October 28, 2013
As published in The Asian Banker
R Vivekanand, Vice President, TCS, discusses the outlook for financial market infrastructure space in Asia.
Tata Consultancy Services is a well-known India- based independent solutions provider to the financial market infrastructure space. From its 1990s landmark SECOM platform, which was an electronic depository and clearing system produced for SegaInterSettle (SIS) to its more recent TCS BaNCS deployment for the strategic Derivatives Clearing platform for LCH.Clearnet, TCS has demonstrated clear intent to service market participants.
At the helm, is senior executive Mr. Vivekanand Ramgopal, Vice President at TCS who has over the past two decades played a key role in the growth and transformation of its capital markets business delivering projects to meet the needs of exchanges, depositories and clearing organizations.
Global Financial Crisis and its Impact
A particularly challenging time for him was during the global financial crisis (2008-2011) where a volatile market environment and cuts in discretionary spending led to a slowdown in client decision-making of key projects in the Market Infrastructure space. Vivek observed that “How we were responding to the crisis was largely determined by how our customers were having to deal with the pressures and regulators.”
Vivek pointed out that TCS BaNCS projects going live this year were actually commissioned post-2011 once important legislative reforms such as Dodd-Frank Wall Street Reform and Consumer Protection Act and European Market Infrastructure Regulation (EMIR) were signed in to law. He also noted that Asian customers of TCS were not as directly affected by the evolving regulatory framework as their North American and European clients based in advanced markets.
Opportunities in Asia
Discussing the range of integration projects TCS will seek to support include the ASEAN Bond Markets Initiative, backed by the Asian Development Bank, and the rise in number of cross-listing opportunities available as exchanges in the region become increasingly inter-connected. Commenting on the state and quality of financial market infrastructure in Asia, some of which is over fifteen years old, Vivek said that, “the ability of those systems to extract the maximum benefit from that hardware is not very high and there are markets that are looking to revamp and refresh their entire ecosystem.”
He elaborated that even an establishment of a new CCP in an Asian country would become a ‘catalyst for change’ in that market and participants would take advantage of such inflection points to replace their existing platforms.
When asked whether a Target2Securities type settlement mechanism would be possible in Asia, Vivek remarked that it was unlikely in the next two to three years. He pointed out that, “There is very little intra-operability within Asia, when it comes to the downstream clearing and settlement most of the exchanges are clearing and settling with organizations in their own home country.” He also remarked that the Euro was a big driver behind T2S although it is working to introduce a multi-currency model.
Vivek stated that the first step towards an Asia-wide settlement platform begins from the exchanges connecting, followed by linking depositories. With such market structures in place, intra-operability should engender clearing efficiency and low -cost.
Central Counter-Parties (CCPs) in Asia
In reference to centralized clearing, Vivek underscored the need for Asian countries to have independent CCPs with strong collateral, risk management and capitalization. If established now they would be in a position to clear multi-asset class securities such as equities and fixed income products but also OTC derivative products like swaps.
He also believes that CCPs and Central Security Depositories can co-exist within the same eco-system with exchanges themselves taking the lead in facilitating the establishment of CCPs. On the clearing, risk management, margin and collateral management, he also expects a certain level of convergence among OTC and exchange traded markets.
To sum up, Vivek does believe that optimism is returning to the Asian market singling out Indonesia and Vietnam among the markets which are growing. Market participants want to modernize and achieve reduced cost of ownership with TCS seeing more replacement projects in the pipeline. He opined that, “the decision- making cycle is much better than at any time in the last three years.”
As published in The Asian Banker, issue dated October 28, 2013 (Requires registration).