The back-office of sell-side firms is increasingly spending its time dealing with regulatory and cost reduction issues, according to BNP Paribas Securities Services Asia (BNP SSA).
Last year, 44% of the Asian sell-side’s back-office time was spent on cost reduction and dealing with regulation. That figure has now risen to 60%.
That is according to BNP SSA’s back-office outsourcing survey, which investigates the development of post-trade outsourcing in the Asia Pacific in 2013.
This year the survey asked “what are you spending your time on?” and “Where are your resources going?” About 34% of the sell-side said much of its time is spent dealing with new regulation and another 26% on cost reduction.
BNP SSA said firms are looking to outsource some operations to cope with the increasing burden of regulation and that over 36% of brokers in Asia have now outsourced some part of their post-trade processing, with another 17% planning to do so in 2014.
“We are at the end of a three year cycle in terms of costs containment and we are now at a stage where people are saying they have a handle on where costs are as of today, and the areas they need to keep an eye on,” says Barnaby Nelson, head of client development, banks, broker-dealers and corporate issuers at BNP Paribas Security Services. “Firstly, the balance sheet – whether a broker or an investment bank, and secondly what impact regulation is going to have in the next few years. In both cases people don’t really want to go it alone.”
He claimed the industry is coming to the end of the cost cutting cycle, because there are not many costs left to cut. Industry participants have spent the last few years reducing costs via big cost -management programmes and there are only a handful of areas where they don’t feel they are getting good value for money. One of those areas according to the survey is in equity clearing.
The survey also found liquidity is getting tighter with 89% of brokers cited as expecting collateral and capital requirements to rise in the next 12 months.