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Managing Change in Emerging Markets

By DTCC Connection Staff | July 9, 2019

Turning User Feedback Into Improved Market Insights
Pataravasee Suvarnsorn and Nellie Dagdag.

At DTCC’s first ever Thailand Industry Forum, organized jointly with the Stock Exchange of Thailand (SET), industry participants were brought together to discuss evolving market and clients demands in today’s Digital Age where change is the only constant.

The forum attracted a turnout of over 70 attendees from the financial services industry – including buy-side, sell-side and custody firms. Under the theme, “Leveraging the utility model to expand beyond Thailand”, the Forum discussed the value that financial market utility brings to Thailand’s capital markets and complementary topics such as rethinking the operating model to cope with cross border trading and extra-territorial regulatory requirements and embracing innovation and diversification to move forward.

Defining a No-Touch Workflow

Driven by the need to integrate various disparate, products to an open, integrated platform, Nigel Gnoh, Associate Director – Business Development for South East Asia, DTCC, opened the event by sharing DTCC’s vision of moving towards a no-touch workflow, where the end goal is to achieve zero manual intervention leading to zero trade exception and zero settlement failure.

No-touch post-trade processing is aimed at addressing four key efficiency challenges that firms globally are facing today:

– Multiple points of reconciliation required within and outside the firm – from trade agreement, confirmation to settlement.
– Absence of a comprehensive view across the trade lifecycle as data must be retrieved from various locations, leaving little time for the middle and back offices to identify and resolve errors.
– Ongoing reliance on manual processes that drives up operational cost and increases risk.
– Different formats, messaging protocols and communication methods being used by multiple solution providers, resulting in the need to streamline and stitch together multiple complex systems.

Accelerating Operational Efficiency

In a fireside chat with Pataravasee Suvarnsorn, Senior Executive Vice President (Head of Market Operations), SET, Nellie Dagdag, DTCC Managing Director for Industry Relations – APAC, elaborated on DTCC’s vision to transform Institutional Trade Processing (ITP) into an open environment that allows market participants to decide when to join the new no-touch processing platform.

Drawing the analogy of a train, Dagdag noted the openness of the DTCC’s ITP functionality essentially means that market participants can match trades outside of the ITP platform and enrich it with the correct standing settlement instructions that are stored within the platform. After enrichment, settlement notifications are generated from the system and sent to custodians and relevant administrators.

“While in some countries, manual processing seems like a cheaper option over automated processing, the idea of adding more resources to cope with additional workload does not hold water anymore,” Dagdag said. “Today, the need to automate processes hinges on priority and timing of requirements as firms are focused on straight through processing to achieve operational efficiency and minimize operational risk, particularly when trading cross border.”

Agreeing that efficiency is key to the success of any business environment, Suvarnsorn revealed the Exchange’s three-year plan to support technological advancements to manage costs and improve the service efficiency of Thailand’s capital markets – with the flexibility to connect with foreign counterparties.

Bolstered by improved market stability, growth and rising investor confidence, foreign investors are keen to capitalize on Thailand’s robust economy. However, Suvarnsorn cautioned that foreign investors will need to have a good grasp of regulations within Thailand to succeed in the local environment.

“The concept of ‘ease of doing business’ is now topmost in the minds of Thai regulators and the SET, with initiatives to make it easier for foreign investors to navigate the labyrinth of financial requirements and regulations,” Suvarnsorn said. “The world is changing, progress is not a given in the changing world. Everyone needs to advance and change to adapt to the changing world.”

“Today, the need to automate processes hinges on priority and timing of requirements as firms are focused on straight through processing to achieve operational efficiency and minimize operational risk, particularly when trading cross border.” - Nellie Dagdag

Winning with Innovation

Reinforcing the need to continue to evolve in an ever-changing world, Robert Palatnick, DTCC Chief Technology Architect, discussed DTCC’s focus on innovation, and the how the firm is aligning its business and technology strategies to capitalize on opportunities and best position the firm to serve its clients in the future.

For over 45 years, DTCC has been a pioneer in delivering automated solutions that have transformed the marketplace. Palatnick explained that DTCC is building upon this legacy by creating a culture that continues to highly value and reward innovation. In support of this, the firm has an established Office of Fintech Strategy and Innovation Council to assess, approve and implement new ideas.

To remain competitive, Palatnick suggested, DTCC must be creative in its approach and identify innovative ways to further reduce cost and risk and improve the client experience.

“This is where firms invest in information technology innovation to reduce time to market, and to provide a secure, resilient and extensible platform to do business with clients and business partners,” he said.

In addition to the competitive landscape, he added that there are external factors that influence the pace to which firms implement new solutions, including addressing cybersecurity risks within emerging technologies, evolving regulatory obligations and changing demographics.

Digitalizing Thailand’s Capital Markets

Kitti Sutthiatthasil, Executive Vice President – Head of Office of the President, SET, outlined the Exchange’s vision to promote financial inclusion by serving the needs of the country’s population of more than 70 million and beyond. While this vision is not far from being realized, the SET needs to continue to enhance competitiveness and promote sustainability of Thailand’s capital markets in order to achieve this goal.

To promote greater efficiency and achieve higher levels of straight through processing, the Exchange will focus on building common platforms that reduce redundancy in back office functions. Doing so will allow financial intermediaries to focus on value generating goods and services for end customers.

When embarking on its digital transformation initiative, SET will take the best of two worlds and eventually opt for the most efficient and workable solution. Sutthiatthasil explained that the current traditional world will rely on enhancing existing processes with end-to-end digitization in mind to facilitate standardization of workflows and interoperability of systems across the value chain. The new world will involve exploring the use of distributed ledger technology for business cases that make sense.

For the current world, he discussed the Exchange’s FundConnext mutual fund platform, modelled after DTCC’s Fund/SERV, to promote collaboration among mutual fund stakeholders and provide greater convenience for investors and foster more investment opportunities.

Navigating the Regulatory Environment

Amid the influx of capital flows across countries, regulatory reforms continue to be implemented across the globe to increase the safety and soundness of financial markets. Given these developments, Remi Lopez, DTCC Director of Government Relations for Asia Pacific, stressed that the industry must be vigilant of the changes that may affect the way we do business. From the regulators’ standpoint, these changes are required to ensure that everyone is protected.

His session raised awareness on potential vulnerabilities that could arise through product distribution channels – robo advice, social media and the need to know your customer. In addition, market participants need to also consider risks implications arising from geopolitical, governance and cybersecurity issues, Fintech, market fragmentation, outsourcing, data governance and technological advancements – all pointing to the need to enhance risk management frameworks to meet evolving compliance and risks demands.

He offered a forward-looking view that market participants should build upon the work done to build resilience in financial standing, focus on enhancing operational stability, and prepare for the upcoming focus on conduct. These pillars will form a foundation for creating a dynamic management framework needed to meet evolving regulatory expectations.

To sum up the discussion, Dagdag commented that as the industry continues to evolve, we should all work together to operate in today’s dynamic and complicated environment that is reshaping the post-trade operations process, clients and market demands.