Cost and Complexity for Asian Tigers

As you may have been aware, I've been spending the past week in Singapore, while running our inaugural Asia-Pacific Trading Architecture Summit. Coverage of the event will be feeding through the website over the course of the week, but in advance, I thought I'd share a few observations and conversations that I had before, during and after the event.

Singapore, by the way, is a pretty amazing place. Part modern metropolis, part extended ethnic quarters, I found myself being seriously impressed by the way it could go from buildings that really gave a new definition to the word skyscraper, to small, pagoda-like houses and roof gardens in the time it took to cross a street. Being British, I have to comment on the weather and the haze, which was pretty good and relatively sparse, respectively. If you haven't been, please do, it's an experience. Just make sure you do it on an expense account.

Cost
Back to the conference. Cost, and the ways in which money can be saved in any place, were clearly on the top of everyone's minds, whether it was attendees or people that I met with. Given the amount of change going on, globally, and the need to adapt to new market conditions brought about by increasing electronic trade and interconnectivity, it's an expensive business, and the funds aren't necessarily there. One consultant that I spoke with said that people were just desperate to find ways to trim costs amid budget sheets that are the tightest they've ever been, which is more or less the same story everywhere, but perhaps more defined in Asia.

Why? Regulation is one reason, of course. When we discuss regulation in this column it's usually associated with Dodd-Frank or the Markets in Financial Instruments Directive review. It's big, muscular policy that affects multiple states or countries, and encompasses them all under its wings. Not so in Asia-Pacific, really, which lacks the total federal structure of the US, or the pseudo-federalized nature of the EU. Each country comprising Asia-Pac has its own set of rules, and they aren't necessarily compatible with one another. This idiosyncratic approach leads to a lot of investment that has to be made depending on whether you want to trade Singapore, Japan, Australia, Korea, Hong Kong, or any other region.

Siloes by Law
Take Singapore as an example. Monetary Authority of Singapore (MAS) rules dictate very strict guidelines on the movement of data outside of the country's borders, to the point where it's practically impossible to transmit outside of the state. This leads to relatively simple infrastructural elements - datacenters and the like, for instance - having to be regionalized in a specific state rather than created using a hub approach. Costly, as I'm sure you'll agree. Other rules about capital movement, such as those in China, strongly inhibit interstate trade in the region, and leads to banks having to find workarounds that end up being complex and expensive to implement.

Each country comprising Asia-Pac has its own set of rules, and they aren't necessarily compatible with one another. This idiosyncratic approach leads to a lot of investment that has to be made depending on where you want to trade.

A few weeks ago, I wrote about breaking down silos, but there's not a great deal you can do when you're forced into them by legislation. As such, the strongest advice from panellists was to grow according to need, because if you're setting up an office to handle thin trading in one market, it may not be worth the cost.

Thanks again to everyone who spoke, attended and organized the event. It was a lot of fun, and I'm looking forward to round two next year.