RISK management and transparency will be the watchwords over the next five years as markets come to terms with the new landscape left by the financial crisis.
There will also be a greater need for exchanges to provide regulated and transparent platforms for trading, clearing and the settlement of trades as a way to help investors offset risk.
The ideas surfaced at the annual general meeting of the Asia-Pacific Central Securities Depository (CSD) group, held at the St Regis hotel on Monday.
CSDs are organisations which administer securities or other assets. They may also help clear and settle securities.
A central theme at the meeting was managing risk. Market players have become more wary of rising counterparty risks associated with over-the-counter (OTC) trades in these uncertain times.
Singapore Exchange chief executive Hsieh Fu Hua said 'there has been a trend reversal in OTC trading' with the loss of confidence among investors.
'Exchanges can look to alleviate the situation by providing regulated, transparent and safe platforms for trading, clearing and settlement, thereby reducing counterparty risks,' said Mr Hsieh.
The chief executive of HSBC's Institutional Trust Services, Mr John van Verre, said he expected financial markets to be a lot more prudent over the next three to five years. 'There is a rush to quality,' he said. 'Investors will want to go where risks are better managed.'
Increased focus on risk management and more regulation are on the cards, said Mr William Hodash, managing director of Depository Trust and Clearing Corporation, and Mr Robert Urtheil, partner at Oliver Wyman.
Monetary Authority of Singapore deputy managing director Ong Chong Tee said that while central securities depositories have not featured in the crisis, 'some of the fallout...will have implications on how CSDs operate in the future'.
'The global consolidation among financial institutions and the need to manage costs will be strong impetus to employ better, more efficient market platforms,' said Mr Ong, who added that more work needed to be done to establish links to enhance cross-border arrangements and to lower transaction costs.
The event also discussed opportunities for collaboration among CSDs as investors increasingly trade across markets. Asean exchanges, for example, are exploring electronic links and creating an Asean trading board to profile the best stocks from each exchange and market them as an asset class.
