Securities forecast good, despite headwind

While the fundamentals for growth in the securities industry are good, market participants face challenges in taking advantage of these fundamentals, delegates heard yesterday. Speakers mulled the question of how regulated securities markets could return to growth, given the various headwinds they face.

Satvinder Singh, global head of institutional cash and securities services at Deutsche Bank said for the past 15 years the securities industry had faced a “perfect storm” of challenges, including interest rate and margin compression, increased competition, the emergence of new technologies and underlying infrastructure changes. While dealing with these challenges, he said, banks such as Deutsche Bank had to invest in their businesses and continue to grow. “Our challenge is to grow and de-risk at the same time. This requires increased efficiency and greater scrutiny of the bottom line,” he said.

Growth is achievable given the “strong fundamentals” in the securities markets, said Christopher Rowland, managing director product executive at JP Morgan’s custody business. Governments need to fund country and pension fund deficits and there is wider access to global investment products than ever before, he said. There is also a move back to focus on the fundamental soundness of the industry, with regulations focused on capital strength, asset safety and investor protection. “The industry needs to understand the risk environment in which it works and investors need a sound environment in which to invest,” he said.

The wider access to global investment products was also touched on by Marc Robert-Nicoud, chief executive of Clearstream. One of the international central securities depository’s main tasks is bringing new markets into the international securities market, he said. A focus at present is on giving international investors access to China. “One of the key requirements in this industry is to know where your clients want to move and to be able to meet their changing requirements,” he said. Clearstream and its client banks are looking for sources of growth and, while that means something different for each group, they are looking in the same places, particularly Asia.

Speaking about the Asian investment community, William Mak, head of Asia Pacific region Northern Trust, said since the financial crisis data had become very important for clients. “Our clients want good information on trading and settlement. Accuracy and timeliness of data is a key feature as well as data security,” he said. Securities market participants needed good data to help them manage risk better and to make better informed decisions.

Dealing with the challenges of providing accurate and timely data, said José Placido, global head of client development and strategy at BNP Paribas Securities Services, is possible if the industry has a strong underlying infrastructure. “Regulators want better disclosure and we therefore need to look at data in a more interactive manner. We need interactive platforms to manage risk on an intraday, end of day or any other basis our clients require,” he said.

The rules of the game had changed, said Placido, from regulatory compliance to managing the business better. “The threshold of choosing a securities services provider will be data and information,” he said.