This white paper explores how banks are trying to adapt to a new normal. Now in its eleventh year, the RiskTech is globally acknowledged as the most comprehensive independent study of the world's major players in risk and compliance technology.
This report updates the Chartis report Solvency II Technology Solutions , focussing on risk management systems for the insurance industry. Can you analyse highly specialised information at the drop of a hat? Director of Risk and Compliance with financial services or insurance experience for a global IT services company in the heart of London.
You are currently accessing Risk. If you already have an account please use the link below to sign in. If you have any problems with your access or would like to request an individual access account please contact our customer service team. A recent survey of the Asian foreign exchange market, conducted by Asia Risk and sponsored by Thomson Reuters, determined how increased financial regulation will affect forex traders in Asia and which major new trends or developments could have the greatest impact on the future development of this market.
The Asian foreign exchange market has faced great change in recent years, as it continues to feel the effects of regulation and of recent conduct-related scandals. While some Asian countries are further along than others in developing a regulatory infrastructure in response to the financial crisis and the ensuing global market crisis, most financial market participants, regardless of location, remain unsure about how the dust will eventually settle.
In markets such as forex reporting requirements are already in place in many jurisdictions throughout Asia, but firms still face unknowns in terms of the development and implementation of new rules relating to trading, central clearing, and capital and margin requirements.
So, as the forex market faces increasing levels of regulatory scrutiny, how will these new rules, regulations and standards affect traders in Asia? What are the major new trends or developments that are likely to have the greatest impact on the future development of the Asian forex market?
A November survey by Thomson Reuters and Asia Risk polled more than forex trading organisations about a range of issues that are set to impact the market over the next 18 months or more. As the results of the survey show, market participants are generally positive about many of the changes that are likely to come about in the sector over the period as a result of regulatory developments and new technology.
When it comes to pricing, trading activity, regulation and innovation, respondents believe the market will be affected in a variety of ways in relation to transparency and liquidity. These changes are likely to spur technological innovation as the forex market learns from other parts of the financial services sector that have already been affected by similar regulatory and market change, and positions itself to fully address the changing needs of both regulators and investors.
Following the global financial market crisis in , the leaders of the Group of 20 G20 nations came together in Pittsburgh, USA, in September to map out a way forward that would support a global recovery and ensure avoiding another financial crisis of such magnitude. The commitment made to reform over-the-counter OTC derivatives trading as a result of that meeting has reverberated throughout the global financial markets ever since. The agreement was based on the need for greater transparency and for measures to protect against systemic risk and prevent market abuse.
Four main areas of reform were agreed upon to meet these aims: More specifically, FSB member jurisdictions in Asia have made progress in putting trade reporting requirements in place for some asset classes, including forex, according to the FSB report. Hong Kong has established reporting measures currently in place for certain subsections of forex and interest rate transactions, while Japan, India, Indonesia, Korea and Singapore have trade reporting requirements in place for all transactions in both asset classes.
Some jurisdictions in the region have also extended these requirements further, to sectors such as credit and equities. However, problems remain across the global financial services sector when it comes to trade reporting. There are also a number of challenges in terms of the quality and usability of trade repository data, according to the FSB, although it says this is being tackled at a national and at an international level.
We have made good progress in implementing trade reporting requirements. But to fully realise the potential of trade reporting to improve market transparency, mitigate systemic risk and minimise opportunities for market abuse, further efforts are needed by all stakeholders — authorities, trade repositories and market participants — to close the remaining gaps.
As such, perhaps one of the most direct impacts of these new regulations on market participants so far has been the increased compliance burden arising from requirements in areas such as reporting and the resulting need to manage greater volumes of data efficiently and effectively on a daily basis. There is a clear need for regulated entities to invest time, money and people to address these issues and to develop the necessary systems and processes to remain on the right side of regulation.
As a result, there has been a marked drive for, and an expectation of, increased transparency among market participants. Looking at the forex market in Asia in particular, two-thirds This level of confidence in the regulations is interesting and may be due to the progress made in other markets and different jurisdictions — market participants have watched the regulatory infrastructure evolve elsewhere and are comfortable with the results so far.
This indicates that the equities market is being viewed almost as a pilot or a model for other markets such as forex trading that are due to face similar changes in this area. Best execution is a key element of the systems of financial regulation that are currently being rolled out throughout the global markets.
The aim of regulators in this area is not only to protect clients and investors, but also to safeguard the price formation process and ensure the necessary level of competition among trading venues.
As such, a strong approach to best execution is needed to provide the level of transparency that market participants seem to expect, according to the survey. Increased regulation and the desire for greater transparency through measures such as best execution have also encouraged firms in the sector to be more open-minded or welcoming towards new or evolving technology such as electronic platforms and algorithmic trading. Regulatory change, such as that currently faced by the forex market, typically results in a need for new or evolving forms of technology in order to help financial firms meet compliance demands more efficiently and cost-effectively.
