Speaker 1 [00:00:23] Welcome to the first Middle East Securities Finance panel discussion. My name's Gaber Fredianelli. I've been involved in Repo for 30 years, mainly in market infrastructure. I've been involved in the region advising absolute collateral and more recently, the United Nations designed outfit to look liquidity, sustainability and facility. I have the honor of moderating a very impressive panel today where we will discuss the potential growth, the existing growth of the region. I will. Now let's start with Andrew, maybe, for the introduction.

 Speaker 2 [00:01:00] I'm Andrew. Give us some of the head of agency lending at BNP Paribas. We're a global agent lender, and we have an interest in the Middle East as one of our regions for growth.

 Speaker 1 [00:01:10] Jalal Farooqi. I'm head of custody and security services at S&P Capital. We are one of the largest local investment banks and a custodian and have been active in the securities lending and repo space for the past couple of years.

 Speaker 3 [00:01:26] Hi, I'm Dmitri Orlando. I'm the head of sales for Europe, Middle East and Africa for Excellent. Excellent as a fintech solely focused on the securities finance industry. I've worked and covered the region for over 25 years and been at various different custodians through that time. Hi. And Darren Schroeder and Head of Securities Finance Broadridge and Broadridge Olaf FinTech who provide securities finance solutions and BPO services for our back office, for hire services and within the security finance space. And I've been working within the technology space for 24 years.

 Speaker 4 [00:02:03] As Managing Director, head of security services at real capital. We are the largest custodian in the Saudi market. We have over 200 billion U.S. dollars of assets under custody, and we are based on real.

 Speaker 5 [00:02:15] Hi, I'm Alicia. As I discussed with him covering the equities structuring solution. I'm based in Dubai because we believe that it should be seeded with the least as a as a strategic region was, was a high potential and higher growth. So thanks for being you.

 Speaker 3 [00:02:31] Well, thank you, everyone. I'm Andrew Steven. I'm responsible for JPMorgan's client footprint growth in the Middle East. I've been most of my career in London. But as of last year, I moved out to the Middle East to focus on growing the client franchise. JP Morgan obviously a large universal bank with a very strong security services franchise. And within that, securities lending is a core business for us.

 Speaker 1 [00:02:54] The first topic of discussion for today will be the high potential growth of the region. During our prep call, we actually discusses a high potential user growth already there. Maybe you can start with some numbers and a bit of background and I will ask Dimitry to use some figures of what is this market? Sure.

 Speaker 3 [00:03:12] Thank you. So look, I think the exciting thing for me in any new market is when I see data flowing through the pipes and into our ecosystem. And if you look back maybe even a year ago, although there was securities lending activity happening in the regional markets, there wasn't that much data flowing through. But if you look at the data today, we actually see quite a lot. Now it's not everything because there are still some trades that are happening that aren't being and are flowing through the pipes. The standard pipes that we see. So so having said that, what we are seeing at the minute right now is about $2.6 billion of lending while assets in Saudi Arabia and $370 million of assets are on loan just in Saudi Arabia, which is interesting in itself because some of those other markets, although there is securities lending activity, we're not actually seeing any of that data flow through the standard pipes, if you like, into our dataset. And of that 370 million that we're seeing out on loan, that's across 103 securities and now has more data from from the local market perspective. And I'll hand over that to him shortly. But just as a, just as a comparison, if you like, the lending market in in its whole is about $37 trillion of lender assets and about 2.6 $2.7 trillion out on loan on any given day. Focusing on some of the fixed income markets then as well regionally and specifically with Saudi, we're also seeing about $20 billion of lending bill corporate bonds and $1.6 billion of those out on loan and $21 billion of lender ball sovereign debt and 2 billion of that are online. And that is actually across all the GCC countries, not just Saudi Arabia like. Child. Did you.

 Speaker 1 [00:05:19] Have more? Yeah. So I think when we look at the local market data, which comes from the depository, if you go back to the beginning of 2023, that data balance was basically zero. There was maybe very little or maybe 1 or 2 positions out on loan. If we look at September last year, you probably had around 30 or 40 different securities on loan for a total value of about $180 million. When we look at this year, the market's grown significantly. You have around 166 positions on loan. Out of total listed companies have around to 80. So more than half the market has some kind of position on loan. And you have around, you know, 600, $550 million that are outstanding on loan as of end of August. Is this a trend we're seeing, you know, across the different firms? Are you experiencing this in in lot from the London perspective?

