A growing number of Hong Kong brokers are seeking to outsource their back office functions in a bid to deal with increasingly complex and competitive local markets, according to a survey from BNP Paribas Securities Services and Swift.
The survey of over 150 brokers shows that, with a growing number of brokerages in Hong Kong, firms are looking at new options such as third party clearing and multilateral trading facilities in a bid to gain a competitive edge.
Asked what is driving them to look at back office outsourcing, 30% cite market changes, 26% risk reduction in the post-Lehman world and 19% expansion.
The trend towards outsourcing is most evident amongst smaller brokers, 13% of which have already handed over operations to third parties. Faced with limited IT resources, budgets and in-house expertise, many such brokerages consider themselves too small to go it alone, says BNP.
From a management perspective, the benefits of outsourcing is increasingly outweighing the drawbacks, reasons BNP, given continued pressure to move fixed costs to variable and to focus on time-to-market as firms expand throughout the region.
There are still factors deterring Hong Kong firms from outsourcing, including the value of brand recognition in the region, with many considering their name on the trade ticket as an essential part of their value proposition.
Respondents are also still not fully satisfied with what third parties are offering. Nearly a third want to see more outsourcing agents who can fully manage the settlement process (including all dealings with custodians) and 13% highlight the need for agents to manage client and security data on their behalf.