The Asia Pacific FX Markets:
Opportunities for GrowthThe Asia Pacific FX Markets: Opportunities for Growth2

Content
01

Foreword

01

02

Executive summary

03

Key findings

05

03
04
05
06

(a)
(b)
(c)
(d)

Market conditions
Market participants
Electronic execution and technology
Regulation

5
6
7
9

Introduction: Changing market landscape(a) Markets and Currencies(b) Market liquidity(c) Non-deliverable forwards

12
14
15

Changing nature of market participants(a) Reporting dealers(b) Other financial institutions(c) Non-financial customers

17
19
21

25
25
26

29

Opportunities for regulatory equivalence

07
08

(a)
(b)
(c)
(d)
(e)
(f)
(g)

Margin requirements
OTC trade reporting
Central clearing of derivative transactions
Prudential requirements
MiFID II
Global Code of Conduct (GCC)KYC and market infrastructure opportunities

31
32
33
35
36
36
37

41

Appendices(a) Glossary(b) References

17
23

Evolution of execution methods(a) Spot(b) Forwards, Swaps and Options(c) Emerging technologies

11

41
43

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

01
Foreword
Asia Pacific is comprised of diverse currency markets that are shaped by various and, attimes, competing forces, from global regulation to local capital controls.
The objective of this study is to examine the structure and development of the foreignexchange (FX) market across the region, including the roles of different market
participants, methods of execution and the regulatory environment. It aims to illustrate
the changes in regional FX markets over the past decade and shed light on their future
direction.
The report has been jointly written by KPMG and the Global FX Division (GFXD) of
the Global Financial Markets Association (GFMA). All the statistics used in the reportare based on a combination of data from the Bank for International Settlements (BIS)
Triennial Central Bank Survey of Foreign Exchange Market Activity from 2004 to 2016;
desktop research from publicly available sources; internal resources of the GFMA and
KPMG; and multiple interviews with market participants, including members of the
GFXD.

John Ball

Tom Jenkins

Managing Director
Global FX Division – Asia Pacific
GFMA

Partner, Risk Consulting
Head of Financial Risk Management
KPMG China
The Asia Pacific FX Markets: Opportunities for Growth© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

1

The Asia Pacific FX Markets: Opportunities for Growth2© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

02
EXECUTIVE SUMMARYCURRENT

FUTURE TRENDS
Market Conditions• Continued adoption of algos• Further concentration of liquidity

Market Conditions• Increased local currency activity• Liquidity more concentrated• Volatility more extreme and harder
to predict• Reduced risk appetite• Greater use of algos for orders• Greater fragmentation
Electronic Execution & Technology• Asia playing catch-up• Active marketing by SDPs and MDPs
• Driven by best ex, cost reduction &STP

Regulatory Environment• Diverse & complex• Inconsistent application• Challenges for strategy &technology• Uncertainty over extraterritorial
impactMarket Participants• NBLPs will increase influence across theregion• Changing business models and alliances
Regulatory Environment• Greater cross-border co-operation
required• Potential for multiple global liquidity
pools• Developed market regulation has
unintended consequences acrossemerging markets• RMB internationalisation likely toshape global markets over the
next decade• Opportunities to develop greater
price discovery, improve market
access and efficiency in onshore
markets will benefit local
economies• Access to local markets and ability
to incorporate new technologies
will differentiate market
participants• Market participants will need toinnovate and leverage newservices to create capitalefficiencies• Access likely to remain restricted
in certain markets• Conduct requirements willcontinue to help shape businessmodels• Higher levels of cross-borderregulatory equivalence but not
full harmonisation, hence possible
bifurcation© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for GrowthMarket Participants• Opportunities for local/regionalbanks• Growing influence of NBLPs• International/local interdependency• FDI & institutional investor inflows

Asian
FX
Markets

Electronic Execution & Technology• Capacity for further growth• Big data analytics & machine learning to
influence execution capability, drive
platform development• SDPs will need to evolve• New technology likely to alter roles ofcurrent market participants, drive theformulation of new alliances• Distributed ledger capability to drive
efficiency over longer term (5-15 years)

OUTCOMES

3

The Asia Pacific FX Markets: Opportunities for Growth4© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

03
KEY FINDINGSThis study has identified the following key conclusions, which can be divided into current andemerging trends, and likely future outcomes or implications for regional FX markets.

(a) Market conditions
Current and emerging trends
In line with the region’s rapid development, average daily FX volumes traded in Asia haveclimbed 20 percent since 2013 to US$1.16 trillion. This regional market growth, since 2013, hasbeen supported by a 28 percent increase in swap volumes to US$608 billion and a 52 percent
increase in forwards volumes to US$193 billion.
The Japanese yen (JPY), despite volumes having recently fallen back from their 2013-14 Bankof Japan (BoJ) quantitative-easing (QE) peak, continues to dominate overall regional trade, withvolumes rising 172 percent since 2004. Whilst JPY’s dominance continues, the renminbi (RMB)
has become the eighth most actively traded currency in the world and the most traded non-G10
currency. This has been driven, in part, by the Chinese authorities’ encouragement since 2009
to use the currency to settle current account transactions and for cross-border trade invoicing.
However, the recent priority for the Chinese authorities has been stability and the strengtheningof existing capital controls over the internationalisation of the RMB which may impact short term
future growth.

Despite the increase in volume traded in the region there has been a fall in the number ofreporting dealers[1] in most jurisdictions indicating that liquidity is becoming more concentrated
across a smaller number of banks.
[1] BIS reporting dealers are typically large commercial and investment banks that are active in the local markets and regularly trade throughelectronic platforms© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

Given the widespread currency restrictions across the region a number of currencies are nondeliverable. Four of the top five globally traded non-deliverable forward (NDF) currencies -- the
Korean Won (KRW), Indian Rupee (INR), onshore Chinese Yuan (CNY) and Taiwan Dollar (TWD) -are from Asia and in most cases have higher volumes than their onshore deliverable equivalents.

5

The Asia Pacific FX Markets: Opportunities for Growth6

A series of recent events has resulted in periods of extreme volatility and pricespikes increasing the randomness in volatility that has been exacerbated by thefollowing structural changes in the FX market:•

the impact of prudential regulation on banks’ ability to warehouse risk•

the increased cost of continuing to participate in the market•

the competitive edge some institutions have gained through enhancing thesophistication of their platforms•

the growing influence of Non Bank Liquidity Providers (NBLPs)

An apparent outcome of this combination of structural changes is that during
periods of price stability there is ample liquidity, but when there are events
resulting in extreme volatility the liquidity disappears.

Outlook•

Liquidity is likely to concentrate further among fewer institutions in theyears ahead.

•

Despite its rapid recent growth China’s FX market is still disproportionately
small as a percentage of GDP and primarily domestic, pointing to a clear
opportunity for the market to develop further.

•

The ongoing internationalisation of the RMB is set to be a major force
shaping the global financial system over the next decade. It will make
China’s financial markets deeper and more liquid and have significant
implications for international investment trends and global asset prices. The
challenge for China will be furthering this internationalisation while ensuringstability, given the likely disruptions to the exchange rate and capital flows.

(b) Market participants
Current and emerging trends
The banking segment of the market is still largely split among:•

International banks that serve an extended group of international andregional clients, but have limited local currency offerings•

Regional banks that compete with international banks for cross-borderflows in the region but struggle to provide competitive G10 currency
liquidity•

Local banks that dominate domestic currency liquidity and the onshoreclient base. This can be due to local currency restrictions in somejurisdictions.

These divisions are more nuanced than they may initially appear. Relationships
are often symbiotic, with international banks partnering with local entities
that act as distributors for products and provide access to local liquidity. These
partnerships also act as a crucial secondary market for local banks looking torecycle risks and exposures in the G10 market.

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The role of the institutional investor has become more significant with theflow of capital into the region’s markets rising. Forwards traded by financial
institutions (FIs) in the region have more than doubled since 2013 as investors
look to hedge the regional component of their portfolios.
NBLPs in Asia are becoming more significant in liquid G3 currencies where they
can use their developed market strategies. However, their penetration into local
currencies has so far been limited by a lack of access to the local markets andbecause local currency trading has traditionally been relationship based, voice
executed and subject to higher levels of volatility.

Outlook•Given the rising costs of compliance, the continued development ofelectronic platforms and the investment required in new technologies, onlya small number of banks together with NBLPs will be in a position to act asliquidity providers.

•

NBLPs will play a key role in liquid spot currencies and will grow theiroffering in more liquid local currencies and NDFs. Some may become niche
players in certain products, asset classes or markets in response to buyside demand.