 Speaker 3 [00:06:16] Yes, definitely. For for JP, Saudi Arabia was a key of market for us. And we went live with securities lending to middle of last year. As a result of that, we start to see clients come to market clients. And it's an interesting one, right, with with the Middle East, because you've got international investors that have been active in securities only for many, many years with their international portfolios and now closer to home as domestic markets start to open up. The questions are like, how do we how do we get into these markets? How can we so generate the revenues that are available, But also then understanding how entering the local market is somewhat or could be different to the international models that they have today? So it's definitely a trend we've seen. I think one of the interesting things I think with Saudi in particular is we're seeing a lot of clients who are sort of I like single countries, right, where the portfolio is Saudi specific and they are coming to market. And it's a it's a a to client type that we would have never spoken to previously because obviously lending wasn't available in Saudi Arabia and that was opening up a whole new small segment of the market, which typically Saudi domestic firms, domestic investors, which we're able to now now target.

 Speaker 1 [00:07:27] So this dimension of domestic and cross-border, which arguably is recent, visible, if I understand correctly. Is this something, sir, that you're saying?

 Speaker 4 [00:07:39] Yeah. So maybe if I can add. So the initiatives are the securities lending and borrowing framework in Saudi Arabia. So the EDA, the Saudi Arabian CST, launched the Saudi the Securities Lending and Borrowing Regulation that is approved by the CMA back in 2017. And as well as so the market infrastructure, EDA and the exchange, along with the market participants, the brokers and the custodians, along with the investors, they have collaborated for the sake of enhancing the changes in the regulations. And one of these changes actually. So they have allowed the expansion of the agent services with the third party. So this helped added efficiency within the securities lending, borrowing program in Saudi Arabia.

 Speaker 1 [00:08:27] So from a a user case, I'm talking to you and this type, as a, as a, a firm with extremely large reach where the trends for you.

 Speaker 2 [00:08:39] I think on the points that we'll probably touch on a bit more detail is what you just discussed around understanding the international participants versus domestic domestic participants. But the trend we're seeing from our client base in the region and elsewhere is interest in the markets. What's going on? And is there a potential of securities lending? Can they access it? What does it mean for this, their local securities? But also just, you know, where's the future direction of travel within trends from international investors more broadly beyond securities lending of investment into the Middle East. And with that, you're starting to see things like dual listings.

 Speaker 1 [00:09:15] So we feel that the you know, as you pointed out, the numbers are still, from a global perspective, limited and a small but we all feel that this is the beginning of a, a very big adventure of a certain point out the regulatory frameworks there. The numbers are starting to come in. The visibility is there. Your you will benefit from this once you really.

 Speaker 5 [00:09:38] You know, definitely on track to come back to, to, to the growth element. Same thing on our side. We're witnessing in fact, the growth. We can describe it as exponential. In fact, since the early, early 2024, a million Saudi volumes have been multiplied by by ten, as highlighted by Dimitri know, we're talking of, of water to and measured in billion dollars. And we in HSBC, in fact, we have identified and believed in this and this growth since the beginning. From day one, we have been working on collaborating with the regulator to refine the rules. We have done the first SBL transaction in Saudi Arabia. It was early 20. When he first year firms built transaction mid-July in mid 2023. And the way we are trying to do tremendous growth in a very careful and smooth way in order not to squeeze the liquidity and the market and to bring comfort to all market participants. So we take it as a as a responsible, responsible or responsible growth. In fact.

 Speaker 1 [00:10:45] We have a specific panel on our specific points sorry, on the on technology a bit later. But Darren, are we are you feeling from your perspective? Well, the customer's gearing up.

 Speaker 3 [00:10:56] Yeah, for sure. We've seen an interest in the last 2 or 3 years around technology solutions from the market and quite a lot of it has gone positively well because of Saudi. As an example, They've used an international standard framework for the way they approach things. And so when companies are trying to educate their clients on how the market works or the participants, are the systems behind that already kind of meet those standards, it's quite easy. There's always some customization or specifics, but we found quite a lot of interest. And Jalal numbers are quite interesting and UN from zero to 30 or 40 names to know 160 names, you can no longer really run things manually on the side. You need technology underpinning the the operational risk and of it going wrong as it's never too late. So that's where the demands coming from the that the the number of shares that are out there is now really making it operationally challenging for firms to do a manual method. So they're definitely looking for technology.

