Asifma: Asia’s financial markets must harmonise regulations

Author: Ashley Lee | Published: 22 Nov 2013
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  • The Asia Securities Industry and Financial Markets Association released a white paper today that included its recommendations for the sustained growth of Asia’s capital markets;
  • The white paper, targeted at policymakers and regulators, emphasised the need to develop a regional – rather than domestic – platform for capital markets in Asia to facilitate cross-border transactions;
  • In particular, lawyers will play an important role in establishing standardised documentation for certain products throughout the region.

Today the Asia Securities Industry and Financial Markets Association (Asifma) released its white paper on the development of Asia’s capital markets. It highlighted the need for transparent and harmonised regulation across the region.

Although the pace of Asia’s economic growth has exceeded that of other regions, the structural development of its capital markets has not kept pace. Asifma’s white paper detailed industry recommendations for the continued growth of Asia’s capital markets.

It recommended policymakers across the region to encourage the growth of regional-wide capital markets. For regional capital markets to continue their growth, policymakers must establish regulatory regimes and market infrastructure that functions across products and jurisdictions.

Asifma CEO Mark Austen told IFLR that Asia’s capital markets need to move to another level, which would require a greater regional cooperation than has been seen before.

Related links

Asifma: Asia’s 2014 regulatory outlook

How US prudential standards could fragment global market

How lawyers will shape Asian high-yield

What’s needed

The white paper included Asifma’s recommendations for the development of five market segments in the Asia-Pacific: equities, fixed income, foreign exchange, commodities and derivatives. While there are specific recommendations for each segment, the bulk of the paper focuses on harmonisation of the markets across the region.

As an example, Austen noted the status of local currency corporate bond markets in Asia.

While local currency bond markets have developed, most of that development has happened in the government space, Austen said. While governments might want to control their own national markets, a regionalised model with trading platforms that go across borders would make more sense for the corporate bond market.

In addition to developing regional market infrastructure, the white paper recommended improving the bankruptcy, insolvency and resolution regimes across Asia and implementing more consistent and effective legal and regulatory regimes.

A newer asset class might also provide an example for the rest of the Asia-Pacific.

"Ironically, the one asset class that has seen the most regionalisation is the offshore RMB market," said Austen.

New markets have recently started in Taiwan and Singapore, while the product originally began in Hong Kong. This is creating a much more regional market outside of China, Austen added.

He predicted that going forward, the RMB market and RMB as a currency will play a much bigger role in the region, which still relies heavily on US dollar funding.

"Although RMB funding might not challenge USD funding in five years’ time, it will certainly become much more important," he said.

What lawyers can do

Aside from taking part in consultations regarding broader market infrastructure and regulatory issues, lawyers and compliance teams play key roles in establishing disclosure and documentation standards across the region. For example, they could take the lead in developing standard covenant practices within the corporate bond market.

"Lawyers and compliance teams should be focusing on creating greater standardisation of practices across the region through documentation," said Austen. "They need to not only look at what’s been done in the US and Europe, but what makes sense from an Asian point of view."

Related links

Asifma: Asia’s 2014 regulatory outlook

How US prudential standards could fragment global market

How lawyers will shape Asian high-yield