Digital Transformation in Securities Markets: Advancing Services and Managing Risks Highlighted at 26th ACG Annual Meeting

Digital technologies are changing the concept of companies’ operations and interaction with clients. However, their use creates certain risks that financial market participants are already considering today. This opinion was reached during the panel session “Digital Transformation and Improving the Quality of Services in the Securities Market” at the 26th Annual General Meeting of the Asian-Pacific Central Securities Depositories Group (ACG).

Digitalization not only changes work of financial market participants, but also supports demand for financial services. In Indonesia, during the pandemic and active implementation of digital solutions, the number of investors has significantly increased, – Samsul Hidayat, President of PT. Kustodian Sentral Efek Indonesia, said during the event.

“During the pandemic, many investors registered on our exchange, their number reached 13.3 million in our central depository,” he added.

The Indonesian Stock Exchange index has doubled over the past 10 years and reached 7,700 points. Today, the Indonesian stock exchange records about 200 thousand transactions daily. Total number of issuers on the exchange amounts to 9037 companies.

Capitalization of the Indonesian stock market is estimated at $ 700 billion. At the same time, the Indonesian capital market is considered one of the most developed in Southeast Asia.

Taiwan Depository & Clearing Corporation (TDCC) also decided to improve customer service through digitalization. Julie Wang, Senior Vice President of Corporate Strategy and Public Affairs at TDCC, explained that the platform introduced new financial technologies in its activities back in 2009. 

TDCC also uses artificial intelligence, for instance, for translation, coding, encryption and other solutions. However, she noted, not every task is suitable for artificial intelligence. For example, highly confidential information should not be provided to AI. In addition, AI does not work very effectively with restricted data. But since TDCC works mainly with accurate data, AI can be used to predict and aggregate it. At the same time, Kazakhstan not only keeps up with global trends in technology, but even surpasses them, says Mikhail Novoselov, Executive Advisor at Freedom Finance.

“Our GovTech and RegTech technologies are not just the most advanced in the world, but exceed the highest standards. For example, we have a biometric database of all residents, and, in fact, you can open a bank account or board a plane simply by scanning your face and providing only your document number. All checks are carried out quickly and invisibly,” – said Mikhail Novoselov. He added that today it takes just a few minutes to open an account, although previously this operation took 15 minutes. But, he agrees, the use of digital technologies creates certain risks, whereby it is necessary to conduct many checks on the client, taking into account sanctions and other risks.

With the development of digital solutions, an important emphasis is also given to regulation. According to Jim Micklethwaite, Director and Head of Operations at Thomas Murray, regulation emphasizes that all organizations take into account all risks, conduct internal training, testing and report on all issues. He also noted that some unstable systems can be moved to the cloud to ensure their security.

“These technologies are inexpensive, and you get more benefits. Many countries have implemented regulations on securities and on key and personal data storage. Another trend is post-Covid. Working from home is becoming normal, although previously there was a wary attitude towards the issue, because people are accessing important systems from home. But now it is becoming the norm,” – Jim Micklethwaite added.

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ACG is an association of central securities depositories in the Asia-Pacific region, established in 1997. Its main objective is to cooperate across various sectors to improve efficiency in the clearing and settlement field.