 Speaker 1 [00:12:00] Can I can I ask this panel, I mean, obviously you've spoken about the role of Saudi Arabia in the region. How is the rest of the region, very quickly, how is that benefiting or is this a is this a friend or foe? Is this an opportunity or is it either or is it driving? I mean, everyone's basically been all over the place here. But a quick word on that would be interesting.

 Speaker 3 [00:12:21] I think there's there's definitely an opportunity. I think that's why we're all here. And it's not just the Saudi story. I think Saudi is just the front runner, the early the early adopter. And to Darren's point, they've embraced the technology solutions that are available in order to help that growth happen. If you speak to the various different regulators in each of the GCC countries, I think they're all trying to observe how Saudi Arabia is evolving and also then looking at how their own markets can follow suit. I think the the opportunity in Saudi Arabia is just is just slightly larger at the moment because of the number of securities that are actually listed on the exchange, which is which is greater than any of the other markets in the region. So yeah, I mean, I think it's the other markets definitely have potential. But, you know, in terms of the scale of the Saudi market, it perhaps offers a greater potential from a revenue perspective. And we're all here because we're trying to generate revenue in some way, shape or form, right? If it's the borrowers are borrowing securities not just for a hobby that they're trying to they're trying to they're trying to earn revenue on the back of the agent. Lenders are doing the same. So Saudi definitely offers probably the biggest potential for that revenue.

 Speaker 5 [00:13:41] No, definitely Saudi is leading the there's better growth in the market. Now, that's not a surprise. It's the biggest economy. The juices was in the juices market. But definitely as well, it's not that has not and will not be an isolated case. We have the DSM and Qatar who have implemented the alpha and same the same as well as we the model We we believe and we expect that they will witness the same success with Saudi in the in the future. You have ADX and Kuwait who will be encouraged to implement the same the same framework as well. We believe that Oman Bahrain will follow the same route and try to develop there as we well, the market as well. The beauty of this region, in fact, and like each country, has its own rules and vision, vision plan and the momentum is on an individual and collective basis. Whatever is implemented and whatever is a successful story in one market is replicated in the market. Whatever is fate of the one market was tried to be avoided and then the other markets. So the good news, good vibes is that the all this year this year countries has promising promising projects they are on a good track and we highly believe that each whether each country or collectively they will take part of this wonderful journey of growth.

 Speaker 1 [00:15:02] Can use a Sarah as a as a local Saudi. I know it's a lot of you. I'll tell you this. Is this a view you share as well?

 Speaker 4 [00:15:09] Yeah, definitely. So I couldn't agree more with Dimitri. So it's a mutual benefit across the region. For example, if we have a local. Lender and then with a qualified foreign investor based. Could be in Dubai or in any other area in the region. Each jurisdiction here in the region within the tricky are enhancing and developing their SBL framework, as he mentioned, and eventually growing the economy across the JCC and also enhancing the revenue across the exchange. And I couldn't agree more with Ali mentioning that the Saudi exchange is the largest in the region. In fact, we became the 10th largest market and market capitalization exchange within the globe. And so this is I think it's a great milestone for the Saudi exchange.

 Speaker 2 [00:16:05] I think if you look at Asia as an example as well, I'm going to put my part of the hat back on. But the size of the markets doesn't take away from the opportunity for some of the smaller markets as well. And they're all growing at their own speed. There's a bit of fragmentation around rules and implementation. But that's fine. And and I think that, you know, the opportunity in API demonstrates what can be done in the world. So some of the markets are very large and liquid. Others are a bit smaller and have different rules. But the opportunity for those markets to be next and now we're seeing this mirrored within the region here as well.

 Speaker 1 [00:16:38] I would add that there may be, I think one key thing from all of these markets in the region, they all have the infrastructure. They all have the regulations and they have people willing to lend inventory. I think the driver in Saudi for it to really pick up and it was again, years after the regulation was there was people willing to pay because we have to make an investment in technology and capability. It's the same from any international custodian. They have to invest in building the legal opinions and building the documentation and all of the infrastructure for that market to work. And until you have borrowers willing to pay to borrow those shares, it's not going to it's not going to get going. And we have something in common in a lot of the regional markets that's helping with that. So you have market making frameworks in the UAE, you have exchange listed derivatives in the UAE and Saudi and other markets as well. So these are all also drivers of demand for stock loan and they're part of making it an economically viable product. Otherwise no one is going to really invest in the capability to deliver.

