it is composed of numerous countries that differ significantly in terms of market size, market liquidity, maturity, political situation, economic potential and culture.
These differences have informed their respective legislative frameworks, with regulations implemented in different ways according to variations in countries’ existing legislature. What’s more, new regulations are always open to divergent interpretations, which can themselves be exaggerated by cultural differences among local regulators. Consequently, country-specific differences abound in the CEE region’s securities services industry – making local expertise a ‘musthave’ quality for service providers. With direct presence in 13 CEE countries, UniCredit is uniquely placed to provide exactly this expertise. But this must also be combined with flexibility. The environment is constantly changing and AIFMD and UCITS V represent just one market change among many more to come. Providers must therefore have the flexibility to adapt their existing expertise as new changes break. Indeed, it is these two qualities in combination – flexibility and local expertise – that can set funds apart in these challenging times, giving them the nimbleness to adapt quickly to new regulatory nuances, and turn adversity into opportunity.
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OPERATING IN DIFFERENT REGIONS OFTEN REQUIRES VERY DIFFERENT APPROACHES, AND A WRONG STEP CAN SLOW DOWN PROCEDURES OR EVEN BRING THEM TO A HALT.
Susanna Scheffold Head of Global Securities Services, UniCredit
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REBUILDING FINANCIAL MARKETS
THROUGH HARMONISATI N
In Asia, the focus has been primarily on how harmonisation and integration can enhance the development of the Asian Bond markets under the ASEAN+3 Initiative. A pilot platform involving Bank Negara Malaysia, the Hong
Kong Monetary Authority and Euroclear was launched in 2012. At the same time the Asian Bond Market Initiative is looking at other regional integration and settlement architectures. Progress here will be driven in part by the implementation of the G20 and FSB regulatory agendas. For instance, regulatory changes in the major Asian financial centres will likely require initial margin for both counterparties and a reduction or removal of thresholds for variation margin. This means that there will be an increasing demand for collateral which in turn will require increasing integration of Asian Bond markets to satisfy the increased demand for high quality liquid assets.
As a neutral infrastructure, Euroclear works to understand each country’s position and work with its authorities to come up with tailored structures that meet their demands - while enhancing their access to international investors and allowing market participants to realise operational efficiencies. Where countries are looking to reform their capital markets and engage more actively with international investors, we will work with their market authorities to help develop an appropriate capital markets regime. Euroclear are an associate sponsor of NeMa Asia 2015, taking place in Shanghai 9 – 11 November.
Building stronger financial markets for all As the regulatory landscape changes, the challenges facing capital market participants in Asia are intensifying. Covering 46 markets and 51 different settlement currencies, with over USD 31 trillion in assets under custody for our clients, we deliver: • risk-mitigation • automation • efficiency We are your global gateway to investment funds, ETFs, equities, fixed income and collateral management services. Rated AA+ by Fitch and AA by S&P, Euroclear is the partner that you can trust.
Post-trade made easy
euroclear.com
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© 2015 01 15 Euro roclea cle l r SA /NV V, 1 Boul Bo evar evard dd du Roi R Alb bert rtt II, I, 1210 1210 Bru Br ssel ssels, s Belgi el um, m, RPM Brus Brussels sels l num number ber e 0423 423 747 47 369 369 9
The liberalisation of capital markets around the world, allowing easier access for international investors to local markets and greater harmonisation of trading and settlement practices, is widely viewed as a catalyst to economic growth. The associated alignment of regulations and market practices are seen as key building blocks in helping achieve a level playing field with which international investors feel comfortable.
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When NeMa Insider first contacted me, I asked myself ‘what will be of most interest to the readers?’ I sat down with a cup of coffee and realised that more than a few regulatory initiatives have gone live in the past 12 months! The initiatives are not limited to the mutual funds’ offering via banking channels but are also around the corner for insurance companies.
