M’sia needs to sync domestic, foreign trade standards
KUALA LUMPUR: Malaysia needs to attain harmonisation between domestic and international standards in post-trade processing in enabling the country to drive further growth in the capital market.
Depository Trust & Clearing Corporation (DTCC) executive director and head of Business Development Asia Pacific, Hasan Rauf said post-trade processing is an infrastructure that supports automated trade matching and real-time communication of trade details between counter parties.
The market challenge, according to Rauf, is to create a cost-effective infrastructure which supported both domestic and international requirements.
“Malaysia’s capital market is diversified, comprising both domestic and international portfolios. It is primed for substantial growth and internationalisation.
“The challenge is for firms to meet regulatory requirements across multiple jurisdictions,” he told Bernama.
He said the DTCC, the premier provider of post-trade market infrastructure for the global financial services industry, could provide what is needed to deal with international trading, including mitigating operational risks that may result in failed or delayed trades.
With over 40 years of experience from operating facilities, data centres and offices in 16 countries, DTCC through its subsidiaries, automate, centralise and standardise the post-trade processing of financial transactions.
This includes mitigating risks, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers worldwide Rauf said DTCC’s Malaysian clients comprise government-linked institutions and those from the banking industry.
“Malaysia, like the capital markets of Australia and Thailand, has a strong domestic market of its own.
“As more companies in Malaysia shift their trading strategies to develop diversified offshore investment funds that trade in multiple countries, DTCC can help these firms to standardise the processes and trade across these jurisdictions,” he added.
He also emphasised that developed markets like Hong Kong and Australia, both of which operate on shorter securities settlement cycles compared to Malaysia, would have an impact on the country’s trading infrastructure.
He said the challenge for Malaysia is the contrast between local and international practices, since not all firms have fully adopted automated processes which supported internationalisation.
“The challenge is in integrating local market practices with international standards,” he added.
However, the smaller boutique players have been holding back from streamlining their processes and embracing a regional model, due to their investment strategies and reluctance to invest in an international trade ready platform.
By investing in a robust and scalable post-trade system, firms can take advantage of regional linkages such as the Asean Trading Link, a regional platform which allowed stock brokers to trade and link within the Asean countries via an electronic system.
The post-trade system will also enable foreign investors to meet increased trade volumes in China’s Stock Connect programme.
Rauf said there is need to expand further into global platforms that address pertinent issues that affect the financial industry globally.
“This includes stringent regulations in the US, such as the Dodd Frank and Basel III regulations and in other developed markets on risk management practices,” he added. — Bernama