•

Local institutions may find the cost of operating beyond their traditional
client base uneconomical and may be limited to being the main providers ofliquidity in their domestic currencies.

(c) Electronic execution and technology
Current and emerging trends© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

Electronic trading has gained ground in Asia in recent years, with providers
playing catch up with the developed markets and widening their productofferings and client coverage. Secondary FX venues are generally managed out
of London and New York so have not had the same focus to onboard regional
market participants. High-frequency traders (HFTs) and NBLPs have historically
preferred markets where liquidity is deeper and where they have access to a
multitude of secondary venues, which make emerging markets less attractive.

7

The Asia Pacific FX Markets: Opportunities for Growth8

Banks have actively migrated voice-executed trades onto their single-dealer
platforms (SDPs) to drive cost reductions and improve efficiency. Multi-dealer
platforms (MDPs) have gained popularity by providing access to multiple
counterparties, enabling investors to satisfy client best execution requirements.
The primary trading venues are still popular with banks in the region due tothe fact that flows tend to gravitate towards them in the less liquid and morevolatile conditions of the Asia time zone. In addition, almost all of the central
limit order book (CLOB)/interbank offshore renminbi (CNH) volume is now
captive on these venues.
There has been significant investment and progress in the ability to quote
NDFs. As a consequence, NBLPs are starting to look at building their trading
capabilities in more liquid local currencies and NDFs.

Outlook•

Regional e-trading volumes will continue to match those in developed
markets, driven by changes in regulation, increased surveillance
requirements, cost pressures and best execution obligations.

•

Advances in areas like big data analytics and machine learning have thepotential to produce a paradigm shift for the FX industry. On the one
hand technology driven transformation can help the traditional market
participants drive greater internalisation and generate greater efficiencies,
while on the other it can eliminate some market distinctions, enabling
technology firms with low overheads to compete with the traditional
participants.

•

International banks will migrate more order types to algo execution on their
SDPs to improve surveillance and eliminate potential conflicts of interest.

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

•Banks that have been actively developing and marketing their SDPs will beable to take advantage of big data analytics generated from client behaviour,and machine learning to drive greater internalisation and efficiencies. In
order to maintain relevance, SDPs will need to evolve to allow clients
access to other liquidity providers.

•

Banks that have invested heavily in proprietary systems will struggle toupgrade to new technologies without significant new investment that not
all will be able to afford. Those that are able to pay the ‘cost of entry’ willneed to focus on building partnerships to develop utility platforms and/or better leverage third party systems, while others may be faced with adecision to change business models or develop new alliances.

(d) Regulation
Current and emerging trends
The regional regulatory environment has been driven both by the global postfinancial crisis agenda and efforts to protect local economies while ensuringstability as markets grow. It is diverse and complex, presenting challenges
to global and regional banks as well as multinationals that seek to implement
standard strategies and technology models across the region.
Despite the market and prudential regulatory agenda being agreed at the global
level, there are often inconsistencies in local interpretation that can create an
uneven playing field. However, there is evidence that national regulators, in theregion and beyond, have started to consult on a more consistent regulatory
approach.
Given the role of international banks in providing liquidity to regional market
participants, there is a need for awareness of the extraterritorial consequencesof regulation implemented in markets like the US and EU. These can lead to a
fragmentation of the FX market and create multiple liquidity pools.

OutlookThe most significant near-term drivers of change will include theimplementation of the Global FX Code of Conduct (GCC), the extraterritorial
impact of the Markets in Financial Instruments Directive II (MiFID II)/
Markets in Financial Instruments Regulation (MiFIR), and prudential
regulation such as the Fundamental Review of the Trading Book (FRTB),
which could impact the liquidity of some Asian currencies.

•

Despite greater dialogue and cooperation amongst regulators via the
Financial Stability Board (FSB) and regional forums, a more harmonised
regional regulatory framework is seen as unlikely to emerge in the nearterm. This lack of harmonisation will continue to act as a dampener to the
expansion of the regional FX market. One solution is the greater adoptionof substituted compliance or equivalency in order to mitigate the impact ofdifferences between regulation at the national level.

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth•9The Asia Pacific FX Markets: Opportunities for Growth10© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

04
INTRODUCTION:

Changing Market LandscapeThe most recent triennial survey by the BIS showed a contraction in global FX trading
activity for the first time since 2001, with Asian currency trading volumes also slipping. This
is attributable to several factors, including:•

The slowdown of global trade from its 2013 peak•

US dollar appreciation which has reduced the reported value of volumes in othercurrencies•

Bouts of risk aversion prompted by shifts in monetary and macroeconomic policies indeveloped markets that have impacted active fund management and activity

However, the average daily FX volumes traded in the region have climbed 20 percent since2013, to US$1.16 trillion. This growth is broad-based and has been driven by:
An 18 percent uptick in the volume traded between reporting dealers, which, partly
due to the smaller presence of NBLPs, account for 56 percent of volume in the region
compared to 42 percent globally•

A 28 percent increase in swap volumes to US$608 billion, of which 65 percent wastraded cross-border and 67 percent between dealers•

A 52 percent rise in forwards volumes to US$193 billion, with 59 percent traded byother financial institutions -- up from 41 percent in 2013

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth•11The Asia Pacific FX Markets: Opportunities for Growth12

Figure 1: FX average daily volumes (ADV) by counterparty [2](a) Global(b) Asia Region

6,000

1,200

9%

5,000
18%

3,000

1,000
...

14%

40%

33%
53%

42%

2004

2007

14%

800

53%

51%

600

48%
39%

16%

1,000

13%

4,000

2,000

8%

8%

400

42%

39%

200

16%
15%
25%
60%

24%

35%
27%

34%

60%

52%

2007

2010

57%

56%

0

2010

2013

2016

Reporting dealers

2004

Other Fls

2013

2016

Non-financial customers

Figure 2: FX ADV by product [3](a) Global(b) Asia Region

6,000

6%

5,000
5%

4,000

6%

3,000
2,000
1,000
...

6%

45%
52%

50%
11%
33%

11%

2004

2007

31%

42%
13%

12%
38%

39%

5%

2013

4%

800

48%

4%

600
400

14%

200

33%
2016

Options

5%

1,000

0
2010

5%

1,200

4%
54%
10%
32%
2004

Swaps

Forwards

51%
11%

52%
12%

52%
49%
13%

17%

34%

32%

33%

26%

2007

2010

2013

2016

Spot

(a) Markets and Currencies
Asian FX markets can essentially be divided into two categories. The first is comprised of jurisdictions with large FX
trading volumes, limited local regulatory restrictions, high cross-border activity and G10 currency volumes
The second consists of markets with onshore regulatory barriers, lower volumes, lower cross-border and G10 volumes.
This category includes India, South Korea and, notably, China, which has swiftly emerged as the leader in terms ofvolume despite being a relatively recent entrant.
Other restricted jurisdictions -- with the possible exceptions of Korea and India, both of which are relatively large -- exhibit
limited growth prospects due to a lack of liquidity in their fixed income and FX markets.
In line with the region’s growing global role, Asian currencies have exhibited more global trading patterns with larger
volumes traded offshore to hedge the flow of trade and investment into the region. One notable driver of this trend is[2] BIS, volumes adjusted for local and cross-border inter-dealer double counting[3] BIS, volumes adjusted for local and cross-border inter-dealer double counting© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

Figure 3: Relationship between the volume of G10 pairs and the level of cross-border activity [4]100%Low level of cross-border activity,
Dominated by trade in G10 Pairs

JP

90%

AU

% of Transactions in G10 Currency Pairs

80%

70%

SG

60%
High level of cross-border activity,
Dominated by trade in the G10 Pairs

Low Level of cross-border activity,
Dominatedby tradein non-G10 Pairs
Low Levelof cross-borderactivity,

50%

HK

Dominated by trade in non-G10 currencies
40%
MY
TW

30%

CN
ID

20%

Size
reflects
Volume

PH

10%

TH

IN

High level of cross-border activity,
Dominated by trade in non-G10 Pairs

0%

0%

10%

Largest Market:

20%

30%

40%
50%
60%
% of Cross-Border Transactions

2004 – JP (USD 206 billion)
2016 – SG (USD 511 Billion)

2016

High level of cross-border activity,
Dominated by trade in non-G10 currencies

KR

70%

80%

90%

2004
100%

the FI segment. International institutional investors are hedging their Asia asset
weightings, which have increased as a by-product of extended monetary easing
in developed markets.
The yen continues to dominate regional trade, with volumes climbing 172 percent
since 2004. However, the RMB is the region’s rising star, with volumes surging
over
100 times to US$202 billion since 2004 to make it the most traded non-G10
100%
Low level of cross-border activity,
Dominated by trade in G10 Pairs