REGIONAL FUND PASSPORTING
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A I S A IN
t ITAS Asia 2013 in Hong Kong I shared my thoughts on the key developments in the Asian fund management industry during which I prompted audiences to look back at the early 90s vs nowadays. A few drivers account for this milestone include remuneration to the channels, private wealth expansion to tap the Asian wealth and asset managers’ localisation. In order to cope with these changes, we have seen some mergers and acquisitions in the financial sector to streamline the salesforce and also the operating cost to fulfil the necessary regulatory requirements. More importantly, investment products need to be stripped back to the basics due to the lengthy regulatory approval process. In 2014, my topic for the ITAS Asia was ‘How is UCITS Positioned now in Asia?’ As of 2013, it had about EUR7 trillion invested assets in UCITS. Generally, UCITS is an automatic passport with greater access especially in Europe but also allows greater use of financial instruments to minimise the risks on the fund level under certain circumstances. I have highlighted to the NeMa community the potential shift from UCTIS to other regulatory regimes. So who will be the winner? The likely answer is ALL of them! The statement that I make at all times is the regulatory changes create challenges, but also business opportunities.
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THE RIGHT HAND IS TIGHTENING THE REGULATIONS FOR PUBLIC MUTUAL FUND OFFERING, HOWEVER, THE LEFT HAND NEEDS TO LOOSEN THE GUIDELINES ALLOWING SOPHISTICATED PRODUCT FOR PROFESSIONAL INVESTORS
On 30th June 2014 and 5th August 2014, the Office of the Commissioner of Insurance (‘OCI) in Hong Kong issued a Guidance Note requiring insurers to carry out a review at the product design stage to ensure that the product meets the ‘fair treatment of customers’ principle as well as the ‘Remuneration Disclosure Guide on Calculator Methodology and Disclosure Format’ respectively. The insurers have to seek reapprovals and in compliance with the new guidelines. It has slowed down their businesses in Q4, 2014, however, an opportunity to add new mutual funds into the new plans for the fund managers.
NEMA 2015 WORLD TOUR
More recently, the Taiwanese regulators released key points to reinforce the management of offshore funds and to enhance the contribution level of offshore fund distribution to the Taiwan asset management industry in September 2015. The Asia Regional Fund Passport is on the agenda although it is perceived even more challenging to be achieved for the launch in January 2016.
The passorting allows access to capital and investment opportunity in countries that were restrictive towards non-domestic investors and fund managers. A common goal for each scheme On 27th August 2014, the ASEAN is cross border recognition and CIS Fund Passporting scheme was widening the domestic fund announced, a framework which markets. These all increase the covers Singapore, Thailand and diversity of investment products Malaysia at launch. Since its launch, available in the region, and it has three funds approved in are seen as bridges to tackle Singapore but is yet be approved in the differences within financial Malaysia and Thailand. However, practices as well as the broad the global fund managers (for SG structures. based) are making many significant steps to take advantage in building Apart from product development the AUMs for their Singaporeand operational set-up to cope domiciled funds. with the changes, some questions have popped up on the radar On 7th July 2015, the screens…Do regulations create announcement was made boundaries or time to market? by CSRC and HKSFC for a Does it affect business structure, Mainland-Hong Kong Mutual either locally, regionally or Recognition Scheme. As of today, globally? Is profitability on the only about 100 HK-domiciled top of the list or should we launch funds qualify for sales in more product for AUM gathering? Mainland and about 500 ChinaShould product innovation or domiciled funds will be allowed in client suitability comes first? Hong Kong. Although within the industry it was widely viewed that Fund managers in the region are this may not add much value, as in different scales and are eager it will be much more cost efficient to tackle the regulatory changes for fund managers who are banks in effective ways. The right hand with networks in Mainland China, is tightening the regulations for or with JVs in china for the global public mutual fund offering, fund managers. however, the left hand needs to
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2015
REGULATORY CHANGES CREATE CHALLENGES, BUT ALSO BUSINESS OPPORTUNITIES
loosen the guidelines allowing sophisticated product for professional investors. This may pave way to bring in new product given the regulatory gaps between UCITS and locals. In conclusion, all initiatives require resources and long-term views. Invest in your brand, investor education and lastly build close relationship with regulatory bodies in order to keep abreast of the market development.
