Securities & Investments Newsletter, June 2013

Analyst’s Point of View

Tokyo Roundtable 2013: The Capital Markets Revolution in Japan and Asia

Tokyo, home to Asia's largest capital market, is also wonderful in May, and was a perfect location for a recent Celent roundtable.

One of the sessions was an Exchange Panel: Drivers of Innovation and a Market in Transition. Executives from five major global exchanges participated in the panel: CME Group, JPX Group, Korea Exchange, NYSE Euronext, and Singapore Exchange Limited. Representatives from both Asian and global exchanges discussed changing equities derivatives market structures, business models, challenges, and opportunities in Japan's and Asia's capital markets.

Though similar at first glance, the exchanges from the East and West presented a marked contrast.

Asian exchanges insisted that competition, diversity, and deregulation are the keys to growth. Exchanges based in Europe and the United States said they found the diversity and competition excessive; they would prefer order and market discipline. All exchanges stressed the importance of innovation and collaboration, and all agreed the distinction between investment and speculation is important.

Such differences between East and West reflect the history of the global exchange business. Differences in time and distance are shrinking as networks grow, but, ironically, the advent of global capital markets has led investors to recognize the importance of individual trading venues.

For another panel, The Capital Markets Revolution in Japan and Asia, leading industry firms participated in the discussion, including online securities companies, such as Monex, Inc., Nissay Asset Management Corporation from the buy side, and Nomura Securities Co., Ltd. from the sell side. This session focused on the emerging low latency landscape and the opportunities and challenges in the region's equities and derivatives markets. In Japan and Asia, since the introduction of arrowhead, latency has been lowered enough and attention has shifted to execution quality. Technologies such as Big Data and transaction cost analysis, are the focus of their challenges.

Finally, in response to audience questions, we asked the panelists to comment on high frequency trading. Among the comments, there were two of note: one was, “the opportunity to get everyone used to HFT is here,” and another was, “HFT is welcome in Japan.”

The market environment has changed drastically. Conversion of monetary policy, “Abenomics,” and the "three arrows" were a volcanic combination. Magma flowed, but all indicators began to rise.

These discussions will continue in New York this week with two events: Innovation in Focus: Eight Great Technologies in Fixed Income You Should Care About and Digital Strategies: Effective Client Service Across Mobile and Social Channels. Watch for upcoming research and events as Celent continues to explore future market trends.

Eiichiro Yanagawa
Senior Analyst

Chart of the Month

From the Celent report Maximizing Collateral Advantage: A Survey of Buy Side Business and Operational Strategies

Celent Published Reports

Research in Progress

The Return of Low-Latency Technologies
SEF-Equivalent European Swap Ventures
Basel III and Liquidity Management Solutions
Foreign Investment and Cross Border Training in Emerging Markets
The Indian Mutual Funds Industry

Events

27 June 2013
Webinar: Maximizing Collateral Advantage

11 July 2013
Webinar: The Blurring of the IDB Vs. D2C Models in Fixed Income and FX

3 October 2013
Conference
What's Next: The Search for Disruptive Innovations
San Francisco, California

For more information on the above events, contact info@celent.com or call +1.617.262.3120.