JP

90%

AU

Figure 4: Summary of trade in Asian currencies [5]70%% transactions executed between reporting dealers% of Transactions in G10 Currency Pairs

80%100%
90%

SG

80%

60%

50%

70%
60%

High level of cross-border activity,
Dominated by trade in the G10 Pairs

MY

ID

TWD

Size
Size
reflects
reflects
VolumePH
IN

10%

Largest Market:

20%20%

30%
30%

2004 – JPY (USD 403 billion)
2016 – JPY (USD 1,097 Billion)

2016
2016

High level of cross-border activity,
Dominated by trade in non-G10 currencies

KR
10%10%

Volume

TH

40%
50%
60%
40%
50%
60%
% of Cross-Border
Transactions% of currency tradedoffshore

70%
70%

80%
80%

90%
90%

2004
2004
100%
100%

[4] BIS. Includes only transactions with G10 currencies on both sides of the transaction[5] BIS© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

JPY

INR

CN

20%

0% 0%
0% 0%

AUD

TW

20%

10%

SGD

40%
30%

HK

RMB*

HKD

40%50%30%

KRW

Low Level of cross-border activity,
Dominated by trade in non-G10 currencies

13

The Asia Pacific FX Markets: Opportunities for Growth14

regional currency. This growth has been assisted by the emergenceof offshore RMB centres linking international markets with the
Chinese mainland.
The RMB internationalisation process was reinforced in late 2015
when the International Monetary Fund (IMF) designated the RMB
as freely usable, and again in October 2016 when the currency
was included in the IMF’s Special Drawing Rights (SDR) basket.
However, the recent priority for the Chinese authorities has beenstability and the strengthening of existing capital controls. This is
more likely to be a pause in the internationalisation process, rather
than a retrenchment.
Despite its performance, China’s FX market remains
disproportionately small as a percentage of GDP indicating
significant growth potential. With the opening of the China
Interbank Bond market in early 2016 and foreign bondholders now
able to use the onshore FX derivatives market to hedge currency
exposures, the onshore market is expected to expand further.

(b) Market liquidity
The region’s liquid, globally traded currencies are characterised byhigh volumes and tight bid-offer spreads. Currencies where activity
is primarily restricted to onshore markets to prevent speculation are
typified by low volumes, wide spreads and directional trading. This
limits the availability of natural hedges and increases trading costs.
However, there are exceptions - notably the INR and KRW, whichhave active onshore electronic trading and futures markets. Thereis a significant foreign investor presence in the Korean equity and
fixed income markets while onshore Korean financial institutions
can also access the NDF market. Meanwhile, India’s FX market
has developed alongside the growth in its equity market andinternational trade over the last decade.
Among major unrestricted Asian currencies, the Singapore dollar(SGD) is among the more widely traded, particularly by institutional
investors, with 56 percent of volume traded offshore. Hong Kong
dollar (HKD) volumes are comparatively lower with tighter bid-offer
spreads due to the currency’s peg to the US dollar.
As noted RMB volumes have grown strongly since the authorities
began promoting the currency as a means to settle cross-bordertransactions in 2009 and the introduction of the CNH in 2010. Hong
Kong is the pre-eminent CNH centre, accounting for 39 percent
of global turnover despite a falling deposit base on the back ofrecent RMB depreciation. While this sentiment may have adversely
impacted the USD/CNH market, CNH/HKD demand is expected toremain strong as RMB liberalisation continues.

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

Figure 5: Relative spot bid-offer spreads[6] against spot ADV[7] inApril 2016 against the US dollar[8]
16
IDR
14
MYR

Relative Bid-Offer Spread^ (bps)12

Trend of spreads and turnover fromthe same data available in 2007, 2010
and 2013

10

Restricted
Currencies
8

TWD

6

THB

PHP

4

CNY
KRW

2

INR
HKD

0

...

SGD

AUD
JPY

CNH
50

100

150

200

250

300

350

ADV (USD Billions)(c) Non-deliverable forwards
Asia accounts for four of the top five traded NDF currencies globally. In mostcases NDFs have higher volumes than their deliverable onshore equivalents -the result of a wider group of market participants and freer trading dynamics.
The Korean NDF market is the region’s largest with daily volumes of US$30
billion, up 54 percent from 2013. The market has been helped by the factthat the NDFs can be traded both on and offshore, despite KRW being nondeliverable offshore. The KRW’s weighting in the China Foreign Exchange Trade
System (CFETS) RMB index, just behind the USD, euro (EUR) and JPY, alsomeans it is often used as a proxy hedge for CNY exposures.

[6] Relative bid-offer spreads are calculated by dividing the absolute bid-offer spread for the day by the averageexchange rate of the day.
[7] Volumes adjusted for local and cross-border inter-dealer double counting[8] BIS, Bloomberg Terminal© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

Volumes and liquidity in the CNY NDF market, by contrast, have declined with
the introduction of CNH as an offshore deliverable counterpart to CNY, andhistory suggests the CNH and NDF markets will co-exist for a limited period.
That said some market participants continue to turn to the CNY NDF due toconcerns over the depth of liquidity in CNH or because they have not developed
the infrastructure to enable them to physically settle RMB.

15

The Asia Pacific FX Markets: Opportunities for Growth16© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

05
Changing Nature of Market
Participants(a) Reporting dealers
Asian FX markets remain dominated by inter-dealer activity, which accounts for 70 percent[9]of regional activity compared to 52 percent in the UK and only 37 percent in the US.
Volume is also concentrated among dealers in the main trading hubs, particularly Hong Kongand Singapore, where volumes have risen 63 percent and 27 percent respectively since2013 supported by their emergence as CNH centres. Volumes in Japan meanwhile haveslipped marginally due to a decline in onshore spot activity.

Figure 6: Growth of reporting dealer volumes and the level of cross-borderactivity in Asia markets [10]90%2016, HK
2016, AU*80%

2016, KR2016, ID

2016, SG2016, PH70%

2016, TH60%
2016, MY2016, CN

50%
40%

2016, TW

2016, JP

2016, IN

30%
20%

LargestMarket:JP (USD
140 (USD
billion) 140 billion)
LargestMarket:2004 –2004– JP
2016 –2016
SG (USD
368 (USD
billion) 368 billion)
– SG

10%
0%

0%

20%

40%

60%
% of Cross-border Transactions

2016
2004
80%

Size
reflects
Volume100%[9] The percentages are different from those observed in Figure 1 as the volumes here are adjusted for only local inter-dealer double
counting unlike in Figure 1 where the volumes are adjusted for both local and cross-border inter-dealer double counting.
[10] BIS, Volumes adjusted for local inter-dealer double counting only

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entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

Dealer volume as a % of Total FX Turnover in respective country

100%

17

Onshore markets can in turn be divided into two types. The first are highgrowth, large manufacturing-based economies like China, South Korea and India
where over 80 percent of onshore trading volumes are in the local currency. In
these markets, local banks have a strong local client base, but struggle to meetthe needs of international market participants. In addition, the requirements
for underlying commercial trade documentation results in inefficiencies. The
second type is smaller producing economies such as Indonesia, Malaysia,
Thailand and the Philippines, where onshore banks have traditionally sourced
non-local currency liquidity offshore for their clients. Slowing demand has seen
these markets contract.

Figure 7: Reporting dealer ADV by country [11]
400

350

300

SG

250

HK
ADV (USD Billions)

The Asia Pacific FX Markets: Opportunities for Growth

18

International investment and commercial banks account for most of the tradein the hubs, from where they provide their global FI and multinational corporate(MNC) clients with hedging and settlement services. Onshore markets, on theother hand, are led by regional and local banks which are the primary liquidity
providers in their domestic currencies to both global banks and their own
clients.

JP
200

AU
KR
CN

150

IN

100

50

0
2004

2007

2010

2013

2016

Given Asia’s growth and progressive globalisation, it would be reasonable
to expect cross-border transaction volumes to have increased since 2004.
However, slowdowns in economies like Malaysia, Indonesia and Thailand meanthat while reporting dealer volume has risen, cross-border activity has declined.
There has also been a fall in the number of reporting dealers accounting for 75
percent of volume in most markets, with the notable exception of Japan. [12][11] BIS, Volumes adjusted for local inter-dealer double counting only
[12] BIS data indicating the number of reporting dealers which account for 75 percent of turnover© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

This implies volume is being concentrated in the hands of fewer reporting
dealers, which in turn points to a dwindling number of traditional liquidity
providers. Taken with reduced risk appetite and higher costs of risk
warehousing, this means commercial banks with access to a local deposit baseare best positioned to dominate liquidity and grow market share across theregion.
US and European banks may have cut business lines and downsized theirregional presence, but local and regional banks lack the scale and accessto G10 currencies to effectively compete with international institutions for
global business. Banks operating outside their home jurisdictions and in lessliquid convertible currencies may need to reconsider their business models todetermine whether they should act as price takers or possibly on an agency
basis.

