SAFE Vision 2025: Borderless marketplace

Dhaka,  Sat,  23 September 2017
Published : 04 Aug 2017, 21:14:24

SAFE Vision 2025: Borderless marketplace

Muhammad Abdul Mazid
The South Asian stock markets are spread across a wide geographic region, rich with vibrantly diverse cultural backgrounds and practices. More importantly, the region's jurisdiction operates under different sets of law, rendering it near impossible for the members of the South Asian Federation of Exchanges (SAFE) to operate in a symmetrical and harmonised manner.

 SAFE is a forum of 28 member entities from the SAARC region: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka as well as Mauritius and UAE. The purpose is to provide a platform to share, exchange and promote technologies, experiences for the rapid growth and development of capital market and work towards the regional as well as global integration. One of the objectives of SAFE is to help mobilise domestic savings in their respective countries and to introduce best consumer/investor protection standards in the region. It is in line with this objective that SAFE makes regular efforts for the spread of financial knowledge/awareness in the region to promote the objectives of broader financial literacy.

Multiple voices from across the region arrive at the same opinion that the way forward lies in strengthening of the unity across the board. The founding principle of this Federation has been to promote the development of securities markets in the region; and with South Asia's collective efforts, the onus for such development lies on the larger entities to share technologies with their smaller counterparts, while advocating for streamlining legislation to incorporate effective cross border liquidity, and paving new ground for a more integrated and interconnected South Asia.

Thus the SAFE Vision 2025, espoused in SAFE Ideas Workshop in Mumbai (May 12, 2016), charted a roadmap of progress that member exchanges strive to achieve within the next decade. The course of SAFE Vision thus outlined a goal to establish regional inter-linkages among SAFE individual markets, thereby creating rapid deployment of harmonisation and network-integration of the capital market services in the region. As South Asia manifests steady progress towards e-inclusion in the global economy, financial literacy in terms of awareness of banking services is on the uptrend. Yet, South Asian capital markets' investor base shows sluggish growth, and existing investor base is hesitant to diversify portfolios into regional markets.

South Asia is dotted with bourses boasting of stellar returns, with markets that are trading at lucrative discounts, and allow the smart investor to diversify while trimming risk, to generate higher returns. Increased liquidity and a larger pool to raise capital are the essential ingredients to embark on projects of exponentially growing magnitude, launching regional markets into a higher orbit.

The idea of an interactive cross-border investment, aimed across all countries, and sustained across the regional landscapes, should generate the next breed of investors who are both cognisant of the benefits reaped via investments in regional markets, and possess the will to invest within South Asia. 

Common financial literacy campaigns, centrally coordinated and sprinkled in each member's ambit, also function as the perfect vehicle driving a concentrated effort on the micro level, by engaging general population segments. Simultaneously, a campaign launched at the macro level consisting of each member nation's regulatory body can work for streamlining policies towards creating a more fluid cross-border trading platform. Sustained and proactive advocacy from the capital markets and financial services fraternity should be driven amongst the respective governmental circles and regulatory bodies.

In order to broaden the horizon of all the stakeholders linked directly or indirectly with capital markets and financial services, it has become imperative to establish a proposed Regional Governance Body consisting of all Regulators (of Securities, Exchanges, and Banks) as members with the mandate to provide patronage in terms of developing a regulatory framework. 

Additionally, Task Forces should be empowered to harmonise the regulations of all involved parties -- be they exchanges, depositories, issuers, brokers and clearing companies. To maintain overall transparency in the system and to gain confidence of all direct or indirect stakeholders, it is essential to enforce corporate governance rules and an accounting regime with standard reporting.

The importance of investment in technology and innovation cannot be underscored. A clear vision allows for maximising the potential benefits to be harvested in implementing the latest technological advancements. A coherent and relatable set of guidelines and specifications for Exchanges, Depositories, Intermediaries, Regulators and Clearing Companies alike is expected to serve the purpose of standardised connectivity among all regional participants. It will also serve as the framework over which subsequent development can be made.

This vision should also allow for lagging markets to upgrade their IT infrastructure accordingly, and ensure a greater ease of access for their integration, once sufficient technological advances are made. The establishment of a data-centre has been proposed for consolidation of data from regional exchanges and hosting technology services. This development not only allows for greater consolidation for regional data, but also the unification of data accumulated into a standard format, to the benefit of all stakeholders.

SAFE has to play a role in financial engineering, since the structuring of integrated products by regional institutions is still at a nascent stage. Financial engineering here refers to working on product structures, back-testing and financial analysis. 

The political challenges for such inter-linkage may be decades old, but most members have seen enthusiastic responses from governments in recent years, having a common agenda of economic development. It is an opportune time to translate this into opportunities for deepening the regional capital markets. One of the objectives of regional financial integration is to ease the flow of capital from one with surplus to another which needs it. Integration can give a boost to local business expansion, thus aiding economic development. Moreover, this does not entail the constant need to become indebted to external assistances from multilateral or bilateral loans. Investment returns can also assist economic development by increasing the purchasing power of the people, apart from mobilising local money into opportunities within the region without it getting parked overseas.

Dr Muhammad Abdul Mazid, a former Secretary to GoB, Chairman of NBR and Chairman of  South Asian Federation of Exchanges ( SAFE), is Chairman of Chittagong Stock Exchange.

Editor : A.H.M Moazzem Hossain
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