Why is Malaysia so centric to asset servicing? What does it offer in both a continental and global sense?
Malaysia has seen continued GDP growth averaging over 4 percent per annum over the past 20 years. On the back of this, institutional investors/asset owners are seeing steady assets under management growth. As investment activities increase globally, the need for global solutions, technology and markets access correspondingly increase.
Essentially, there exists a common theme with institutions in the region and their global counterparts, and that is to continuously pursue efficiencies and scale in their investment’s operations.
Institutions will seek to partner and leverage global providers that have and continue to invest significantly in technology, global network and platforms to settle, safekeep and manage their investments. Institutions will expect continual improvements in the delivery of core custody capabilities. In addition, artificial intelligence and machine learning will be used to streamline and accelerate processes, and improve investment decisions.
What trends are you currently seeing in the Malaysian asset servicing market?
We are seeing a move to a more data-centric ‘open’ platform approach in which the custodian will provide access to a range of optional services via application program interfaces (APIs), allowing clients to select and subscribe to data and services.
This aligns with institutions’ pursuit of higher efficiency and scale in operations including the ability to dynamically view overall risk exposures at the enterprise level via dashboard and such. This also provides the institution the ability to transfer information more quickly from back-office to front-office providing greater access to real time information while investment decisions are being made.
Is automation, machine learning and/or AI causing challenges or providing opportunities within the industry in Malaysia? How are you utilising the technologies?
These represent opportunities rather than challenges particularly for global providers such as BNY Mellon. We have invested significantly in technology and are positioned to help institutional investors navigate challenges they currently face.
As an industry leader, BNY Mellon is in a favourable position to deliver a broad range of solutions across asset classes, investment strategy and geography—ultimately helping them make choices that fit their business strategy.
Our approach entails integrating modular components using APIs and cloud technologies to deliver a seamless client experience, regardless of where the functionality is derived from. This approach to open-architecture delivers the benefits of choice and convenience that drives unique value to our clients.
What trends are you currently seeing in clearing and settlement within Malaysia?
In line with shorter settlement cycles seen in other markets, Bursa Malaysia had recently implemented TARGET2 Securities settlement. As processing times shorten and asset mobility increases, institutional investors will require bespoke tools and services that provide greater visibility and transparency across the entire post-trade value chain on a timely and responsive basis.
On a macro level, focusing on cyber security and regulating electronic trading platforms lead to a more robust fintech infrastructure in the long run which will benefit clearing and settlement.
How do you think technological innovation in asset servicing will help or hinder the industry in the next few years?
The automation and standardisation of core services and processes will deliver greater visibility, operational efficiencies and cost savings to the industry, boosting service quality and enabling the global custodian to respond quickly to future needs. We also see a move to a more data-centric ‘open’ platform approach which will change how services are subscribed and therefore, priced.
What are you seeing from a Malaysian perspective? What challenges do you see going forward to 2020 and beyond?
Global developments on the regulatory front continue to evolve rapidly and remain the focus of institutional investors. For instance, there is a recent ruling that institutions involved in over-the-counter trading of derivatives are now having to adhere to non-cleared margin rules.
Anti-money laundering/know your customer are very much an integral process in any banking relationship and expectations are that this will continue to tighten over time. The positives are that institutions are becoming increasingly aware of the requirements and remain ` highly collaborative.
Institutions will continue to demand more value from their asset servicing provider, yet this should not be viewed from the perspective of pricing solely, but a holistic view of the provider’s credit standing, asset safety, technology innovation, business focus, market leadership, size and scalability—which points to whether they have entrusted their assets to a future proof provider in this rapidly changing environment.