(b) Other financial institutions
FIs account for 35 percent of the total FX volume traded in the region, with their
total trading volume more than doubling to US$421 billion between 2013 to2016. This growth has been driven by an increase in volumes of both forwards
traded primarily by institutional investors looking to hedge portfolios as more
capital flows to the region, and swaps used by local and regional banks tomanage volatility.

Figure 8: Growth of other FI volumes and the level of cross-borderactivity in Asia markets [13]60%LargestMarket: 2004
2004––JP
JP (USD(USD 4747billion)
LargestMarket:billion)2016(USD124
124
billion)2016 –– SG
SG (USDbillion)% of Total FX Turnover in respective Country

50%

Size
reflects
Volume2016
2004

2016, CN40%

2016, IN

30%

2016, JP

2016, TW

2016, SG2016, HK

2016, MY2016, KR20%

2016, PH2016, TH2016, AU*10%
2016, ID
0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

% of Cross-Border Transactions

Historically, Japan has had the highest volume of forwards traded by FIs in theregion primarily due to a large trust bank presence. However, this mantle has
passed to Singapore, where the volume of forwards traded by FIs has tripled to
US$ 60 billion between 2013 and 2016, or 52 percent of the regional total. This
reflects Singapore’s rising significance as a global trading centre.

[13] BIS. Volumes adjusted for local inter-dealer double counting only
© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth0%19The Asia Pacific FX Markets: Opportunities for Growth20

Restricted currency jurisdictions, with the exception of India and China, posted
falls in volumes traded by financial institutions between 2013 and 2016 due todepreciating local currencies and declining net investments.
Regional swap volumes have exhibited similar patterns to forwards.In Japan, FI
volume has moved onshore due to a change in investor behaviour influenced by
the BoJ’s QE program. In 2010, 80 percent of the FI volume was traded crossborder compared to 33 percent in 2016.
Hong Kong and Singapore accounted for over half the region’s FI swap volume
with a turnover of US$90 billion in 2016, up from US$59 billion in 2013.
In China, currency and access restrictions mean the market is illiquid in all but
the shortest tenors. FI activity is thus dominated by spot and short-dated swaps
traded by local banks providing settlement services or managing liquidity.

Figure 9: FX ADV with hedge funds by geography [14]
4%

600

1%

ADV (USD Billions)

500

4%

400

4%
300

SG, HK & JP

94%

200

Rest

UK and US
92%

100

0
2013

2016

[14] BIS© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

Hedge funds are becoming a growing presence in Asia’s key FX hubs from avery low base. Total daily activity from this market segment rose from US$6
billion in 2013 to US$16 billion last year -- with US$11 billion originating in
Singapore where a number of funds have set up offices. However, this growth
should be kept in perspective as hedge fund turnover still only accounts forunder 2 percent of the regional total.
NBLPs will continue to play a key role in liquid spot currencies and will growtheir offering in more liquid local currencies and NDFs. However, their businessmodels will evolve and some may become niche players in certain products,
asset classes or markets in response to buy-side demand.

(c) Non-financial customers
FX volumes traded by non-financial customers have fallen 37 percent since 2013
to US$102 billion in 2016 on the back of a decline in both swap and spot trades.
This is primarily the result of a slowdown in trade, particularly in commodity
based export markets.
Over the past two decades there has been a trend for multinationals toestablish regional treasury centres to improve risk management and enable
the internal netting of positions to reduce hedging and transaction costs, with
Singapore and Hong Kong the preferred locations.

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

Retail activity has also declined since 2013 due to several factors that include
the appreciation of the US dollar, tighter credit and margin requirements, andincreased regulation. In Japan, historically the most active and sophisticatedretail market globally, reduced market volatility and the BOJ’s QE program in
2013-14 has led to a fall in spot trading by retail traders who tend to thrive inperiods of uncertainty.

21

The Asia Pacific FX Markets: Opportunities for Growth22© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

06
Evolution of Execution
Methods

The proportion of electronic execution in Asia is similar to that seen elsewhere given thehigh proportion, 65 percent, of regional FX turnover conducted in G10 pairs. While G10 spot
can be traded electronically in all jurisdictions, Hong Kong, Singapore and Japan together
accounted for 86 percent of the regional volume in 2016. For local currencies, restrictions
prevent the electronic execution in some markets, including Indonesia, Taiwan and thePhilippines.
Other markets have their own well-established electronic platforms for local currencyinterbank trading. These include:
China, where interbank trading of USD/CNY on CFETS is mandatory•

Korea, where electronic execution of USD/KRW can only be undertaken on two statesponsored platforms but a lack of application program interface (API) connectivity
hampers price transparency•

India, where the central bank has encouraged competition between platform providers,
resulting in an active and liquid electronic USD/INR market

Levels of electronic execution have recently plateaued, but are expected to rise further in
response to improved algo trading as well as requirements for greater price transparency
and best execution. This will present opportunities to enhance price discovery and efficiency
in onshore markets that could benefit local economies.
Globally, banks have focused aggressively on developing their SDPs. They are enhancing
product offerings by improving interfaces, execution algos and analytics, and on-boarding
more clients in an effort to drive straight through processing (STP) and reduce costs. This© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth•23

The Asia Pacific FX Markets: Opportunities for Growth

Figure 10: Method of execution - 2016 [15](a) Global

24

Electronic
55%(b) Asia

Voice
45%

Electronic
48%

Voice
52%

focus is likely to continue as banks look to migrate additional order execution toelectronic platforms to avoid trader discretion and possible conflicts of interest.
Activity on primary venues has decreased as large international dealers withfunctionally rich platforms have moved to internalise more client flows. MDPs
are also gaining popularity by providing access to multiple counterparties,
helping investors satisfy best execution requirements of their clients.
Secondary FX venues tend to be managed out of London or New York and so
may not have had the same focus on attracting Asian market participants. This
together with lower levels of multi-dealer execution compared to London or
New York suggests that the number of venues that are active and showing
liquidity is lower during Asian trading hours.
High-frequency traders and other NBLPs are more active in markets whereliquidity is deeper and they have access to secondary venues to ‘make’ and[15] BIS, central bank websites, KPMG calculations© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

‘take’ on. Consequently, they tend to trade major currencies outside the lessliquid Asian trading hours.
The proportion of forwards executed electronically in Asia has lagged global
levels as NDFs have traditionally been voice traded. However, both banks and
NBLPs have made significant progress and investment in their capabilities toquote NDFs on their platforms, and levels of electronic execution are likely togrow as a result.

(a) Spot
Globally electronic spot trading levels are likely to have been skewed by the
top eFX banks which have actively marketed their SDPs while pursuing market
share with algos. In Asia, by contrast, SDPs have suffered as regional banks
have moved away and Asian domiciled retail aggregators have looked tointernalise more client flows.
MDP volumes have also grown in Asia as platforms improve their productofferings and attract new clients. Changing regulation and being able to offer
one perceived solution for best execution may see more volumes move on to
MDPs worldwide.
The primary trading venues remain popular with a number of banks in Asia. In
the less liquid and more volatile conditions that can be experienced in the Asia
time zone flows tend to gravitate towards the primary venues. In addition, bothvenues have made a strong push to capture CNH volume, and now host almost
all the CLOB/interbank CNH trade.

(b) Forwards, Swaps and Options
Primary venues dominate the electronic NDF market and, with Asian NDFs
among the most liquid with volumes highest during Asia hours, overall volumes
have risen. MDPs have seen some success in providing liquidity for currencies
such as KRW and INR, but recycled liquidity continues to be an issue.

