Technology may decide the battle of the financial giants
5 September 2011
The rivalry between Hong Kong, Singapore, Tokyo, Shanghai and Sydney to become the Asia Pacific's dominant financial centre will be debated at a University symposium in the Singapore Exchange this Thursday (8 September).
Alex Frino, Professor of Finance in the University of Sydney Business School, will take part in a panel discussion with Magnus Böcker, Chief Executive of the Singapore Exchange, and businessman John Fildes, Co-Chair Asia of FIX Protocol.
Professor Frino said the NSW state government's ambition to create a bricks and mortar financial centre in Sydney was reflected in the redevelopment of the Barangaroo site at the entrance to Darling Harbour, a concept similar to London's Canary Wharf.
But Professor Frino questions whether the traditional concept of a financial centre is still valid. "Technology is the mechanism that brings market participants together these days, not physical meeting places," he said.
"Consider what happened before we had electronic trading on the Australian Stock Exchange two decades ago. Stockbrokers would have to meet on a trading floor at 20 Bond Street to execute orders. They typically had offices close to each other, ate at the same restaurants and drank at the same bars - all near the Stock Exchange.
"But with electronic trading, the brokers became geographically dispersed. Their activities are now glued together by technology - the electronic trading system of the Australian Stock Exchange. We now have some market participants who barely have a presence in the country, let alone the city of Sydney."
Professor Frino believes this trend will continue as communications technology improves. "When technology becomes so good that communicating with someone across the country is as easy as talking to a person sitting next to you in the office, we will see some very dramatic geographic fragmentation."
He believes the winning cities of the future will be those in countries with an outstanding quality of life, with marketplaces that embrace technology, and that quickly adapt to change. People will choose where to live rather than where to work, he says, and in the contemporary marketplace debate about who owns the bricks and mortar of the financial centre is irrelevant.
He said: "Firms will naturally choose to set up their operations where people would like to live. Their decisions will be driven by preferences for culture, amenities and climate.Some may even make the decision based on income tax rates. Market participants will naturally choose a geographic location which appeals to them, and technology will be the mechanism that brings these geographically dispersed businesses together."
He argues that this trend is already apparent in the United States. "I was recently part of a project which involved visiting some of the largest hedge funds in the United States. Rather than going to New York to meet them, I found myself travelling to all kinds of weird and wonderful corners of the United States - places like Connecticut and Walnut Creek.
"Some of the largest hedge funds in the world have created what they call campuses virtually in the middle of nowhere. These are large workplaces that are very convenient to get to for their employees. Basically, lifestyle choices have dictated where these individuals live and work, and technology is the thing that brings them together. Long gone are the exchange floors. In their place are exchange servers and other ICT devices."
Event: International symposium on the Asia-Pacific financial hub
Date: 8 September, 12 noon to 2pm
Venue: Singapore Exchange Auditorium
Registration: Contact Kayla Brock
The symposium will be moderated by Michael Dee, a former MD International with Temasek Holdings and MD with Morgan Stanley. Professor Frino and Magnus Böcker will talk about the concept of an Asia Pacific financial centre on CNBC Asia at 8.30am on 8 September.
Contact: Richard North
Phone: 02 9351 3191