Navigating growth amid emerging opportunities
20 March 2025
As APAC’s securities finance landscape continues to evolve, market participants face a dynamic environment characterised by regulatory shifts, technological change, and emerging opportunities, says State Street’s Richard Gallagher
Image: stock.adobe.com/HadK
The Asia Pacific securities finance markets are on the cusp of significant transformation in 2025. Market participants should anticipate continued evolution, driven by regulatory developments and technological innovation, and subsequent changes in market behaviour. Readiness is key — State Street will work with clients and partners to stay ahead and drive the best possible outcomes over the coming year.
The shape of the future
One prominent development which will have far-reaching implications is the push towards central clearing for specified US Treasury transactions via the Fixed Income Clearing Corporation (FICC). Today, a significant portion of treasury funding and cash markets remains uncleared. This move aims to strengthen the global financial system by reducing contagion risk posed by non-centrally cleared trades, in the event of a default.
We have seen a strong interest and engagement from clients as they prepare for the implications of this regulatory development. Even clients not directly required to clear via FICC have recognised that there will be a continued liquidity shift to this clearing model, necessitating its adoption purely as another source of liquidity.
One refrain I have been hearing more from asset owners and managers in the region is that they are looking to streamline and simplify their counterparty relationships. The regulatory, geopolitical and technological environments are complex enough without a multitude of counterparty relationships to manage. At State Street, we have seen particular interest in our Prime Services offering, as clients see it as a complementary, diversified value-add to their existing relationships and product sets in custody and financing.
I am also excited about the growth in agency lending in the region. In my view, Asia is home to some of the savviest sovereign wealth and pension investors globally. They have been early adopters of internalisation of asset management, as well as becoming more sophisticated in use of their balance sheet. Increasingly, asset owners are solidifying their status as financial partners within the global financial ecosystem. It has been a pleasure to work with these clients to adapt our model and ensure flexibility as we endeavor to continue to add value to their financing arrangements.
As for the outlook regionally, I am cautiously optimistic. We are anticipating the resumption of short sale activity in Korea, which should help bolster volumes and interest from international investors. Increased corporate events in Japan should drive alpha opportunities. In Australia, the superannuation industry will undergo significant changes in 2025, with the trend towards mergers and consolidation a focus on fees and profitability. State Street is well positioned to help the biggest super funds maximise their return on assets via agency lending, as well as evolving the programme to meet their growing sophistication.
Leadership and commitment
State Street’s leadership in securities financing is underpinned by over 30 years of experience delivering services and solutions. In Asia-Pacific, State Street plays a vital role in supporting liquidity and operational efficiency in financial markets. Our comprehensive, integrated offerings, including Agency Lending, Secured Financing, and Prime Services, help enhance client portfolios and support investment strategies.
The firm’s commitment to the Asia-Pacific securities finance business is evident through numerous accolades, including the Securities Finance Times Industry Excellence award in 2024 for Asian Lender of the Year.
State Street has been doubling down on its commitment to our Financing Solutions suite and I am excited about the opportunities ahead and look forward to partnering with our clients globally, and in particular, within APAC.
The shape of the future
One prominent development which will have far-reaching implications is the push towards central clearing for specified US Treasury transactions via the Fixed Income Clearing Corporation (FICC). Today, a significant portion of treasury funding and cash markets remains uncleared. This move aims to strengthen the global financial system by reducing contagion risk posed by non-centrally cleared trades, in the event of a default.
We have seen a strong interest and engagement from clients as they prepare for the implications of this regulatory development. Even clients not directly required to clear via FICC have recognised that there will be a continued liquidity shift to this clearing model, necessitating its adoption purely as another source of liquidity.
One refrain I have been hearing more from asset owners and managers in the region is that they are looking to streamline and simplify their counterparty relationships. The regulatory, geopolitical and technological environments are complex enough without a multitude of counterparty relationships to manage. At State Street, we have seen particular interest in our Prime Services offering, as clients see it as a complementary, diversified value-add to their existing relationships and product sets in custody and financing.
I am also excited about the growth in agency lending in the region. In my view, Asia is home to some of the savviest sovereign wealth and pension investors globally. They have been early adopters of internalisation of asset management, as well as becoming more sophisticated in use of their balance sheet. Increasingly, asset owners are solidifying their status as financial partners within the global financial ecosystem. It has been a pleasure to work with these clients to adapt our model and ensure flexibility as we endeavor to continue to add value to their financing arrangements.
As for the outlook regionally, I am cautiously optimistic. We are anticipating the resumption of short sale activity in Korea, which should help bolster volumes and interest from international investors. Increased corporate events in Japan should drive alpha opportunities. In Australia, the superannuation industry will undergo significant changes in 2025, with the trend towards mergers and consolidation a focus on fees and profitability. State Street is well positioned to help the biggest super funds maximise their return on assets via agency lending, as well as evolving the programme to meet their growing sophistication.
Leadership and commitment
State Street’s leadership in securities financing is underpinned by over 30 years of experience delivering services and solutions. In Asia-Pacific, State Street plays a vital role in supporting liquidity and operational efficiency in financial markets. Our comprehensive, integrated offerings, including Agency Lending, Secured Financing, and Prime Services, help enhance client portfolios and support investment strategies.
The firm’s commitment to the Asia-Pacific securities finance business is evident through numerous accolades, including the Securities Finance Times Industry Excellence award in 2024 for Asian Lender of the Year.
State Street has been doubling down on its commitment to our Financing Solutions suite and I am excited about the opportunities ahead and look forward to partnering with our clients globally, and in particular, within APAC.
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