The Asia Pacific FX Markets: Opportunities for Growth© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

25

The Asia Pacific FX Markets: Opportunities for Growth26

For swaps, as with spot, non-bank market participants in Asia are moving to
MDPs in order to access better liquidity and demonstrate best execution. Banks
are also focusing more on providing liquidity to MDPs rather than the highnumber of direct APIs to which they have historically provided liquidity.
Primary platforms have increased swap market share over the last three years.
They have recently acted to on-board additional banks as liquidity providers
taking volume from other platforms and generating new volume frompreviously inactive market participants.
Given the nature of the product, voice continues to dominate the options trade,particularly for larger deal sizes. With the overall fall in option volumes acrossthe region, electronic execution volumes have also fallen, hit by declining
demand for vanilla and structured options from SMEs and other Northeast
Asian corporates due to regulatory changes and CNH depreciation. This has
directly impacted SDP volume which had been robust historically due to a highconcentration of regional and private banks accessing liquidity for clients insmall ticket sizes.
The market share of options traded on MDPs has historically been low as they
were either not available or not liquid on these venues due to a lack of liquidity
providers. However, local banks have become more active in trading vanilla
options on MDPs, making pricing more competitive and challenging the positionof SDPs.

(c) Emerging technologies
In response to the increased capital required to operate across multiple
jurisdictions, banks will need to innovate to reduce costs, and leverage evolving
utilities. Banks actively developing and marketing their platforms will be able
to take advantage of big data analytics generated from client behaviour andmachine learning to drive greater internalisation, efficiencies and insights.
Distributed ledger technology (DLT) has the potential to deliver cost savings
across financial markets. The activities most likely to be impacted are those thatare costly, complex and involve high levels of operational risk, especially in posttrade transaction processing where there has been minimal recent technology
investment -- i.e. confirmation and trade settlement. This will involve smaller
proof of concept implementations over the next five years and wider adoption
over the following decade.
However, new technologies and upgrades may require investments that will not
be feasible for all institutions, meaning some may need to adjust their businessmodels or cultivate alliances to maintain their competitiveness. With market
participants facing the same regulatory shifts and cost pressures, there is an
attractive opportunity for banks to form partnerships to develop utility platforms
and/or better leverage third-party systems.

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

27

The Asia Pacific FX Markets: Opportunities for Growth28© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

07
Opportunities for Regulatory
Equivalence

Reflecting the varied levels of development of the region’s economies and markets, Asia’s
regulatory environment is diverse and complex. This presents significant challenges to bothglobal and regional banks and MNCs operating across the region. This environment is also
being shaped by global forces, which include:
The G20 regulatory agenda: Global initiatives that have been implemented with local
variations add complexity and cost to the design and build of technological solutions tofacilitate compliance. International banks face additional challenges when home and hostcountry requirements differ.
Anti-Money Laundering (AML) and Know Your Customer (KYC): Requirements
frequently vary from country to country adding to the administrative burden of entities
operating across multiple jurisdictions, and leading to inefficiencies in the client on-boarding
process and impacting service quality.

impact trading levels and liquidity of emerging market currencies and options.
Questions also surround the potential impact of emerging and future regulation.The recently
launched GCC, designed to provide common guidelines to promote the integrity and proper
operation of the FX market, the EU’s MiFID II, which is due to take effect in early 2018, andthe BASEL prudential regulation will all have major implications for trading in Asia.

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for GrowthBasel capital requirements: Inconsistencies in the implementation of these requirements
could create a non-level playing field in some markets for non-locally incorporated entities
that may be governed by a different interpretation at group level. In particular, there areuncertainties about how the Basel Committee’s FRTB will be interpreted, and how it will

29

The Asia Pacific FX Markets: Opportunities for Growth30

Table 1. Summary of the key regulations applying to the FX markets in the region [16]IMPACT OF G20 OTC DERIVATIVES REFORM ON FXPRODUCTSCAPITAL

Basel 2.5

Basel III

Australia

G20 Trade
Reporting
Initiatives

FRTB

CentralClearing

Platform
Trading

MarginCURRENCY
RESTRICTIONSConvertible

Deliverable
Offshore

Other Local Regulations
Local onshore
systemrequired?

Central BankTransaction
ReportingSupporting
documents
required to be
filed

Data privacy/
secrecy
impactingreporting

DelayedJapan
Singapore

DelayedVoluntaryHong Kong

DelayedVoluntary

China

Voluntary

India
Korea
TaiwanIndonesia
Potentially
DelayedMalaysia
ThailandPhilippines

Capital & impact of G20 reforms

Currency restrictions

Adoption is not / has not been planned

Restricted

Deliverable

Adoption is planned / in progress

Partially Convertible

Not Deliverable

Rules in force

Fully Convertible

Other local regulations
Requirement in place

At the local level, there are marked differences among jurisdictions in areas
such as:Data privacy and secrecy: Inconsistent requirements complicate server
deployments and compliance with mandatory over the counter (OTC)
derivatives reporting obligations. They present challenges for cross-borderbooking arrangements and centralised management of client accounts andpositions.
Use of electronic trading platforms: Regulations may be unclear or preventthe use of such platforms altogether. This lack of consistency has hampered theadoption of electronic trading in some jurisdictions.
Outsourcing and use of offshore servers: Requirements to place systems
onshore and to register software with the authorities adds to the cost andcomplexity of maintaining and securing multi-jurisdiction platforms and the
security of source code.
Currency controls: Designed to provide central banks with currency oversight,
limit capital outflows and/or limit market access, controls can include
requirements for transaction-based reporting to central banks and to present
underlying commercial trade documents to support FX transactions. These
impact operational efficiencies and opportunities for electronic execution.
The following sections examine in more detail how major global regulatory
initiatives will impact the Asian FX market.

[16] BIS, EIU, FSB, IMF, central bank websites, KPMG research, various currency guides© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

(a) Margin requirements
Recognising that international inconsistencies could lead to regulatory
arbitrage, the Basel Committee on Banking Supervision (BCBS) andInternational Organization of Securities Commissions (IOSCO) issued aframework to establish minimum standards for margin requirements for noncentrally cleared OTC derivatives in 2015. Nonetheless, national regulators haveadapted the framework to account for local market differences, resulting in a
number of jurisdiction-specific variations that span areas such as:•

The scope of covered entities•

Treatment of physically settled FX forwards and swaps and reliance on
BCBS Supervisory Guidance, resulting in interpretational and enforcement
differences

Table 2. Treatment of deliverable FX forwards and swaps and exchange of margin with non-netting
jurisdictions
Treatment of VM for
Collateral Settlement
Deliverable FX Forwards &Timeliness
Swaps1EU

Subject to the margin
regime*The Fed has formally
US Prudential Rules adopted the BCBS
Supervisory guidanceNon-Netting Jurisdictions
Treatment of IM

Treatment of VM

Collected on or before T+2

Exempt where <2.5%
ratio**

Exempt where <2.5%
ratio**

Collected on or before T+1

Collect only

Collect gross; postnet

NA

Collected on or before T+1

Collect gross; post net

Collect gross; post
net

Australia

Subject to the BCBS
Supervisory Guidance2 (notexplicit)

Conducted promptly

ExemptExemptJapan

Subject to the BCBS
Supervisory Guidance2

Without delay

ExemptExemptSingapore

Subject to the BCBS
Supervisory Guidance2

No later than T+3

ExemptExemptHong Kong

Subject to the BCBS
Supervisory Guidance2

No later than T+2 after being
calledExemptExemptIndia

Subject to the margin
regime in draft rules

Draft rules indicate on aregular basis

No guidance in draft
rules

No guidance in draft
rules

Korea

VM can be exchanged if it
is considered necessary to
manage risk

No later than T+3

No exchange – butrisks should beproperly managed

1 Under the BCBS/IOSCO Margin requirements for non-centrally cleared derivatives deliverable swaps and forwards are exempt from IM http://www.bis.org/bcbs/publ/d317.htm
2 BCBS Supervisory guidance for managing risks associated with the settlement of foreign exchange transactions http://www.bis.org/publ/bcbs241.htm* Delay granted for VM on FX forwards until earlier of 31 December 2018 or application of MiFID2 amendments.
** So long as certain conditions met ratio of notional to total notional of all non-centrally cleared derivative at group level© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

US CFTC Rules

31

The Asia Pacific FX Markets: Opportunities for Growth

32•

Treatment of exposures with counterparties in non-netting jurisdictions,which may limit the ability of some participants to trade in thesejurisdictions, thereby impacting liquidity and transaction costs•

Timing of collateral settlement, which may create additional funding costs
for Asian entities trading with US counterparties

While some of these differences may be resolved by the substitutedcompliance arrangements adopted by jurisdictions, it is still unclear how
these will be applied as substituted compliance assessments have only been
completed by Australia and Japan.
Some jurisdictions in Asia have not implemented margin requirements. This
creates challenges for participants incorporated in those jurisdictions that are
still expected to comply with margin regulations in other countries as a result ofcross-border transactions.
European and US banks operating in the region that are subject to homecountry requirements due to their booking models are also potentially placed at
a commercial disadvantage. This could result in a bifurcation of the market andhigher transaction costs that will eventually be passed on to clients.

