As Chinese investment managers become more connected with the international trading community through increased activity overseas and gradual adoption of global best practices, counterparty risk measures are becoming more important, according to Omgeo, the post-trade solutions specialists.
Omgeo recently tied up with Chinese software provider Shenzen YSS Tech to bring greater automation to cross-border equity and fixed income trade processing for mainland clients.
The partnership will link Omgeo’s Central Trade Manager – an international and domestic equity and fixed income transactions matching system – with YSS Tech’s GoldenFinger – a financial valuation management product – and SPOMS, an investment transaction management solution.
“Because the solutions link YSS Tech’s financial valuation system and investment transaction management system for Omgeo CTM through a data bridge, the design provides a solution for users of either YSS product as well as those using both products at the same time,” said Chen Zhenfei, vice president of YSS Tech’s Product Center.
Chinese investment managers will now be able to benefit from increased settlement efficiency and reduced counterparty risk on international transactions, as well as connecting with Omgeo’s worldwide network of 6,500 brokers and investment managers through a local-language interface.
Since the inception of the Qualified Domestic Institutional Investor (QDII) program in 2007, Chinese investment managers have become more sophisticated in terms of diversifying investment strategies and risk/compliance controls, according to Cornelia ‘Nellie’ Dagdag, executive director of sales and solution delivery at Omgeo. “This is reflected by the overwhelming reaction to the adoption of electronic trade confirmation solutions in the market.”
“China is speeding up the process of internationalisation, and our clients are gearing up to adopt global best practices and standards,” Dagdag told the TRADEnews.com.
Chinese QDII firms have grown to be more selective and informed in their cross-border trade investment choices, according to Dagdag.
“When these firms initially started investing beyond their borders, they had gone mostly after the brand names. Now, based on multiple factors, we have seen that many regional brokers are winning business from these Chinese firms,” said Dagdag.
Relationships between the buy-side and sell-side are also undergoing changes, suggested Dagdag, with “Chinese QDII investment managers demanding higher standards from their brokers,” including the provision of proper counterparty risk management solutions.
Omgeo has gained significant market share in China since its entry in 2009, with eight out of the top 10 QDII funds – as ranked by chinafund.cn – using Omgeo CTM to match cross-border trades, by April this year.
Meanwhile, YSS Tech’s GoldenFinger system enjoys more than 85% market share in China. Established in 2001, YSS Tech provides software solutions to companies across the financial services spectrum in the mainland.
If direct connectivity between Chinese investors and their global counterparts does continue to become more convenient and commonplace, the obvious loser would be Hong Kong, which has been benefiting in recent years from its status as a conduit between the two.