Mabel Chan Head of Wholesale Distribution, Asia, Henderson Global Investors (HK) Ltd Mabel Chan will be presenting on 11th November at NeMa Asia 2015 on the topic of ‘Regional Fund Passporting In The Spotlight – What Are The Challenges? And What Is The Real Value In These Initiatives?’
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THE ROAD AHEAD FOR AFRICAN EXCHANGES
Is there a road or a highway to the future for African exchanges? Africa is seen as the next great investment opportunity by international investors due to the very large infrastructure development opportunities, better growth prospects than other continents, a young growing workforce and domestic pension funds looking to invest in their markets. The pension funds in 10 African countries already have $379bn in assets and then there is the growth of sovereign wealth funds; 15 African countries have created them in last 20 years, managing $159bn by the end of September 2014 with 5 funds started in the last 3 years. A further 13 African countries are in the process of examining or creating sovereign wealth funds. But are African exchanges positioned to take advantage of these potential investments by major investors, domestic or foreign? As Ashish Chauhan, CEO of BSE India said at the World Exchange Congress in March 2015, “If you don’t work for the larger purpose of the society, exchanges will become irrelevant. Slowly they will become smaller and smaller…Most of the funds are being raised by private equity, by venture capitalists, not by the exchange industry. Stock exchanges that concentrate on trading for the sake of trading are in a zero-sum game.” Across most of the exchanges in Africa there is a low level of companies listed to invest in, which means there is a lack of liquidity. When quality companies are listed, their liquidity is usually lower because of a lack of other quality assets for investors to switch to.
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ACROSS MOST OF THE EXCHANGES IN AFRICA THERE IS A LOW LEVEL OF COMPANIES LISTED TO INVEST IN, WHICH MEANS THERE IS A LACK OF LIQUIDITY
NEMA 2015 WORLD TOUR
Existing exchanges are also facing the challenges of new or alternative exchanges appearing – for example ALTX in Uganda, ZAR X, A2X and 4AX in South Africa - in the same way that has already happened in Europe and the USA. Order flow will be reduced for an existing exchange and they will have to be nimble on their feet to handle the new competitors. Competing exchanges also change the demands made on the posttrade infrastructure: the CSD can no longer be considered to be hardwired into the exchange, but needs the flexibility and independence to accept trades from competing platforms. How many African CSDs are able to achieve this? Exchanges need to examine how they can create new methods for African companies wanting to raise money for investment. The hurdles along the road are high given that exchanges may not have the infrastructure and corporate governance in place to undertake these changes. Also, breaking the current monopoly of banks providing finance for new ventures is a significant issue to be resolved. Some of these hurdles can be lowered by working together to improve the services offered by exchanges. With six regional economic communities in Africa - Arab-Maghreb Union (AMU), Central African Economic and Monetary Union (CEMAC), Common Market of Eastern and Southern Africa (COMESA), Economic Community of West African States (ECOWAS), East African Communities, and Southern Africa Development Cooperation (SADC) –
all of them offer opportunities for exchange integration facilitating market access at the regional level, cross listing and the crossborder movement of capital. One example already is the work done by the eight French speaking countries in West Africa, which belong to the West African Monetary Union, who integrated their stock exchanges into a single exchange, the BRVM. In East Africa, the Kenyan, Ugandan, Tanzanian and Rwandan exchanges are talking of merging into a bigger East African Stock Exchange (EASEA). Another area that needs to be developed is the use of infrastructure bonds. As they start to be utilised, how will exchanges react to them given that the majority of exchanges in Africa are weak in handling corporate and government bonds?
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2015
EXCHANGES NEED TO EXAMINE HOW THEY CAN CREATE NEW METHODS FOR AFRICAN COMPANIES WANTING TO RAISE MONEY FOR INVESTMENT
Lastly, are the regulators in African countries ready for the new initiatives that exchanges have to develop in a relatively short period of time so that they do not lose out to competitive financial infrastructures? Big challenges remain for exchanges in Africa but the returning diaspora of highly experienced and qualified people back to their homelands mean that many exchanges are ready to move forward and in a strong vote of confidence for exchanges, a recent paper on the role of exchanges by Norway’s Norges Bank Investment Management, which manages the largest sovereign wealth fund in the world, supports of the role of exchanges as critical to well functioning markets, as regulated marketplaces that facilitate funding, police listing privileges and ensure price discovery. 21
John Falk Partner, Bourse Consult John will be presenting at NeMa Africa 2015 on 24th November on the topic ‘Exchanges Initiatives – what is in the pipeline?’