(b) OTC trade reporting
OTC derivatives trade reporting requirements also vary depending on
jurisdictions, creating significant complications particularly for internationalbanks with trading activities in multiple Asian locations.
Transactions that are reportable in one jurisdiction may not be reportable inanother due to differences in:•

Definitions of OTC contracts•

Rules for reporting of packaged transactions•

Dual or single-sided reporting obligations•

Definitions of lifecycle events and their reporting treatment•

Reporting timelines

Australia, Hong Kong and Singapore add an additional layer of complexity byimposing ‘nexus’ reporting obligations, meaning trades booked in an affiliate
can be subject to reporting requirements.
Another issue is the unique transaction identifiers (UTI) that most authorities
require trades to carry when reported. There are no harmonised requirementson the formulation or use of UTIs, and while the Committee on Payments andMarket Infrastructures (CPMI) and IOSCO have published technical guidance forregulators addressing harmonisation, concerns remain as to how this will workin practice.

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

Table 3. OTC trade reporting requirements in the region
G20 or
Local

Australia

Japan

G20

G20

Hong Kong G20

Singapore

China

G20

TimingWithinT+1

WithinT+1
WeeklyWithinT+2

Within
T+2

G20

India

Local

Korea

Local

TaiwanLocal

Indonesia

Local

Hourly,EoD.
T+1

Single orDual-Sided

PublicDisclosure

Direct or Via
Agent

Content

Nexus

Dual

Trade
Repository

WeeklyVia agent

Trade data
(61 fields)

Reportable if
acceptance of theoffer to enter into thecontract is received inAustralia (exemptions
apply

Dual

Trade
Repository,
Regulator

Quarterly

Direct of via
agent

Trade data

Not specified

Under
Direct or via
consideration agent

Trade data
(100+
fields)Reportable if decision
to trade made in Hong
Kong or parameters
for electronic platform,
are set in Hong Kong

Dual

Trade
Repository

Dual

Trade
Repository

SingleCFETS, China
Securities
Daily &
Internet
Monthly
SystemDual – interdealer; Single - CCIL
All other

Daily
T+1

RecipientSingleUnder
Via agentconsideration

Trade data
(36 fields)

DirectReportable person
who conducts
activities relating to
execution is located in
Singapore. Trades onelectronic platforms
may be captured.
Not specified

Trade data
(13 fields)

Real-time

Via agent

KRX, BoK

Quarterly

DirectNot specified

TaipeiExchange

Regularly1

DirectNot specified

Bank
Indonesia

No public
disclosure

DirectNot specified

Malaysia

N/A (Consultation paper issued in November 2013)

ThailandN/A

Philippines

N/A

Not specified

1 Based on Taipei Exchange’s PFMI, Information Disclosure Report. FSB, ASIC, DTCC, HKEx, CCIL, SHCH, OTC Clear, SGX, TPEx, Various Regulator Websites(c) Central clearing of derivative transactions

A 2013 GFXD, study based on historical data of deliverable OTC FX options
traded globally in 17 currencies and exercised between January 2007 andDecember 2011, estimated CCPs must demonstrate they are capable of© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

Clearing of deliverable FX contracts in Asia is only available in India and China,
where the clearing of USD/local currency contracts on local central counterparty
clearing houses (CCPs) is underwritten by the central bank. This is a result of
BIS/IOSCO principles introduced in 2012 that state CCPs must understand thesize and nature of same-day liquidity risk to guarantee full and timely sentiment.

33

The Asia Pacific FX Markets: Opportunities for Growth

managing same day liquidity shortfalls as high as US$161 billion - the result of
the failure of two clearing firms representing the largest combined settlement
obligations in each currency on any given day.
Rules on the recognition of equivalent regulatory regimes can also impact thestatus of CCPs, potentially limiting the ability of some market participants toclear in some jurisdictions. European regulation, for example, prevents ‘covered
persons’ from participating in third-country CCPs that have not received
recognition from the European Securities and Markets Authority.

34

Table 4. Summary of the clearing environment for FX products across the region [17]Local CCP

Mandatory
Clearing of
FX Products

FX Products offered forclearing on local CCP

QCCP Status
QCCP Statusunder CFTC
under EMIR
Regulations
DCO Exempt- ASX Clear(Futures) only

Availabilityof Client
Clearing

Australia

ASX Clear, ASX Clear
None(Futures)

None

Recognised

China

Shanghai Clearing
House (SHCH)

None

Spot in the following RMB
pairs: USD, EUR, AUD,
HKD, JPY, GBP; USD/RMB
forwards & swaps

Not
Recognised

No action
relief1

Available

Hong KongOTC Clearing Hong
Kong Limited (OTC
Clear)None

USD NDFs referencing
RMB, TWD, KRW & INR

Recognised

DCO Exempt

Available

India

Clearing Corporationof India Limited
FX Forwards(CCIL)

Spot and forwards
referencing USD/INR

Recognised

Not
Registered /ExemptN/A

Japan

Japan Securities
None
Clearing Corp (JSCC)

None

Recognised

DCO Exempt

N/A

Korea

Korea Exchange
(KRX)

None

None

Recognised

DCO Exempt

N/A

Singapore

SGX Derivatives
Clearing Limited

None

USD NDFs referencing
RMB, IDR, INR, KRW, MYR, Recognised
PHP, TWD

DCO
Registered

Available

N/A

1 No action relief extended until the earlier of 30 November 2017 or the date on which the CFTC exempts the SHCH.

In the US, the Dodd Frank Act requires third-country CCPs to apply forregistration or exemption from being recognised as a derivative clearingorganisation (DCO). Failure to do so means that US banks and overseas
branches (but not overseas incorporated subsidiaries) using these CCPs will
be in breach of the Commodity Exchange Act -- though US authorities havedemonstrated a willingness to grant temporarily relief from these requirements
as they did recently for the Shanghai Clearing House (SHCH).
Volumes of cleared FX products have generally been low because (i) clearing
is not mandatory, (ii) there is no solution to clear physically settled FX productsand (iii) where voluntary clearing does take place the benefits from offsetting
margin obligations have not been optimal. The voluntary clearing of NDFs on
the London Clearing House’s ForexClear (LCH) increased five times between
August 2016 and February 2017 after the margin requirements for non-centrally
cleared OTC derivatives came into effect.
[17] ESMA, CFTC, FSB, CCIL, SHCH, OTC Clear, SGX, LCH Clearnet Ltd© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

A similar pattern seems unlikely in Asia. Of the four local CCPs clearing FX
products only the Hong Kong Exchange (HKEx) and Singapore Exchange (SGX)
offer NDF clearing. While these provide local market participants with an ability
to clear in the same jurisdiction and time zone, international banks favour
voluntarily clearing Asian currency NDFs on the LCH due to the liquidity andmargin benefits of clearing both sides of a trade on the same platform.

Figure 11: Monthly volume of NDFs submitted for clearing at theLCH [18]900

Monthly Notional Value (USD Billion)

800
700
600
500
400
300
200
100
Mar-15Jun-15

Sep-15

Dec-15Mar-16Jun-16

Sep-16

Dec-16(d) Prudential requirements
The Basel Committee’s FRTB is an ambitious framework that will change
the way banks assess risk and could potentially have significant implications
for the regional FX market. Under the current version of the framework allbanks will have to adopt the revised Standardised Approach (SA) which will
be used to set a floor on the capital held by banks able to use the Internal
Model Approach (IMA). This will require significant investment because both
approaches calculate risk differently to the way that banks currently undertake
risk management for internal purposes. In addition, the risk weightings appliedin the SA and the liquidity horizons applied in the IMA disadvantage non-liquidcurrencies and options.

The most recent study showed that the SA generates an overall capitalrequirement of up to 2.5 times current levels compared to 1.6 times for the
IMA. For FX risk, the SA capital requirements were 5.3 times higher than the
IMA.
[18] LCH; volumes cumulated up to 20th March 2017

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entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

Banks that satisfy the P&L attribution test will gain approval to use IMA internalrisk models. However, the published results of banks undertaking the test show
a particularly high rate of failure which forces banks to fall back on the SA.

