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Pandemic pushes DLT from concept to practical application
Technology becomes crucial to ensure uninterrupted trading in equities in a very volatile market
23 Oct 2020 | Bayani S Cruz

Although blockchain and distributed ledger technology (DLT) have been gaining importance even before the pandemic, it was Covid-19 that pushed buyside and sellside institutions into using these technologies as practical solutions to improve the overall capability and resilience of their businesses.

“Everyone has now moved beyond just the idea of incubation, innovation webs, and POCs (proof of concept) to what is tangibly beneficial to the market to improve overall resilience, effectiveness and, related to that, to address the needs and transformation of their businesses. And, of course, cost is an ongoing issue, to make sure there’s value in the adoption of the technology overall,” says David Becker, managing director and head of Asia-Pacific at Broadridge Financial Solutions.

In the wake of the pandemic, one of the key challenges facing the financial services community was how to ensure the continuity of business operations in a work-from-home environment triggered by lockdowns and quarantine.

The principal challenge was to provide technology solutions that would ensure uninterrupted trading in equities in a very volatile market that generated unprecedented volumes of trading, especially during the February-April period.

“One key area that we faced at the beginning was ensuring that there was business continuity and that all institutions had their (business continuity plans), fully executable and capable of being activated on a nimble basis. Part of that was a central requirement for continuing to do business uninterrupted. But at the same time, clearly there was an increased pace of adoption of technology,” Becker says.

Most financial institutions responded by adopting technology solutions for inter-office and client communications as well as for strengthening their capability to deal with increased trading volumes.

“With that impact of Covid, we saw, particularly in April, a dramatic increase in trading volumes in the market, in our region and time zone, particularly out of Tokyo and Sydney. So both exchanges experienced unprecedented volumes, two or three times what you would normally see on a daily basis. What we’ve done on the back of providing solutions to our clients is we were able to maintain the integrity and ability of our systems to support those huge volumes without any downtime and no spillage in terms of data transaction and trading,” Becker says.

“The volatility really drove home the need to scale infrastructure and the adoption of technology to make sure that no trade is lost, and so the interest for investors to manage their portfolios could continue in spite of the impact of Covid on the financial markets.”

Feeling the pulse

Broadridge conducted two surveys to properly gauge the sentiments of financial institutions on the adoption of technology in the wake of the pandemic. The first survey was conducted at the height of the Covid-19 infections in May-June with more than 500 C-suite executives from Asia, North America, and Europe, both from buyside and the sellside, including broker dealers, assets and investment managers.

Results of this survey highlighted a bullish outlook for the adoption of technology and economic recovery with 95% of respondents expressing confidence that there may be recovery within six to 24 months.

The survey result also highlighted the importance of the role that technology and innovation will play in the economic recovery post pandemic with 60% of the respondents saying they need to increase the pace of the adoption of new technology solutions.

“This was mainly driven by what we’ve seen even pre-Covid which was to improve overall the resilience of their business operations. And related to that, other drivers are market compliance to regulatory changes. Also the need to improve the overall efficiency of their businesses, to reduce higher cost of manual processes, to bring to market more solutions,” Becker says.

Another survey conducted in August 2020 was focused on Hong Kong’s securities houses, brokers, and investment asset managers and yielded similar results, with respondents saying they need to focus on the adoption of technology and upgrading their platforms to allow for more scalability to support their growth plans.

“One of the bullets that came out of both studies, of course, was the sellside, or the universal banks if you like, probably had created more activity and importance around the adoption of new technology and innovation compared to the buyside. But overall majority or more than 60% raised technology as one of the key priorities of their business through the rest of this financial year and into next,” Becker says.

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