The last decade has seen India’s asset servicing advance at an astonishing rate, thanks to innovations in financial technology, but what does the future hold?
Overall, India’s asset servicing circle is an exciting place to be. Fairly new in its creation, an up and coming market, the country has become a heavy anchor within Asia’s market since its National Stock Exchange began operations in 1994.
The National Securities Clearing Corporation Limited, a wholly-owned subsidiary of NSE, carries out the clearing and settlement of the trades executed in the equities and derivatives segments of the NSE. In terms of emerging markets, India is often spoken about in the same breath as China, but the country actually stands well enough on its own.
At this year’s FundForum conference in Berlin, one speaker explained that although China is currently generating high levels of wealth in internal consumption, there is no reason why this trend cannot be replicated in India.
Just one example of a growing interest in India’s emerging market is the initiative of the Canada Pension Plan Investment Board. The board, which has invested nearly CAD $5.30 billion in India since entering the market a decade ago, said it is looking for opportunities to invest in Indian infrastructure, power and real estate projects.
In addition, at the Global Custody Forum held in London in December, Rohinton Mewawala, executive vice president and COO of Stock Holding Corporation of India spoke on key trends in emerging markets and revealed that more than half of global economic growth is now driven by markets such as India, among others. Mewawala stated India has the highest gross domestic product growth rate projection in the world and it’s asset servicing growth also shows no signs of slowing down, its strongest financial technology hubs being Mumbai, Jaipur, Chennai and Pune.
Movin’ on up
NSE was the first exchange in India to implement electronic or screen-based trading, a good springboard to start a strong asset servicing utility. But more recently, the NSE officially signed an agreement for Nasdaq to deliver a customised real-time clearing, risk management and settlement technology to one of the world’s largest stock exchanges. In addition to the post-trade agreement, Nasdaq has also signed an agreement with NSEIT to utilise NSEIT’s capability in implementations and project augmentation globally. NSEIT is a global technology firm with a focus on the financial services industry.
According to NSE, the technology will provide a state-of-the-art architecture utilising the Nasdaq Financial Framework, which will enable all asset classes to be cleared and settled in one system. These changes will increase efficiency, and effectiveness of the market, supported by a modern, flexible and efficient technology that reduces risks in the post-trade area alongside international best practices and standards.
Adena Friedman, president and CEO, of Nasdaq, says: “We will use this new partnership to bring Nasdaq’s premium market technology, the Nasdaq Financial Framework, to the Indian capital market and to explore new opportunities for collaboration across each other’s businesses.”
“Additionally, we look forward to our partnership with NSEIT to work together to expand our technology delivery capabilities.” Elsewhere, Nomura has launched the Voyager—a financial technology partnership in India, aimed at harnessing emerging technologies to improve its processes.
Location, location, location
SmartStream has opened a new office in Jaipur, India, initially to serve a particular tier-one investment bank. The managed service office will provide reconciliation, corporate action and cash management services for the client.
SmartStream has transferred the bank’s operations and processes to the new site, and will manage its Jaipur and Bangalore sites.
Nick Smith, senior vice president of managed services at SmartStream, said: “What our office in Jaipur has enabled us to do is expand our capability to four locations—in doing so we’ve expanded our geographical footprint within India which enables us to provide a second site capability to service customers.”
“Because of this separate geographical location, Jaipur enables us to utilise a completely different telecommunications infrastructure in India. This is something the banks will be looking for and will be demanding even within their own operations.”
Smith adds that SmartStream’s staff are very much behind its success in India. “There’s staff we are able to hire in Jaipur that we wouldn’t have been able to hire in other parts of India. We are in a brand new business park—Mahindra World City Business Park.”
Elsewhere, Northern Trust is expanding its operations in Asia by opening a new office in Pune, India. According to Northern Trust, the Pune office will complement existing operations located across the region, including Bangalore, India, and Manila, the Philippines, and is expected to house more than 500 employees within two years.
Looking to the future
It’s of little doubt that innovation will be key to the future of success for India’s asset servicing.
This was recently reiterated by Julia Streets of Street Consulting Ltd, when she said it’s about “thriving not just surviving”, when concerning innovation. Streets indicated that change is also “being driven by a desire for efficiency that can give firms a competitive edge in a highly competitive world”.
She adds: “Some firms are embracing the digitalisation journey, where they are investigating innovation including artificial intelligence, to help manage and normalise data processes.”
Smartstream is one such firm aware of this, as Smith indicates: “Organisations are moving away from hosting solutions on-premise using their own servers and the costs this entails. We’re seeing a real drive towards our cloud hosting offering. I see the landscape changing in India. In Jaipur, the services that we provide today probably would have been unheard of a decade ago.”
Smith predicts: “As those people [in India] become more skilled and their knowledge of the financial markets evolves, it will become more and more of a global financial hub.”