 Speaker 3 [00:17:37] Yeah, I'd add to that. I think a lot of these countries in the G6 are on this journey to go from where they like a frontier market to an emerging market. And I think one of the prerequisites for that on the MSCI is that they need to have an established spatial framework. I think if you read further into that, it's not just the framework they need to be able to demonstrate that it's a yeah, it's a functioning framework and that you can actually trade using that framework. So I think that's the first one. I said we're all on this journey to, you know, reduce dependance on oil and diversify the economies in this whole big capital markets transformation thing across the region. I think also one of the things I'll say that we've seen, which is quite interesting, is there's always this quick halo effect. And when you see one thing happening in one market, they're like cousins, right? So you see one thing happening, one market immediately. The countries across the GTC will start, okay, they're doing that over there. How can we implement, how can we benefit? And I think it was very visceral, Dimitri, that said it. I think one of the benefits of kind of the Saudi story I know we'll talk about this a bit later on is you can there's lessons that can be learned. I say Saudi went in first. They now they worked with market participants. People came in, international banks came and worked with regulators. There was there was a real kind of cohesive approach to getting the market light. They didn't just go off in isolation. Maybe when they initially wrote the framework, they might have done it in isolation, but to actually implement you need to get buy in from the international community. And I think what that has done is is informed the regulation and formed the frameworks. And now when, say, a Qatar goes next or a UAE goes next into actual implementation, what you find is that they can learn from some of the sort of the wrong times that would take in the Saudi and they can now implement with a bit more with less friction, shall we say.

 Speaker 1 [00:19:15] Or an existing framework that works. Correct. Let's leave that thought.

 Speaker 3 [00:19:18] So just to add to Chilwell's point about the potential for people to pay to borrow these securities, of those 103 securities that we're seeing in our dataset, 101 of those are trading at more than 100 basis points. And actually half of them are trading over 500 basis points. So there's quite significant value in lending those securities.

Speaker 1 [00:00:22] It brings us to our second point, which is a right. So what are the challenges and opportunities going forward? What are the strategy solutions to attract even more? Again, there's potential for growth. And maybe I'll start with you, Joel, because you've been in the forefront of.

 Speaker 2 [00:00:37] Yeah. So I think when we look at the challenges, practical challenges, there's a few different parts of it. So the biggest one we've faced as a as a large local custodian and investment bank is educating the lender community locally. So obviously, you know, in a in a fully developed market, you'll have international lenders and borrowers and local lenders and borrowers. But we also realize at this stage it's going to be a natural supply and demand and the natural supply is probably going to be local lenders. And the natural demand is probably going to be foreign borrowers. So for us, educating the local lenders has been the biggest challenge. Conditioning them that, you know, any incremental return you can generate on on a stock loan portfolio is, is good. Many people want to negotiate prices in the beginning and instead we're trying to condition them to that. You know, we have a fiduciary responsibility to get you the best possible price. So, you know, you benefit from having more assets in those lending pools. And then on the borrower side, I would say there's been some challenges from not having a clear nothing opinion. A lot of borrowers still see this as a as an immediate red flag or a hurdle that they're not willing to work around. But I think what's happened in the past year is that you've seen certain counterparties willing to take an RWA impact, to be active and to be first in the market and getting the benefit of that business. And that's sort of starting to get people to shift to say, okay, well, let's try to get this right. And even if we if we have that hurdle.

 Speaker 1 [00:02:05] That remains a challenge going forward.

 Speaker 2 [00:02:07] It remains a challenge. And I think there's a lot of work that's being done with ISda, with the CMA, with different regulatory bodies in Saudi to clear that challenge. But it's still there and it will still be a challenge in the market becoming more efficient. And then maybe on the final side, from the lender's perspective, Sharia compliance is critical in Saudi. You know, a majority of investors, if not all, will always would prefer a Sharia compliant transaction structure. So having that as something that we can offer, it's something we've gotten cleared with our Sharia board. But now going through the documentation process and and making sure that it flows properly in our systems is the next step. But we think that will also open up a lot more on the supply side, on the demand side. I think the other key factor is you're seeing long short funds coming to the market. So those are something that didn't exist a year or two ago in Saudi and now they're starting to exist and they need to have physical borrow. And I think the growth in that sector is going to continue driving to driving demand.

