Post-Trade Automation Continues To Drive Capital Market Efficiency

EITN interviewed Hasan Rauf, DTCC’s Executive Director and Head of Business Development for Asia Pacific, post event ‘Industry Forum 2018 ‘Winning in Today’s Increasing Interconnected Capital Markets’ which was held in Kuala Lumpur recently.

Please the key highlight and learning points from the senior executives from the event, that depict the scenario in Malaysia (as compared to other countries).

Hasan: DTCC’s Malaysia Industry Forum is our annual gathering of senior executives from the financial services industry to discuss industry trends and developments. The event allows DTCC to share insights on operational challenges and pain points within the post-trade lifecycle and discuss how market utilities can assist financial firms to optimize operational efficiency, reduce cost and mitigate operational risk.

This year’s theme of “Winning in today’s increasing interconnected capital markets” underscored three key areas of interest among the attendees:

–       Islamic Finance and Sustainability Responsibility Investments

As Malaysia’s capital market matures with new segments, investment instruments like Shariah-compliant funds and sustainable funds will bring about new market dynamics ranging from regulatory obligations to social and environmental challenges. To manage these issues and mitigate risks related to Islamic finance and sustainability, financial services firms would need to rethink their operational infrastructure and diversification strategy to ensure that they are not only operationally ready to meet evolving requirements but also exposure risk is spread across various asset instruments.

–       Shorter Settlement Cycles

With ASEAN markets moving to T+2 settlement cycle, and financial services firms’ expansion plans involving multiple asset classes and investments in multiple markets, it is important that best practices and robust systems be implemented to minimize operational and compliance risks to meet the tight settlement deadlines.

–       Market Maturity

While financial services firms in Malaysia remain largely focused on its domestic capital market, the connectedness among capital markets in the region and beyond presents unlimited opportunities to go cross border – in pursuit of diversification and business expansion. This essentially means that financial services firms in Malaysia must ensure that their post-trade automation process and systems are aligned with global market best practice to support and meet new global demands.


How can DTCC help its clients make an improvement difference to this sector? 

Hasan:Our mandate has always been to reduce the cost and complexity of the post-trade process. One way to achieve this is to automate post-trade lifecycle events. For example, the most efficient way to streamline trade flows and achieve higher levels of automation is central matching. Our central trade matching platform, CTM, is DTCC’s global platform for the central matching of cross-border and domestic transactions, automating the trade confirmation process across multiple asset classes such as equities, fixed income, repos and synthetic equity swaps.

When used in conjunction with our ALERT platform, the industry’s largest and most compliant database for the maintenance and communication of standing settlement instructions (SSIs), users can automatically enrich trades with SSIs, ensuring account information is accurate.

CTM connects to almost 2,000 counterparties across 52 countries, and provides seamless connectivity from trade execution to settlement. This includes direct connectivity via FIX from front office to middle office trade processing as well as via the SWIFT network to a full community of custodian banks for settlement notification.

What are the technologies behind DTCC’s Post Trade automation solutions and services

Hasan: The technologies fall under post-trade processing, which refers to automated trade matching and real-time communication of trade details between counterparties. It’s post-trade (allocation, matching and settlement instructions) but pre-settlement.

What is DTCC’s unique differentiation from its competitors? Does being MAS’ licensed trade depository help?

Hasan: DTCC’s Global Trade Repository (GTR) is the only regulated trade repository licensed by the Monetary Authority of Singapore (MAS) since 1 November 2013. It is the only global trade repository to provide reporting across all 5 derivatives asset classes (OTC credit, equity, interest rate, foreign exchange and commodity derivatives). Leveraging a utility model to provide over-the-counter (OTC) transaction reporting services, it enables users to meet their regulatory reporting obligations wherever they are located, in an open, cost-effective and efficient manner via a single platform.

The re-architectured Singapore trade repository has successfully launched this month to meet forthcoming equities and commodities trade reporting requirements by the MAS effective 1 October 2018. The re-architectured platform brings improved usability, reduced complexity and increased transparency to users.

The GTR service is an essential tool for managing systemic risk, providing MAS and the other regulators around the world with an unprecedented degree of transparency into the OTC derivatives markets they supervise in Singapore, Australia, Hong Kong, Japan, Canada, Europe, and the United States. It has grown to become the largest trade repository in the world – with approximately 40 million open OTC positions per week and processing over one billion messages per month – providing new insight and perspectives to better monitor and respond to the regulatory reporting requirements of our clients.