A majority of emerging markets have better same day affirmation rates than their developed counterparts, according to a survey by Omgeo, using data from Global Custodian surveys of agent banks in the major and emerging markets.
Emerging markets have more modern technology and more legacy processes, says Tony Freeman, executive director at Omgeo.
India, Taiwan, Hong Kong, Japan, Singapore and Korea all had SDA rates over 90%. Amongst the more developed markets Italy and the United States all had SDA scores of less than 70%. However not all emerging markets excelled in SDA. Both Brazil and South Africa lagged below 70%.
Looking at SDA rates by region, the Asia-Pacific region came out trumps, with an SDA rate of 94.4%. The global average is 80.4%. The Americas region scraped 53.8%, the lowest regional rating. EMEA SDA rates were 81.4%.
If you compare some of the Asian markets which are incredibly efficient, they are a much younger community of clients, says Freeman. They also have a big focus on speed, accuracy and efficiency. In the U.S., you have very high volumes regarded as very cheap, in an efficient market. The SDA statistics are half what you would see in Japan or Taiwan.
Freeman pointed towards behavioural tendencies for Asia-Pacifics superiority in SDA rates. Japan has a modus operandi of constant technology innovation, and no mistakes, he says. The U.S. market tends to process things much more in batch cycles, so they do things in a more legacy way.
Regulation also plays a key part in SDA rates. Japan has very tight deadlines for valuing mutual funds, which is a huge segment of their market, says Freeman. You have to do the valuation, as of 6pm on the day you traded. That drives a frenetic process confirming all the trades that have been done that day, resulting in the highest SDA affirmation rates in the world.
See the full Omgeo survey here.