Overcoming Asian fragmentation to improve standardisation and automation

As discussed in a previous post, the fragmented nature of Asia Pacific’s financial services market leads to numerous challenges for banks when trying to create a standardised approach to the processing of corporate actions.

The region contains some of the world’s most sophisticated markets in Australia, Hong Kong and Singapore.

However it also encompasses many emerging markets that while growing in importance to global investors, do not have the same level of infrastructure for disseminating corporate action events.

Add in a myriad of regulatory regimes and even greater number of languages, processing data in a timely and automated manner across the region becomes a daunting prospect.

There is also a divergence between firms, where the larger institutions are able to invest in technology to automate processes while smaller, more domestically-focused organisations continue to process corporate actions manually.

So what can be done to try and overcome some of these issues?

 With a desire for more sophisticated and structured approaches to corporate actions processing apparent in Asia Pacific, SWIFT recently established a new working group in the region. The APAC Corporate Actions Working Group provides market participants with a recognised platform to discuss common issues and challenges and a forum to discuss potential solutions.

I’ve long been a supporter of this idea and have worked closely with SWIFT in Asia so that we could launch this specific Working Group. Previous forums have provided an opportunity to discuss broader issues.

However, due to their inherently general scope they couldn’t provide an in-depth examination of the issues specific to the APAC region, such as the immense fragmentation in terms of both business practices but also language and dialects.

The new Working Group aims to bring everybody in the region together, whether they are international or domestic banks, to discuss common concerns and interests, share knowledge and establish a consensus locally on topics that can be raised separately at the Securities Market Practice Group or National Market Practice Groups.

We want to create a voice for Asia Pacific, share information about issues in the region and examine ways to solve them. This local voice is important to ensure that none of the ideas, interests and issues that are specific to the operational requirements of the region are lost in a wider conversation, as they have sometimes been in the past.

The first few meetings brought together custodian banks, investment banks, data vendors and exchanges, who contributed to a highly interactive discussion, sharing a wealth of information and subjects for the group to tackle.

These ranged from macro-level discussions on taxation through to local market conventions such as managing the change from cash dividend event to dividend reinvestment plan andhow rights issues in Taiwan are categorised as non-renounceable rights by some market participants and as priority offers by others.

Another area of debate is the use and potential uptake of ISO standards for corporate actions. This is due to an overall lack of transparency into and understanding of the different market practices and structures in each jurisdiction, as well as the region having no single regulatory body to steer discussions.

This has resulted in different event interpretations and differing business practices and rules regarding event notifications.

I would encourage anyone who is interested in the issues surrounding corporate actions to join certain groups whose aim is to accelerate the building of market prices for processing corporate actions in the region and participate in the meetings and update calls.