For example, the survey shows that These tools allow organisations to manage and respond to certain trading risks on a real-time basis, for example, by using analytics to assess and hedge positions as necessary. This allows organisations to remain within the bounds of regulation, and also to successfully and profitably transact in a cost-effective manner. In addition to current technological developments and solutions aimed directly at regulatory issues, banks are also keen to draw inspiration from other sources.
Cryptocurrencies such as bitcoin have the potential to change the currency trading markets and the wider financial services industry in general via the underlying technology behind these digital currencies. However, the blockchain technology that facilitates bitcoin transactions has started to pique the interest of banks throughout the financial services sector. The blockchain is essentially a public ledger that records any and all bitcoin transactions. As such, there are obvious applications for financial services that banks have already started to explore in terms of transferring funds internally and recording transactional information in a faster and more cost-effective manner.
For banks that are experiencing the strain of antiquated technology systems at a time of more onerous regulation that is particularly focused on reporting and record-keeping, the blockchain presents many attractive possibilities.
This onslaught of regulatory change, and the adoption of new or evolving forms of technology to manage and even profit from the subsequent changes, is likely to result in a number of market developments, according to forex trading professionals who participated in the survey.
In addition to tightened spreads, market-takers should also see more competitive pricing for the transactions they wish to conduct, thanks to a new level of transparency throughout the global financial markets. Indeed, according to the survey, forex market participants believe developments such as electronic trading and algo trading will cause spreads to continue to tighten When it comes to post-trade processing, the survey reveals there is also a need for better solutions.
According to the results, almost three-quarters of respondents Such services offer a single platform for organisations to perform capture, routing and processing activities across numerous trading locations.
This simplifies operational needs and cuts costs because multiple systems can be integrated across the organisation to provide whatever post-transactional data is necessary for internal risk systems, and to satisfy regulators and clients.
In addition to regulatory concerns and expectations, the survey polled forex market participants about other important issues that are likely to affect the Asian forex market in the near future. The huge difference between the top pick and the subsequent choices shows the great deal of support and confidence that exists in the market for RMB internationalisation in the Chinese currency.
In fact, many organisations have already felt the effects on their business of the internationalisation of RMB to some extent. Indeed, according to the latest figures from the Society for Worldwide Interbank Financial Telecommunication Swift , RMB was the fifth most active currency for global payments by value in October , accounting for 1.
This supports the evidence in the survey that market participants have seen changes in relation to the impact of RMB internationalisation on their businesses in recent years. Change remains firmly on the horizon for the financial services industry as global regulators continue to roll out complex programmes of new rules. But, as this survey shows, forex market participants are willing to explore new options, such as electronic trading While some concerns about issues such as liquidity remain among one-third of respondents figure 1, at top of article , organisations in this sector seem keen to try new forms of technology such as algorithmic trading or auto-execution The transparency that regulators hope to instil in the global financial markets should lead to better trading conditions.
As participants continue to explore the use of new platforms, trading strategies and IT systems and processes, this regulatory goal of transparency remains well within reach.
Forex market participants have already started to anticipate how new rules are likely to be written and implemented, and have begun to explore the tools that can be used to comply, as well as the potential results for the market in the short term and over a longer-term basis. Forex organisations must connect with vendors and other third parties that can provide the necessary assistance, advice and access to innovative tools, in order to face this new era of regulatory change and technological innovation with confidence.
You need to sign in to use this feature. Risk Training Risk Training's public courses and in-house services. Search by job title, salary or location to find your perfect role. Risk Pricing Analyst Can you analyse highly specialised information at the drop of a hat? Director - Risk and Compliance Director of Risk and Compliance with financial services or insurance experience for a global IT services company in the heart of London.
Excellent , City of London. Major findings from the survey include: The route to transparency Following the global financial market crisis in , the leaders of the Group of 20 G20 nations came together in Pittsburgh, USA, in September to map out a way forward that would support a global recovery and ensure avoiding another financial crisis of such magnitude.
The effect of technology This onslaught of regulatory change, and the adoption of new or evolving forms of technology to manage and even profit from the subsequent changes, is likely to result in a number of market developments, according to forex trading professionals who participated in the survey.
Currencies outlook In addition to regulatory concerns and expectations, the survey polled forex market participants about other important issues that are likely to affect the Asian forex market in the near future. The way forward Change remains firmly on the horizon for the financial services industry as global regulators continue to roll out complex programmes of new rules.
You are currently on corporate access. To use this feature you will need an individual account. If you have one already please sign in. Alternatively you can request an indvidual account here:More...