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Exploring Northern European cash & custody opportunities. Together. At SEB, we have a proven track record of working closely with our clients. We like to build long-term relationships and will stand by you in good times and bad. As the leading Nordic corporate bank with a complete portfolio of financial services, we can help you grow and expand the scope of your business. Together, we can explore a wider world of opportunities. To find out more, please contact: Gรถran Fors, goran.fors@seb.se sebgroup.com/corporatesandinstitutions
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NEMA 2015 WORLD TOUR
SPONSORED ARTICLE
2015
ASSET SERVICING –
A NEW MODEL FOR A
NEW BUSINESS REALITY The complexity of asset servicing continues to amplify, in part due to significant increases in cross-border trading activity. Between July 2014 and June 2015 Broadridge handled institutional investor proxy votes from over 110 countries and saw voting ballots grow by 12%. Increasing multi-jurisdictional requirements and the sheer volume of activity have presented a new set of business challenges to custodians, central securities depositories and brokers. Revenue, profitability and growth are being eroded by increased competition, increased infrastructure costs, like those related to T2S in Europe, regulatory capital constraints and the drive for greater transparency.
T
his new business reality for asset servicing requires new business models. More than ever, financial services firms need to focus on the few things that they uniquely do well to add value to their businesses. Outsourcing non-core business activities can enable firms to focus their resources on those functions that provide the most differentiation and returns in a highly competitive market, rather than simply follow existing models. Mutualised shared services solutions for business functions like proxy processing are gaining traction in local markets around the world. They allow market participants to manage complexity and leverage economies of scale and best practices, creating significant operational and business opportunities along the chain of custody. Broadridge’s Direct Market Solutions are built as a shared service. The solutions extend Broadridge’s Global Proxy Management platform by adding tailored solutions for local markets, such as the direct sourcing of meeting announcements and related meeting materials, translation from local language to English, and execution of vote instructions in local markets through direct delivery of the local and cross-border instructions to the CSD, issuer, issuer’s agent or registrar.
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MUTUALISED SHARED SERVICES SOLUTIONS FOR BUSINESS FUNCTIONS LIKE PROXY PROCESSING ARE GAINING TRACTION IN LOCAL MARKETS AROUND THE WORLD
Broadridge’s mutualised proxy services model delivers cost savings and best-in-class scalable services. Custodians and CSDs can streamline their operations by quickly and efficiently on-boarding a comprehensive local market capability, increasing efficiency through end-to-end proxy processing. Further, Broadridge’s integrated proxy solutions have many benefits to institutions including enhanced vote transparency, an extended voting window, and improved data analytics, ultimately improving corporate governance.As institutional appetite
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for cross-border investment and active participation in local market activity grows, asset servicing and proxy processing specifically are requiring financial firms to adopt new business models. A mutualised, shared service model for global proxy processing is creating real operational and competitive advantage.
Demi Derem General Manager, Investor Communication Solutions, International, Broadridge
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GETTING TO KNOW YOU We touched base with some of our NeMa regulars and hit them with the hard questions about life in an attempt to get to know them a bit better. Designed by Freepik.com
Alvaro Camuñas BNP Paribas Securities Services
1.Which living person do you most admire, and why? King Juan Carlos... He was able to manage the political transition in Spain to one of the most stable periods in our history and maintain the country unified. 2. Property aside, what’s the most expensive thing you’ve bought? Cars. 3.What is your most treasured possession? A watch - for sentimental reasons. My grandmother gave to my grandfather when they celebrated their 25th wedding anniversary and it’s been in my family for generations. My father gave it to me a few years ago and it is very special to me.