 Speaker 1 [00:03:08] As we would you agree? You mentioned Asia. So let's let's widen this up and see.

 Speaker 3 [00:03:12] Yeah, I would. And I think that Asian Americans aren't so unique or fragmented region and you're looking to grow. The challenges are and Josh mentioned them at the very start as well resources that you need to put to the region or put into the region to develop. So that's a that is a challenge because banks, global banks, domestic banks, we all challenge from a resource perspective. There's not an abundance of resources available. So therefore, how you focus on these new regulations that you're learning and you're ensuring that you and you grow in the right way, how you ensure that you mitigate any risks and how, you know legal was a good example. So to get a view on the Sharia impact, on the legal documentation that has to go into place for a transaction as well as how you make sure that you are abiding by the regulations locally. You need to invest into a legal opinion on that. Most international participants or forum participants won't have a team locally. They're experts in that. So that same resource expended on that point as well as the infrastructure. So as just a small example, in Saudi, you have to connect to the EDA and do so in a way that requires and requires more investment as well. So the challenges from a from a global age and lender perspective are how we dedicate our resources to match of the opportunity which of we we said is high already as well as what our clients want, but we do it in the right way so we don't fall foul of any regulations or, you know, upset a market by doing something that you didn't mean to or intended to do. And that is another challenge is there is an unforeseen with this. When you have a new market, some of it is exploring things that haven't happened yet. You haven't seen the market react to, say, a big fail in the market. That hasn't happened yet. So things like that are the challenges.

Speaker 1 [00:05:03] Are you seeing this across the fixed income equities?

Speaker 2 [00:05:09] I think interesting point that Andrew made around the resource because when you going into a new market and you probably get this is the. The business where people come to you asking for resource, but then you're asked to substantiate what the opportunity is. You kind of in that chicken and egg because it's hard as a as a salesperson going out there to try and canvas the market. You always need the product to be able to then go sell it. But if the business then needs the business case to be able to substantiate the investment, you kind of have this sort of a loop. So I think to a certain degree I think you might have uses that way. You take a leap of faith into the market.

Speaker 1 [00:05:44] If you feel that.

Speaker 2 [00:05:45] The market is with this particular opportunities, one worth pursuing. I think the banks, the lenders or whoever wants to play a part on this in the infrastructure of the market needs to kind of put their money down today in the hope that that kind of gains in the future.

Speaker 1 [00:06:01] Sarah, you're feeling this because you on the other side, are you feeling this, people knocking on your door and you feeling frustration or you're feeling no joy?

Speaker 4 [00:06:10] So I think the demand in Saudi is very high. We keep getting so many requests. And on the securities lending side. I think even the kingdom of Saudi Arabia, as I mentioned before, is is ready. And the framework is there has been launched by the CMA, by the ADA back in 2017. And so definitely as the that is a high demand.

Speaker 1 [00:06:35] Even there, there's a little lag before it actually pushed off. You need solutions. Ali Correct. Definitely. In fact. And to to come back to to to the to the challenges. Yes, for the SBA, the market environment is like one of the channels with the expansion and the diversification of of the supply. Right. So if you take the example of the Saudi market, most of the assets are owned locally. And as any grows, it needs to be driven locally as well before and to encourage foreign investors to to to enter this market. Jalal mentioned the education. Yes, definitely raise raising awareness and education along with local this to encourage them to participate to encourage the foreign foreign investor. This is one second thing. This is something that we are trying to do within HSBC. We are we are well positioned because we have good network, was local and international, participant, was mid-size and a large financial institution. We are capable of bringing additional supply which is diversified, more stable and not only concentrated on the index linked chains, which are the most liquid. The opposite, in fact, even some supply on on lower, lower, capped. Lower, lower captures. And we believe if the growth is implemented and in a small way that will continue and that will continue it at this point. All this happens because people like Broadridge actually take that leap of faith, anticipate. So where are we going?

