InterContinental Pudong, China, Shanghai
This is the conference to attend to access Heads of Trading/Investment/IT decision makers from leading Chinese buy-side companies, brokers and exchanges and determine your trading/IT/investment strategies for 2012 in two packed days. - save your time and bring you the knowledge that takes you months to obtain otherwise!
2 minutes with Zennon Kapron
Interview with Zennon Kapron, Founder/Manager,
TradeTech China:What is your current outlook on the Chinese economy and the financial sector in general?
Kapron: Although the global economy is facing a number of large challenges especially in the US and Europe, China’s economic growth has slowed slightly, but remains quite strong. This is somewhat down to the fact that domestic consumption in China is starting to pick up to compensate for an overall drop in exports and also due to measures that the government has put in place to keep inflation in check and keep economic growth sustainable. The financial industry is of course a key enabler of growth and so we expect to see the sector continue to grow, yet growth is not without obstacles. Non-performing loans, increased competition and tighter regulation are just three of the challenges facing financial institutions today.
TradeTech China:What are the key capital markets technology trends that are you expecting in 2012?
Kapron: The top IT priority for Chinese securities firms during the last 5 years (China’s 11th Five Year Plan period) was to complete centralization of trading processes which was for the most part achieved and resulted in structured and integrated IT platforms connecting decentralized operating outlets with centralized data warehouses and core systems. Given the push for innovation, risk control and centralized management from the CSRC during 12th Five Year Plan, local securities firms who are highly dependent on IT will need more from their IT infrastructure. We expect that as customer service and product differentiation becomes more important, the introduction of innovative technologies will speed up and budgets will increase, thus opening up a new period of IT spending in the capital markets space.
TradeTech China:In your opinion, what is one prediction for how algo trading in China will develop in the coming year?
Kapron: It is clear that algo trading is a key part of markets in China and will only expand in terms of what algorithms are used and how. Pre-2010, there was a lot of talk about algos, but not much action until UBS really started to offer algo products and services to local fund companies, which can almost be seen as the watershed moment for algos in China. We feel that much of the innovation in China’s algo usage will come from different asset classes beyond equities such as financial futures as that market is less regulated and avoids some of the key settlement, market data and trading restrictions that have hindered the growth of algorithms in the traditional equity market.
TradeTech China:What do you see as the main challenges for foreign vendors coming into the market?
Kapron: Our main business is providing research and insight on the Chinese Financial Technology market and due to this focus, nearly all of our clients are technology vendors and many of those are foreign vendors. The key challenges for vendors coming into China haven’t changed, and it sounds very trite to say, but things in China work differently and coming in with a cavalier and careless attitude usually ends in failure for foreign vendors. The number of financial technology companies that we STILL trying a western strategy in the Chinese market and failing is amazing even today in 2012. A well-researched and thought out strategy is very important. Many clients come to us with preconceived ideas and strategies of what they want to do in the market, but after analyzing their strategies, we find that they often miss particular characteristics of the market that are key determinants of success or failure.
TradeTech China:More specifically, what would you say are the three most important things to keep in mind if you are a technology vendor attempting to sell into the local Chinese capital markets industry?
Kapron: Localisation – Software needs to be localized for the Chinese market. This used to mean having front-end interfaces in Chinese, but this is becoming less of a requirement. Key is adaptability on the backend with functionality such as double-byte character support so that systems can integrate with a company’s existing systems which are often provided by local vendors.
Regulations – Understanding the industry rules and regulations specifically within the capital markets space is critical. Regulations control trading frequency, settlement rules, etc.. Understanding these and accounting for them in software development is incredibly important to make sure you have a product that fits and works in the market from day one. No customer wants to sit around while you figure out how to adapt your solution to the market – your customer will have already moved on to a competitor by that point.
Patience – Having patience is still very important for companies coming into the market. There have been some very prominent examples of foreign vendors coming into China and making a mess of the implementation of key systems. Local institutions can be wary of new entrants and local providers are very often heavily heavily entrenched in various market segments. Success takes time.