4. What would your super power be? Ubiquity ..... I would love to be able to be in several places at the same time .... It doesn’t mean being omnipresent. 5. What is your favourite city? Madrid, without a doubt. Thanks to my job, I have visited many cities around the world and the quality of life that you have in Spain is difficult to find anywhere else. Our French colleagues who come and work in Spain all tend to extend their stay to the maximum. 6. What is your favourite type of cuisine? As a Mediterranean, I love to eat. I like many different types of cuisine: Spanish, Peruvian, Italian and Japanese, just to mention a few. 7. What did you want to be when you were growing up? Otorhinolaryngologist (ear, nose and throat specialist) like my grandfather or politician like my father. 8. Which words or phrases do you most overuse? Vale (Okay in Spanish). 9. What is top of your bucket list? A family trip. Our kids are growing up and it is becoming quite difficult for the six of us to get together ...Two years ago we spent 15 days in Peru and it was 24
one of the most amazing trips we had together. 10. Who would you invite to your dream dinner party? Pope Francis. I studied 18 years with the Jesuits at school and university and have been “positively marked” by their education. 11. If you could go back in time, where would you go? It’s a hard one but it would be 1492 and the discovery of the Americas. 12. How do you relax? Playing golf and solving Sudokus. 13. What is the closest you’ve come to death? I have never come too close, luckily. Probably the first time that I felt that our “friend” was there was this year when the doctor told me I had “melanoma in situ”.. Thankfully this is over. 14. What’s been your NeMa highlight of the last 15 years? Networking and meeting with friends whom I don’t see very often. This will be my second time at Nema Americas and I have to say that it is still a “family” event where everyone knows each other.
NEMA 2015 WORLD TOUR
Bogart Miheaye BNP Paribas Securities Services
1.Which living person do you most admire, and why? Barack Obama. As he’s the first black elected president in USA. 2. Property aside, what’s the most expensive thing you’ve bought? My car. 3.What is your most treasured possession? My family. 4. What would your super power be? Travelling. 5. What is your favourite city? Sydney. 6. What is your favourite type of cuisine? West Africa (braised fish). 7. What did you want to be when you were growing up? Doctor and Pilot. 8. Which words or phrases do you most overuse? To my kids: please stop shouting. 9. What is top of your bucket list? Have time to combine my business trips with vacation with my family.
10. Who would you invite to your dream dinner party? Jesus Christ and Eva Longoria.
6. What is your favourite type of cuisine? African - Swahili - lots of spices.
11. If you could go back in time, where would you go? Auckland. I went there five years ago and would love to go back and explore some more.
7. What did you want to be when you were growing up? A diplomat.
12. How do you relax? Working in my garden. 13. What is the closest you’ve come to death? Each time I have to take a plane. 14. What’s been your NeMa highlight of the last 15 years? I remember when we drunk “warm beers” in Dubrovnik.
Rose Mambo Central Depository & Settlement Corporation
1.Which living person do you most admire, and why? Margaret Kenyatta, Kenya’s first lady for her personal dedication to her beyond zero campaign to improve maternal and child health outcomes in Kenya. She ran the London Marathon to raise money for this campaign. 2. Property aside, what’s the most expensive thing you’ve bought? A diamond ring. 3. What is your most treasured possession? My Kindle. 4. What would your super power be? Time travel. 5. What is your favourite city? Barcelona.
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8. Which words or phrases do you most overuse? Oh my goodness. 9. What is top of your bucket list? See the Northern Lights. 10. Who would you invite to your dream dinner party? Oprah Winfrey. 11. If you could go back in time, where would you go? To see real dinosaurs. 12. How do you relax? Golf.
2015
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Dan Massey HSBC Securities Services
1.Which living person do you most admire, and why? Bill Gates. For pledging to give away 95% of his total wealth over time. 2. Property aside, what’s the most expensive thing you’ve bought? Mini Cooper sidewalk edition convertible. 3.What is your most treasured possession? My wife and two children. 4. What would your super power be? Invincibility like Zeus.