Speaker 2 [00:08:15] So using Andrew's leap of faith, like I always think of it, is forward revenue. Like we were able to do something today to access revenue probably 18, 24 months from now. But if we don't do it, we'll never get to it. So within the GCC countries, we've seen a large amount of requests. What should we believe will turn into forward revenue? So we are fully behind what we now need to do. The the the challenges actually brings me opportunities. So where we've got a challenge around educating clients and onboarding them, there's also not just educating your clients, but within some new forms who want to start to do securities lending. They need education as well as to how does the market structure work? That can come from as well. They can also come from vendors who dealing this space already have quite a wealth, maturity and knowledge. We found opportunity there. And the thing that's been really positive to see, going back to something Andrew said around fragmentation in Asia, we see much less fragmentation in the GCC countries. There's definitely a lessons learned, continual tweaking and improvements. So that's helping also as well because we have a a standard way of doing things or we will get to a standard way of doing things. The last part is integration. The to integrate, I think you said as well around connecting and to. There are multiple countries within GTC which will have different technology requirements around denigration for us to provide those as service components. We can sell each time as a really good opportunity for us, but also for the market to have more standardization. And we're also probably seeing and you you mentioned a couple of times repos and opportunity space, that's the revenue further forward for us as well. We're being asked a little bit now about Ripple within that the and Saudi to begin with. But we see it as being another forward opportunity. So so that's where we just have to build the infrastructure.

Speaker1 [00:10:15] Just a just point on repo. I mean, repo is a. On fixed income property is a I don't feel as a retail person that we're quite at that stage of the ball rolling. My wife and I deal with the absolute collateral and the other part I, I found that so waiting on Saudi Arabia was, was once an excuse, but was a reason not to make that big step, which is costly for everybody, because if you get it wrong, you're there for a number of years. You know China, you know what I'm talking about. But I still felt that the repos been lagging apart. But if you don't get that repo market, then you are closing yourself a little bit. Do you want to maybe come into that journal?

 Speaker 2 [00:10:53] I mean, what's interesting about the repo side is that actually those transactions started in Saudi through the local depository in 2020 before even the market infrastructure changed and before even the SPL regulations were really adopted the news. So it started and we started seeing a lot of people activity between local institutions, maybe 1 or 2 regional institutions coming in as part of that. And then in the past, I'd say a year and a half, we've seen a huge influx of internationals. So internationals have come in to the local currency debt market and started becoming active in double wide repo with local institutions. And that's also driven a lot of a lot more liquidity and probably competitiveness and activity in that market. But in general, it's still very opaque. There isn't a centralized, you know, a place to see repo activity. There's some platforms that are trying to compete for that, even in terms of how they're cleared. Each one is different. So there's there's bilateral and then there's some that are cleared by the CCP and Saudi by Mikasa. Not everyone uses one or the other. And and to add to the confusion, you also have ICDs like Euroclear and Carestream that also offer a solution for sort clearing people so you don't have one place where it's all aggregating and you can see it in one place, and that's one of the challenges you find. A local regulator will put that in place. So the other single point of report was there was a draft regulation about and it's coming to the Saudi market for fixed income securities only and it has been approved. And from what we know about ETFs will come coming to the market maybe in the next 18, 18 months, 12 months. And we think once you have that, it's it may also drive a related reporting platform to allow it to be sort of linked, linked together and provide that visibility in one place.

Speaker 3 [00:12:39] What's the size of the fixed income market in comparison?

Speaker 2 [00:12:42] I mean, in terms of the outstanding, you probably have between 5 and 600 million Saudi reals in local, a billion sorry, in local currency. So you're talking about around 150 to $170 billion. So it's not a small market at all.

Speaker 1 [00:12:56] Do you believe that the equity repo can pick up? In fact, I fully agree with you that there is there is a pick a pick up on the on the on the fixed income repo, etc.. Is there any room. For the for the financial situation to use equity a vote for.

Speaker 2 [00:13:12] I mean, there's some talk about this, you know, and I think one of the challenges we have right now in this SB Are regulations as they stand in Saudi is that I can't use Saudi assets as collateral in Tripathi or in these kinds of transactions unless it's linked with a local Saudi equity trade. So I can't use Sabic shares as collateral for something that's outside of a trade booked in this USD. And that's one of the key factors we've told the depositor it needs to change because you don't want Saudi shares to just be used to lend. You also want them to be used as collateral for global transactions or other transactions. But just just to your point, though, the.

Speaker 1 [00:13:49] The, the, the.

Speaker 2 [00:13:51] The equity repo globally is significantly less than the fixed income anyway. Right. So I think that's, you know, it's, it's globally something that people are trying to do more of. But the fixed income numbers are a far more dominant and a lot higher anyway.