35

The Asia Pacific FX Markets: Opportunities for Growth36

The regional impact of FRTB will depend to a large extent on how national
regulators interpret the rules -- to date Australia, Singapore and Hong Kong
have all officially delayed implementation of the framework. The weightings
applied under both IMA and SA may force banks to reconsider trading non-liquidcurrencies and options, potentially impacting liquidity and increasing execution
costs. There are also concerns that international banks booking emerging
market transactions in jurisdictions implementing FRTB could be disadvantaged
due to the higher capital levels required.

(e) MiFID II
With an effective date of 3 January, 2018, MiFID II and MiFIR are aimed at
improving transparency, enhancing investor protection, reducing risk in financial
markets and preventing market abuses.
As the directive is subject to the interpretation of European national regulators
before being adopted into local regulations, there is a risk of multiple
approaches being required to meet the same requirements. For example, FX
spot transactions, security conversions and transactions entered into as ameans of payment are not considered financial instruments. However, there isno clear guidance on what constitutes a means of payment, meaning a shortdated forward could be exempt in one jurisdiction but subject to regulation inanother.
There is also considerable uncertainty over the extraterritorial reach of MiFID II
and how it may impact Asian entities, particularly given the different execution
and booking models used for FX that could result in different outcomes.
The immediate concerns facing Asian entities trading with European
counterparties include:•

The obligation to provide personal data subject to local data privacy
legislation to EU trading venues or entities so transaction reporting
obligations are met•

The requirement for all counterparties trading with a European entity tohave a registered Legal Entity Identifier (LEI), which is not mandatory in Asiaand therefore not widespread•

The extent of account repapering required as entities trading with European
counterparties will in many cases have to sign revised agreements(f) Global Code of Conduct (GCC)
Developed by the BIS Foreign Exchange Working Group (FXWG) to promote theintegrity and efficiency of the wholesale FX market, the GCC was launched in
May 2017. It is expected to apply to all FX market participants, including sellside and buy-side, NBLPs, trading venue operators, and other entities providing
brokerage, execution and settlement services. The GCC is a broad initiative thatcovers areas such as information sharing, governance, execution (including© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

Table 5: Summary of the impact of the global code
Actions required•
1st Line of Defence

Strengthening
the Control
Environment

Training

Surveillance

Orders••Strengthening Front Office Control functions, governance structures and policies
and procedures.
Aligning incentives and reward structures to conduct metrics
Improved reporting, co-ordination and escalation

•
•
•
•

Conduct including use of confidential data
Provision of market colour
Conflicts of interest associated with execution discretion including pre-hedging
External communication•

Improved surveillance and monitoring technology to cover chat rooms, email andvoice communication channels
Ability to cross reference between channels to link conversations
Ability to link transactional activity with surveillance

•
•
•
•
•

Business Model

Physical segregation of the Order taking desk
Higher percentage of orders routed through electronic channels and reduced
trader discretion
Best execution obligations•••

Clarity of role
Greater transparency in pricing models and mark-ups
Clear communication of execution practices including execution priority, risk
management and pre-hedging

Agency execution••

Reduction in risk taking activity
Execution on a fee basis

Electronic execution•••

Improved functionality and client interface
Improved controls over algo development, deployment and testing
Enhanced analytics

Client disclosuresrequiring market participants to be clear about the capacities in which they act),
and risk management.
For Asian entities, this will create a clear need to review business models
and refine the front office control environment. This will require investment inpeople (training and control functions), processes (policies and procedures) andsystems (monitoring and surveillance, electronic execution platforms).
The GCC does not impose legal or regulatory obligations. However, it
does include a Statement of Commitment for market participants to sign
demonstrating their commitment to conducting their FX business in accordancewith the Code, and to confirm they have taken appropriate steps to align theiractivity to its principles.

Central bank members of the FXWG have indicated they will demonstrate
their commitment to the Code by adopting the Statement, and they will expect
their regular FX trading counterparties to adhere to its principles. In addition,
a number of Foreign Exchange Committees have decided to publicly linkmembership with adherence to the Code using the Statement.

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entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

Authorities and industry bodies are currently employing a number of different
approaches to ensure adoption of the GCC. The UK’s Financial Conduct
Authority and Prudential Regulation Authority have stated that they could use
the Senior Managers Regime to enforce compliance, while the Association
Cambiste Internationale has made adherence a prerequisite for membership.

37

The Asia Pacific FX Markets: Opportunities for Growth38(g) KYC and market infrastructure opportunities
KYC requirements vary widely across the region, making client on-boarding
processes costly and time-consuming, which adversely affects service tocustomers. These processes are also often duplicated across firms negatively
impacting customers that often have to provide the same information tonumerous counterparties. A 2016 survey by Thomson Reuters found investmentbanks in Asia spend an average of US$100 million on customer due diligenceannually, and regional and retail banks an average of US$30 million.
As noted by the BIS Committee on Payments and Market Infrastructure (CPMI),a standard KYC utility could go a significant way towards addressing theseissues by providing a single template or gateway for KYC checks, reducing
resubmissions of identical information and enhancing accuracy, consistency
and efficiency.
A number of utilities have already emerged that cover jurisdictions in the region,
including Bloomberg Entity Exchange, the SWIFT KYC registry, Thomson
Reuters Accelus and Markit/Genpact. However, in many cases they are still inthe development stage and lack critical mass.
Adoption is likely to remain limited until several factors are addressed, including:•

The lack of a regulatory framework permitting reliance on the informationand documentation utilities provide•

Differences in documentation requirements between jurisdictions•

Interoperability limitations•

Varying cybersecurity and data privacy requirements•

Material outsourcing and data secrecy constraints

While these gaps present difficulties for banks, they also point to opportunities
to develop utility platforms that address these shortfalls and facilitate a more
standardised approach to KYC procedures.

© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

39

The Asia Pacific FX Markets: Opportunities for Growth40© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

08
APPENDICES(a) Glossary
Regulatory Bodies & Other Institutions/Corporations
Association Cambiste Internationale
Australian Securities and Investments Commission
Australian Securities Exchange
Basel Committee on Banking Supervision
Bank Indonesia
Bank of International Settlements
Bank Negara Malaysia
Bank of Japan
Bank of Korea
The Clearing Corporation of India Ltd.
Commodity Futures Trading Commission
European Securities and Markets Authority
Foreign Exchange Dealers’ Association of India
Financial Conduct Authority
Financial Stability Board
Financial Times
Global Financial Markets Association
Hong Kong Exchange
Hong Kong Monetary Authority
International Monetary FundJapan Securities Clearing Corporation
Korea Money Brokerage Corporation
Korea Exchange
Monetary Authority of Singapore© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

ACI
ASIC
ASX
BCBS
BI
BIS
BNM
BoJ
BoK
CCIL
CFTC
ESMA
FEDAI
FCA
FSB
FT
GFMA
HKEx
HKMA
IMF
JSCC
KMBC
KRX
MAS

41

The Asia Pacific FX Markets: Opportunities for Growth

42

PBOC
RBI
SFC
SGX
SHCH
SMBS
TPEx
WTO

The People’s Bank of China
Reserve Bank of India
Securities and Futures Commission
Singapore Exchange
Shanghai Clearing House
Seoul Money Brokerage Services
Taipei Exchange
World Trade Organisation

Other Abbreviations
ADV
API
CCR
CDD
CFETS
CCP
DCO
DF
DLT
ECN
EMIR
FI
FDI
FRTB
FXWG
GCC
HFT
HIBOR
IM
IMA
KYC
LCH
LEI
MDP
MiFID
MiFIR
MNC
MTF
NBLP
NDF
NMRF
OTC
OTF
PTF
QCCP
QE
QIS

Average Daily Turnover/Volume		
Application Programming Interface		
Counterparty Credit Risk		
Customer Due Diligence		
China Foreign Exchange Trade System		Central Counterparty Clearing House		
Derivative Clearing Organisation		
Deliverable Forwards		
Distributed Ledger Technology		
Electronic Communications Network		
European Market Infrastructure Regulation		
Financial Institutions		Foreign Direct Investments		
Fundamental Review of the Trading Book		Foreign Exchange Working Group		Global FX Code of Conduct		
High Frequency Trading		
Hong Kong Interbank Offer Rate		
Initial Margin		Internal Models Approach		Know Your Customer		London Clearing House		Legal Entity Identifier		
Multi Dealer Platforms		
Markets in Financial Instruments Regulation		
Markets in Financial Instruments Directive		
Multinational Corporates		
Multilateral Trading Facility		
Non Bank Liquidity Providers		
Non Deliverable Forwards		
Non-Modelable Risk Factors		
Over the Counter		
Organized Trading Facility		Proprietary Trading Firms		
Qualified Central Counterparty		Quantitative Easing
Quantitative Impact Study© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

RM
RTGS
SA
SDP
SDR
SME
STP
TCA
UTI
VM

Regulated Market
Real Time Gross Settlement
Standardised Approach
Single Dealer Platforms
Special Drawing Rights
Small & Medium Enterprises
Straight Through Processing
Total Cost Analysis
Unique Transaction Identifier
Variation Margin(b) References
1.

