Transcript Slide 1

The Asian Banker Summit 2011
The future of post-trade infrastructure in
Asian bond markets
The Pan-Asian CSD Alliance
Esmond Lee
Hong Kong Monetary Authority
7 April 2011
Asian CSDs share similar disadvantages…
 Less than efficient cross-border
activities
 Less than efficient asset servicing
 Fragmented markets
 Multiple access points
 Varied market practices
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The Pan-Asian CSD Alliance

A Task Force formed by a group of central banks and CSDs in the region

Vision: to gradually improve the post-trade infrastructure for bond clearing and
settlement in the region

Issued a White Paper in June 2010, outlining:

Concept of a Common Platform Model (CPM)

Launch of the Pilot Platform
CPM offers
Pilot Platform
•
Better cross-border access to local
Asian bonds
•
A tactical solution to deliver early
benefits of the CPM
•
Greater issuance of local bonds
•
•
Improved automated process to
manage operational risk
Delivers main functionalities of the
CPM
•
Uses existing systems and links and
requires minimal efforts to start
•
Access to a larger pool of collateral
•
Reduced costs for post-trade execution
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White Paper proposal:
CPM implementation strategy
•
Starting with improvements to interoperability and cross-border
access through investor CSD1, leveraging existing (I)CSD links
(Pilot Platform)
•
Gradually improving local market practices, local CSD
processes and cross-border links
•
Working together to allow some convergence of developments
across markets, leading to harmonisation of processes and a
gradual introduction of common systems
Note 1: An investor CSD is the local CSD, or any other local entity other than
CSDs, that has the right and the capacity to offer settlement and
asset servicing on foreign securities to local financial institutions.
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Common Platform Model
Flexible access
Direct access
ICSD
Investor CSD
Leverage existing links
Issuer CSD
Local systems
Introduction of
common systems
Foreign currency
facilities
Issuer CSD
Local systems
Issuer CSD
Local systems
Common systems
Foreign currency RTGS connectivity tool
Foreign currency
RTGS
New functions provided by the Common Platform
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Common Platform Model
• Addresses the need for access, harmonisation, and
•
•
standardisation
Provides a common infrastructure platform for crossborder access, asset servicing processing, and clearing
and settlement
Individual participating CSDs are able to retain
autonomy in terms of legal entity, finance, business
development and customer relations
However, a common infrastructure platform
will take time to develop……
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Pilot Platform
Flexible access
Direct access
ICSD
Investor CSD
• ICSD database
Increase coverage of ICSD database
Leverage existing links
Issuer CSD
Issuer CSD
Foreign currency
facilities
Issuer CSD
• Local systems
• Local systems
• Local systems
• Local database
• Local database
• Local database
Foreign currency RTGS connectivity tool
Foreign currency
RTGS
New functions provided by the Pilot Platform
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Pilot Platform functionalities and benefits
CPM objective
Pilot Platform functionalities
Benefits for
participating economies
Increase choice
for cross-border
access
Access to Asian and non-Asian
debt securities through the
investor’s local CSD acting as
investor CSD
More choice for local
investors to access foreign
markets
Increase
issuance of local
bonds
Increase issuance of local bonds in
the Asian time zone, in local as well
as foreign currencies, leveraging
foreign currency RTGS systems in
the region
Increased flexibility for
local issuers (governments
and corporates) to raise
funds
Improve
securities
information
Extend the coverage of existing
databases to include more local
securities
Promote local securities to
foreign investors
Improve
interoperability
Use and improve existing ICSD-CSD
and CSD-CSD links
Increase activity in local
bonds
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Evolution towards the Common Platform Model
 Pilot Platform can leverage local developments ahead of
common systems
 Improvements to the Pilot Platform should lead to common
developments
PILOT
PLATFORM
IMPROVEMENTS TO THE
PILOT PLATFORM
Local
developments
Harmonisation
Common
Developm
Gradual removal of barriers
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Progress
 The 5th Task Force Meeting was held in Hong Kong in
November 2010
 Two experience-sharing workshops were held to discuss
the necessary preparation and proposed setup of the
Pilot Platform:
 between the three early movers (i.e. the HKMA, Bank Negara
Malaysia (BNM) and Euroclear) in Hong Kong in October 2010
 between the three early movers and interested parties from
Indonesia (e.g. Ministry of Finance, Central Bank, CSD and
Central Counterparty (CCP)) in Hong Kong in March 2011
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Way forward
•
•
Prepare for the launch of the Pilot Platform in mid 2011
Deliberate on add-on services to be provided after the
launch of the Pilot Platform.
– focus on areas with noticeable deficiencies under current
market practices. Potential areas to consider include:
 corporate action servicing
 cross-border collateral management
– further research and feasibility studies will be conducted.
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Example: Existing corporate action servicing in Asia
Notice of corporate actions
(proprietary channels and
formats)
A/c positions
Asian CSD
Request for
a/c positions
Paying Agents
Asian CSD
members
(acting on behalf of
bond issuers)
(acting on behalf
of bond holders)
Settlement instructions arising
from corporate actions
Instructions (e.g. for voting
or exercising option etc)
(proprietary channels and
formats)
Major deficiencies:
•
Paying agents do not have a/c positions of bond holders and thus require Asian CSD to
provide such information
•
Lack of standardized distribution channels for bond issuers to disseminate corporate
information to bond holders
•
Lack of standardized format used in the communication between individual paying
agents and bond holders, e.g. some may be done by fax and some by email
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Potential add-on services to the Pilot Platform
•
Corporate action servicing
– to enhance market efficiency in processing corporate actions
– to develop standards of communication amongst paying agents, Asian
CSDs and their members and to set up a platform linked with Asian
CSD’s systems so as to streamline / automate some of the processes
•
Cross-border collateral management
– to help banks manage their liquidity more effectively by better utilising
foreign securities lodged with ICSDs or overseas CSDs
– to establish message link between ICSD and domestic RTGS systems
and to agree on a message exchange protocol so that securities transfer
and fund transfer can be settled in a coordinated manner
The Pilot Platform will be launched in mid 2011 as scheduled.
Work has started to deliberate on the possible add-on services
to be provided by the Pilot Platform.
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Thank you