Speaker 1 [00:14:07] Which is also I can understand right because it's much cheaper to to do to use fixed income for for a for cash repo rather than using equity which is more and more and more more expensive. And the equity can be used as a last resource for equity repo repo transaction in fact. There's better use, right? Which is usually that's the way we look at this. And that's why that's why the equity lending is picking up because it's a great value added higher return, higher a higher yield, etc. and then then fixed income lending. While the opposite is true for the for the for the fixed income. In fact, it's cheaper too, to put in place competitive equity as my as my understanding of that. But maybe we'll see the same pragmatic approach to fixed income repo as we see in securities financing. I mean, there's a number of elephants in the room when it comes to repo. Generally regulatory and legal is being one. But in this part of the world, something of a chicken and egg, not being able to sort out conventional Islamic and with reality you could have the two whether the year solution which I look at close to a limit you just.

Speaker 2 [00:15:14] Just add to the point I was making and I think from an education perspective, institutions in the region have been doing repo for a long time. Right? International repo, if you like. Not not domestic repo. So it's a it's a it's a a transaction that people are comfortable with and they know for the most part, which isn't necessarily the same with securities lending. Now, I can contradict myself slightly here and say that actually.

Speaker 1 [00:15:39] If you.

Speaker 2 [00:15:40] Look at the the international securities lending business that's done out of the region, some of those beneficial owners have been lending securities longer than most people in the world over a quarter of a century probably. And I think that it's important to just look at those two things separately. We're discussing a lot of domestic securities lending here, but actually, securities lending isn't new to the region. There are institutions in the region, as I said, that have been who've been lending for over 25 years. And I think that that's true of repo as well. You know, repo, if you guys speak to any corporate treasury in any of the large companies that are that are based here and they've been created here, formed there, they have been doing repo for a long time. So, so really from an education perspective, they're all very familiar with repo, which is really just getting the plumbing and the mechanics and the regulations in place, as Joel said, to enable that repo activity to grow from a local domestic perspective, down from a technology perspective.

Speaker 1 [00:16:40] Concerning some of the investments that need to be done in a pretty straight set up the, you know, so what you have to offer is obviously a bit of a pity not to have the repo market up there.

Speaker 2 [00:16:48] Yeah. Whether it's report securities, lending trades, there's upfront work that everyone needs to do to agree and the pipes and plumbing. There's probably two technology things to talk about more, maybe talk about the the other side, the technology layer, which is around let's call it modern technology. I, I, Alex using that data for decision making. What for processing. The advantage of where the DCC countries are now is that they're going to benefit from the pipes and plumbing is already in and in place from the vendors and be able to immediately take advantage of some of the new modern technologies. So and then the biggest probably challenge at the moment that we see is our own data residency rules within countries. So and being able to deploy. So go back a step. So what I mean by that and the data shoot live in Dubai, for example, where we are today. So banks are saying we don't want our data to leave the country and need to stay here. So for firms like Broadridge who have historically offered data centers and the US, Europe and Asia, we are now saying, okay, well how are we going to do this? How do we service clients demand while keeping the data in-country? The the easy answer is for us. So we are an Amazon partner. We deploy our platform on us. We can do that here. And so we can't do that yet because yes isn't available until 2026. But the services that we need to be able to run. So there's an interim period where we are servicing clients with physical cash and their offices. And then in a couple of years time we'll be able to take that ownership back and provide it on our mutualize basis. Mutualize means cheaper. That's what it comes down to. We should be able to run things more efficiently across multiple clients than banks can do on their own. So as we go into each country, we're doing an assessment of what can we do in that country and what can we offer slightly different country. But I think by the time we get to 26, maybe into 25, we'll be able to offer something pretty standard and to each place which will allow us to roll out much quicker.

Speaker 1 [00:19:01] Yeah. Let's talk about thought, because obviously from a technology perspective, I'm pretty sure I read around this table as a forefront of their daily, you know, opportunities, challenges, the technology. So things from one side we have this will, push this market forward and bring it up to its full potential. And the other side, we also have this availability of learning. You know, not making other people's mistakes, but also benefiting from all the the new acronyms and the new possibilities of new systems that make things cheaper, faster. And are you feeling this or I'll start with you, sir. Are you feel that this is a time where you can now benefit from all these fantastic tools that have been developed over the years from 80 to.