“Triennial Central Bank Survey of foreign exchange and OTC derivatives
markets”, 2004, 2007, 2010, 2013, 2016, Bank of International Settlements –Retrieved from http://www.bis.org/publ/rpfx16.htm

2. Rime, D., & Schrimpf, A. (2013). The anatomy of the global FX market
through the lens of the 2013 Triennial Survey.
3. Moore, M., Schrimpf, A., & Sushko, V. (2016). Downsized FX markets:
causes and implications.
4. McCauley, R. N., & Shu, C. (2016). Non-deliverable forwards: impact of
currency internationalisation and derivatives reform.
5. McCauley, R. N., Shu, C., & Ma, G. (2014). Non-deliverable forwards: 2013
and beyond.
6. Upper, C., & Valli, M. (2016). Emerging derivatives markets?
7.

International Monetary Fund, “Annual Report on Exchange Arrangements
and Exchange Restrictions” (Washington, October 2016).

8. Bank of International Settlements, Exchange-traded derivatives statistics(2017) - Retrieved from http://www.bis.org/statistics/extderiv.htm
9. Bank of International Settlements, Debt Securities Statistics (2017) –Retrieved from http://www.bis.org/statistics/secstats.htm
10. World Bank. (2016). World databank. [Custom cross-tabulation of data] –Retrieved from http://data.worldbank.org/

12. The Economist Intelligence Unit, Forex Regulation Reports, (2016, 2017),
13. Financial Stability Board, “OTC Derivatives Market Reforms: Eleventh
Progress Report on Implementation” (August 2016), Retrieved from http://
www.fsb.org/wp-content/uploads/OTC-Derivatives-Market-ReformsEleventh-Progress-Report.pdf© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

11. World Trade Organisation. (2016), Trade Profiles. [Custom crosstabulation of data] – Retrieved from http://stat.wto.org/CountryProfile/
WSDBCountryPFHome.aspx?Language=E

43

The Asia Pacific FX Markets: Opportunities for Growth

44

14. “RMB Tracker Monthly reporting and statistics on Renminbi (RMB)
progress towards becoming an international currency”, (29 March 2017),
SWIFT, Retrieved from https://www.swift.com/our-solutions/complianceand-shared-services/business-intelligence/renminbi/rmb-tracker/documentcentre
15. “Asia Bond Monitor – March 2017”, Philippines, Asian Development Bank,© ADB, Retrieved from - https://asianbondsonline.adb.org/documents/
abm_mar_2017.pdf, License - CC BY 3.0 IGO
16. “Asia Bond Monitor – November 2016”, Philippines, Asian Development
Bank, © ADB, Retrieved from - https://asianbondsonline.adb.org/
documents/abm_nov_2016.pdf, License - CC BY 3.0 IGO
17. National Securities Depository Ltd, FPI Monitor, FPI/FII AUC Country-wise(top 10 countries) data (Dec 2016) Retrieved from https://www.fpi.nsdl.
co.in/web/Reports/ReportDetail.aspx?RepID=74
18. Financial Stability Board, “OTC Derivatives Market Reforms: Twelfth
Progress Report on Implementation” (June 2017), Retrieved from http://
www.fsb.org/2017/06/otc-derivatives-market-reforms-twelfth-progressreport-on-implementation/

Relevant Country Regulatory, Exchanges and Central Bank related
sources
1.

Australia – Reserve Bank of Australia (RBA), Australian Securities andInvestments Commission ASIC, Australian Prudential Regulation Authority(APRA),© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

2. China – The People’s Bank of China (PBOC), State Administration of Foreign
Exchange (SAFE), Shanghai Clearing House (SHCH)
3. Hong Kong – Hong Kong Monetary Authority (HKMA), Hong Kong Exchange(HKEx)
4. India – Reserve Bank of India (RBI), The Clearing Corporation of India (CCIL),
5. Indonesia – Bank Indonesia,
6. Japan – Bank of Japan (BoJ),
7.

Korea – Bank of Korea (BoK), Korea Exchange (KRX)

8. Malaysia – Bank Negara Malaysia, Bursa Malaysia
9. Philippines - The Bangko Sentral ng Pilipinas (BSP)
10. Singapore – Monetary Authority of Singapore (MAS), Singapore Exchange(SGX)

12. Thailand – Bank of Thailand (BoT),
13. Other Sources – European Securities and Markets Authority (ESMA),
Commodity Futures Trading Commission (CFTC), Bank of England, Federal
Reserve Bank of New York, Norges Bank, Bank of Canada, The Central Bankof the Russian Federation© 2017 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. Printed in Hong Kong.

The Asia Pacific FX Markets: Opportunities for Growth

11. Taiwan – Central Bank of the Republic of China (Taiwan), Taipei Exchange

45

The Asia Pacific FX Markets: Opportunities for Growth46

About GFMAThe Global Financial Markets Association (GFMA) brings together three of the world’s
leading financial trade associations to address the increasingly important global regulatory
agenda and to promote coordinated advocacy efforts. The Association for Financial
Markets in Europe (AFME) in London and Brussels, the Asia Securities Industry &Financial Markets Association (ASIFMA) in Hong Kong and the Securities Industry and
Financial Markets Association (SIFMA) in New York and Washington are, respectively,
the European, Asian and North American members of GFMA. For more information, visit
http://www.gfma.org.

KPMG China
KPMG China operates in 16 cities across China, with around 10,000 partners and staff
in Beijing, Beijing Zhongguancun, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou,
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SAR and Macau SAR. With a single management structure across all these offices, KPMG
China can deploy experienced professionals efficiently, wherever our client is located.
KPMG is a global network of professional services firms providing Audit, Tax and Advisory
services. We operate in 152 countries and have 189,000 people working in member firms
around the world. The independent member firms of the KPMG network are affiliated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm
is a legally distinct and separate entity and describes itself as such.
In 1992, KPMG became the first international accounting network to be granted a joint
venture licence in mainland China. KPMG China was also the first among the Big Four inmainland China to convert from a joint venture to a special general partnership, as of 1
August 2012. Additionally, the Hong Kong office can trace its origins to 1945. This earlycommitment to the China market, together with an unwavering focus on quality, hasbeen the foundation for accumulated industry experience, and is reflected in the Chinese
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Contact Us
Authors
John Ball

Tom Jenkins

Aditya Ramanan

Managing Director
Global FX Division – Asia Pacific
GFMA

Partner, Risk Consulting, Head ofFinancial Risk Management
KPMG China

Senior Consultant, Risk Consulting
KPMG China

Tel: +852 2531 6512
Email: jball@gfma.org

Tel: +852 2143 8570
Email: tom.jenkins@kpmg.com

Tel: +852 2143 8677
Email: aditya.ramanan@kpmg.com

James Kemp

Victoria Cumings

Andrew Harvey

Managing Director
Global FX Division

Managing Director – Americas
Global FX Division

Managing Director – Europe
Global FX Division

Tel: +44 (0) 203 828 2705
Email: jkemp@gfma.org

Tel: +1 212 313 1141
Email: vcumings@gfma.org

Tel: +44 (0) 203 828 2694
Email: aharvey@gfma.org

Simon Gleave

Simon Topping

Paul McSheaffrey

Partner, Regional Head, Financial
Services

Partner, Head of Regulatory Centreof Excellence for Asia PacificPartner, Head of Hong Kong Banking

Tel: +86 (10) 8608 7007
Email: simon.gleave@kpmg.com

Tel: +852 2826 7283
Email: simon.topping@kpmg.com

Tel: +852 2978 8236
Email: paul.mcsheaffrey@kpmg.com

Jia Ning Song

Craig Davis

Bonn Liu

Partner, Financial Services
Advisory

Partner, Asia Pacific Head ofFinancial Risk Management

Partner, Asia Pacific Head of Securities
and Investment Management

Tel: +852 2978 8101
Email: jianing.n.song@kpmg.com

Tel: +65 6411 8533
Email: craigdavis1@kpmg.com.sg

Tel: +852 2826 7241
Email: bonn.liu@kpmg.com

GFMA

KPMG

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Mainland China
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Chongqing

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The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Publication number: CN-MS17-0004
Publication date: September 2017