10. Who would you invite to your dream dinner party? Mike Meyers, fellow Canadian... to crack some good jokes. 11. If you could go back in time, where would you go? Back to 800 to meet Charlemagne, a very distant relative.
9. What is top of your bucket list? Driving a Formula One car on a major racing circuit, writing 13. What is the closest you’ve come a book and climbing a major to death? mountain. A ‘head on’ car collision at 18 years old... not my fault. 10. Who would you invite to your dream dinner party? 14. What’s been your NeMa Bill Clinton, Jenson Button, Meryl highlight of the last 15 years? Streep, Daniel Craig and Sandra Dubrovnik 2011 as MC & meeting Kerns. I think we would have a with Sir Ranulph Fiennes. good laugh!
Mark Kerns Standard Bank Group
1.Which living person do you most admire, and why? Barack Obama. His personal and political achievements have been significant in the face of major challenge. 2. Property aside, what’s the most expensive thing you’ve bought? I have a passion for nice cars.
7. What did you want to be when you were growing up? NHL ice hockey player. 8. Which words or phrases do you most overuse? Excellent. 9. What is top of your bucket list? To return to Myanmar for a more extensive visit.
8. Which words or phrases do you most overuse? I’m sure there are a lot! Probably “we’re burning too many calories on this.”
12. How do you relax? Running.
5. What is your favourite city? Hong Kong.
6. What is your favourite type of cuisine? Thai.
7. What did you want to be when you were growing up? A pilot.
3.What is your most treasured possession? A beautiful bronze Cheetah head that I bought in South Africa. 4. What would your super power be? I already have one. I’m Direction Man. Wherever I go I’m asked for directions! 5. What is your favourite city? New York. 6. What is your favourite type of cuisine? I love Indian food. 26
11. If you could go back in time, where would you go? The 60’s and buy an Aston Martin DB5 and bring it back to 2015! 12. How do you relax? Hanging out with family and friends. 13. What is the closest you’ve come to death? White water rafting in New Zealand. At least it felt like that! 14. What’s been your NeMa highlight of the last 15 years? Dubrovnik for many reasons not least the boat arriving with extra beer!
NEMA 2015 WORLD TOUR
Marshall Milsap JP Morgan
1.Which living person do you most admire, and why? Christine Lagarde - she delivers tough messages with style and clarity. 2. Property aside, what’s the most expensive thing you’ve bought? Cost per ounce- one of the first Epic carbon fibre touring kayak paddles (worth every penny!). 3.What is your most treasured possession? My grandfather’s fire chief uniform (1908) from Abilene, Texas. 4. What would your super power be? Flying. 5. What is your favourite city? London.
8. Which words or phrases do you most overuse? I’m working on it 9. What is top of your bucket list? Sharing a bottle of Masseto (wine) with my best friend (preferably in Tuscany). 10. Who would you invite to your dream dinner party? Nell Gwynn, Helen Mirren, Pauline Bonaparte. 11. If you could go back in time, where would you go? London 1660. 12. How do you relax? Reading esoteric history books about cities I am about to visit. 13. What is the closest you’ve come to death? Left a parking lot 2 min before a DC 10 crashed on it.
6. What is your favourite type of cuisine? Italian - but real Italian
14. What’s been your NeMa highlight of the last 15 years? Being on a panel with Beatriz Molina and Philippe Castelanelli.
7. What did you want to be when you were growing up? An astronaut.
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2015
NEMA ATHENS 2015 GALLERY
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NEMA 2015 GALLERY
NEMA 2015 WORLD TOUR
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2015
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CALENDAR
The 3rd Annual
The 6th Annual
The 3rd Annual
NEMA AMERICAS 27 – 28 OCTOBER, 2015 MIAMI
NEMA ASIA 9 - 11 NOVEMBER, 2015 SHANGHAI
NEMA AFRICA 24 – 25 NOVEMBER, 2015 LONDON
The 7th Annual
The 16th Annual
MIDDLE EAST SECURITIES FORUM 15 - 16 MARCH, 2016 QATAR
NEMA 14 – 16 JUNE, 2016 DUBROVNIK
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NEMA 2015 WORLD TOUR
2015
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