SECURITIES SERVICES: PRESENT AND FUTURE
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26 | ASIA
SECURITIES SERVICES:
PRESENT AND FUTURE
With Luc Renard,
Head of Financial
Intermediaries & Digital
Transformation, Asia-Pacific for
BNP Paribas Securities Services,
and David Braga, CEO, BNP
Paribas Securities Services
Australia & New Zealand
(The following is a condensed and edited version of the GlobalTrading Podcast, Episodes 1-3)
How are the needs of the secu- We’re looking at how we can were already there. So providers
rities services market changing, bring the sell side and the buy with strategic vulnerability — a
and how are providers evolv- side together across our business. lack of scale, a poor value
ing to meet those needs? As a provider, we have to contin- proposition or older technology —
David: Some things haven’t ually adapt to the environment. are likely to be exposed.
changed. The base requirements In Australia and New Zealand, to A lot of our future will be driven
in terms of what’s expected from be competitive you need global by the quality of our people.
a securities services provider — scale, and you need to bring that The value that you can put into
the core processing of trades, global scale into the market and play for your clients based on
of cash, of corporate actions, make it effective on a local basis. local-market and global exper-
the expectations around that tise is incredibly important.
being accurate, on time and Luc: We are in a very competitive We’ve shown through the recent
with a high straight through industry, one that is driven by disruption that all of our normal
processing rate and value for a sustainable capacity to invest business activity can continue to
money — have stayed the same. in technology. Our clients are be delivered. But the real pressing
Technology has evolved, and looking for yield — they are question is, what about change and
the use of technology is driving looking for automation, they innovation? It’s one thing to work
us onto alternative platforms. For are looking for real-time data from home and keep all the settle-
example, last year BNP Paribas and information. Our capacity ment activity going, but innovation
was accredited as the first global to invest [in technology] helps is a different type of work. So we’ve
custodian depository participant them achieve their own goals. been investing in our people.
to join the New Zealand Exchange
[Clearing] Depository since it was What is the future of Luc: We have seen what was
founded in 2010. And as tech- securities services? impossible pre-COVID, becomes
nology brings new players into David: The disruption we have possible. Out of necessity,
the market, we have to set up to seen from the pandemic presses we became even more agile,
interface with those participants. fast forward on the cracks that and were able to meet all our
GLOBALTRADING | Q2 • 2020
ASIA | 27
obligations without taking Because we were already their elections only a few min-
additional risk. As mentioned ISO 20022 compliant, we didn’t utes before the market deadline.
by David, this was based on the have to assess what was the This will be done through smart
commitment of our people. best option for us. We had time contracts and blockchain.
Post-COVID, our clients to understand the potential of
will have new needs and new the DLT, to ask our clients about How has the application of
requirements. They will be their needs, and to work with the DLT been different in Australia
looking for new solutions, and stock exchanges, as well as with compared with elsewhere?
reassessing operating models, Digital Asset Holdings, to lever- David: The Australian stock
to make sure they’re reliable, age the investments they made exchange had a pressing
rock-solid and scalable. to benefit our clients. We see the and imminent business
potential of bringing a new set problem in the form of the
What is the current role, and the of structured and unstructured legacy CHESS environment
future potential, of Distributed data to our clients, and building that they needed to replace.
Ledger Technology (DLT) in additional services on top of that. So the way I think about that as
securities services? What is BNP In post-trade, there is a sequen- a market participant is similar to
Paribas doing in this area? tial workflow, which means you when we moved from T+3 set-
Luc: At BNP Paribas, we are lever- wait for one party to instruct tlement to T+2. Most of the hard
aging a new generation of custody you to forward the same instruc- work is for the ASX, but it is still a
platforms being rolled out across tion to the next party in the significant shift for everyone else,
Asia-Pacific markets. The Australian intermediary chain. Blockchain in making sure that we can con-
stock exchange and the Hong enables a multi-party workflow, tinue to interface into the system.
Kong stock exchange are replacing which speeds up the workflow Because ASX is a first mover,
their post-trade market infrastruc- and the validation process. people can see the difficulty and
ture with DLT technology, and they As an example of what we are complexity, and the benefits
are giving market participants the developing, we are working with have been the subject of much
option to connect. Either you con- Digital Asset Holdings to stream- debate. But they will be one of
nect to ISO 20022 Swift messages, line election processes in a way the first organisations to prove
or you connect directly to the that will allow our prime broker some of the benefits from the
blockchain and you take a node. and asset manager clients, to send smart contracts, and from the
ability for everyone to see the
same data at the same time, and
integrate it into workflows.
We’ve seen high market volatility
and trading volumes recently,
which has put pressure on
banks clearing and settling
these large volumes. What has
been the impact on the clearing
and settlement business?
Luc: The sell-side client didn’t
wait for the COVID-19 situation to
happen to review and to reassess
its operating model. There already
were changes taking place in
terms of the cost of capital, mar-
gins shrinking, and the evolution
Luc Renard, David Braga, BNP Paribas of technology. So all brokers have
BNP Paribas Securities Securities Services Australia
been looking to optimise and
Services, Asia Pacific & New Zealand
simplify their operating models.
Q2 • 2020 | GLOBALTRADING
28 | ASIA
The custodian and clearer
doesn’t just connect the broker
and the market — it also helps ASX supports
revamp brokers’ operating mod-
els. COVID-19 has accelerated the work BNP
some of the decisions for clients
to outsource their back-office Paribas is doing
clearing operations to a custodian.
to investigate the
What business-model evolution
is important for custodians?
use of DAML - the
David: There’s a change happen-
ing at the moment where you
same Digital Asset
can build strong partnerships.
Rather than having everything
smart contracting
made by BNP Paribas, you can
create an ecosystem of provid-
language ASX is
ers and fill out a comprehensive
value chain for your clients. It’s
using to update
a bit like being a smart phone
provider — the apps may be
CHESS - for Peter Hiom, ASX
your own or somebody else’s, but
what matters is how you bring
solutions that
it all together for the end user.
At BNP Paribas, we have a range
enhance the efficiency of BNP Paribas’ own
of different partnerships. One we
signed recently is a partnership
role in securities services. ASX is building
with the wealthtech platform a DLT infrastructure, powered by this new
Allfunds to develop next-gener-
ation fund distribution services technology, in which applications can be
— looking at the dealing, settle-
ment, custody and administration deployed by other parties both within
of unlisted investments on a mul-
ti-jurisdictional basis. And in the and outside financial markets to drive
context of custody and clearing,
there’s our partnership with Digital innovation. We would welcome onto the
Asset Holdings which has pro-
pelled our blockchain capabilities. infrastructure any application built by
So the business model that’s
evolving as a securities services BNP Paribas. As other industries and asset
provider is that you don’t do it
all yourself anymore. It’s about classes have already noted publicly, DAML
finding best-in-class partners to
co-create solutions and bring coupled with an open DLT infrastructure,
these together into an ecosystem
of providers, and harmonising seems the ideal fabric to stitch together
that on behalf of our clients. The
capacity of players to provide a both simple and highly complex workflows
‘one stop shop’ solution for clients
will be absolutely key for the in a safe and secure manner. •
future success of our industry. •
GLOBALTRADING | Q2 • 2020
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