Speaker 4 [00:19:47] Definitely. I can give you an example. And in Saudi Arabia, so the post technology, for example, the changes that have been made, the introduction of keeping them also. So it's helped in effectively management of the clearing as well as mitigating the market risk. There was also an introduction of the transaction processing courts, so to be in line with the global practices. So the introduction of swift messages to ISO messages, the introduction of the Saudi to Darwin group to have a local alignment with the global standards as well. So yes, definitely there is an opportunity.

Speaker 2 [00:20:30] So I think one of the challenges in general we've had in Saudi is that the market infrastructure has changed across so many parts of our business a lot over the past four years. So it's not just some of the ISO message implementations that are talked about, but we also have similar changes in the fix, enabling new types of orders and enabling new IP processes. So all of these are putting a huge load on our infrastructure and technology teams to try to keep up with those changes. So that's why maybe it takes us longer to come and implement some of these new capabilities, even though the market infrastructure and regulation has been there, has been there a while.

Speaker 1 [00:21:11] For as much as we want to go beyond domestic solutions, which I think if you gentlemen have pointed out, how can you help? How can the you know, the banks, the international banks, go beyond cross-border trades and actually help from a market and pointing out what's good for the market and what isn't good for.

Speaker 3 [00:21:31] Circle back on technology point a little bit because Dimension the region benefits from the pipes and plumbing that's already been created before. They also then impacted by the challenges of face everywhere else. And I think a global challenge we see with technology is and two points I'd like to point out around inter-operability. So we are seeing more and more fintechs come to come to market at the moment. And what that is doing is creating potential silos in the market and that's the global agency lending market and secure sending market, not particularly based, region based, but we've that there are challenges and I think that demand from the Asian lender side is just inter-operability and be extremely helpful because without that the market's not efficient and that will have a knock on impact on to the in the region. And then a little bit around what diamonds around data. I think cybersecurity is a huge topic for us as a global bank at the moment and that will impact the region as it grows and what technology solutions they use to build upon, as well as the fact that you have, you know, all these future technology that are mentioned at their disposal as this market is in its early stages and it can probably adopt a little bit easier than something that's been in place for a long, long time. So there are a couple of points from a technology perspective. But beyond that, the global how global businesses can help. I mean, education is one that's been mentioned a few times. Use our knowledge. We've been doing this for a long time. We have successful set ups in multi jurisdictions. So utilizing that and that's something that we're doing is looking to work with local participants to help build these models. So that's something that we think where we can help and help develop the markets further.

Speaker 2 [00:23:14] If I can get one point that I think is important to mention, because this is something that global custodians also drive but local custodians need to participate in is is enabling asset managers to properly reflect assets on loan. So if you look at, you know, this generally, who are the most frequent lenders, a lot of it is long only index based and benchmarked asset managers. We have a lot of those in Saudi and us very odd couple other investor managers have huge pools of capital that are allocated to these products. Most of those products aren't able to lend now because the local sub custodian or local middle office or administrator doesn't have ability for them to reflect shares on loan versus not in custody. And that impacts knobs and valuations. So this is something that we think, you know, is a key market development that needs to take place and it's something that even global custodians need to to drive with their local subs to make sure that they have the same capability. They haven't developed markets in reflecting those assets properly. But there's there's technology.

Speaker 1 [00:24:13] Solutions.

Speaker 2 [00:24:13] That are existing. You know, there's two two people here with books and records, platforms that can help do that. But I think the difficulty is perhaps more that the technology in some of the. And please correct me if I'm wrong has evolved over time. Sometimes it's in-house developed as well. And that's where that interoperability is really important. The ability from technology providers to make sure that whatever we're building is able to connect to the various different platforms out there, not just from about some records perspective, but from a trading perspective. I think a hot topic is that this year, as you were both, there was interoperability. There was a quite significant amount of time spent talking about interoperability. So again, you know, I think it's it's it's important that the technology providers are able to offer that connectivity to whichever platforms and systems that you guys have. But it's also difficult, I would imagine, to extract those systems and put something new and wants to do an extra manual process. Nobody was saying you don't have to, you know, and and that's not just in the region. I think that's globally, right. It's much easier to get internal budget to spend if there's a regulatory driver rather than trying to improve or be more efficient. It's it's a lot harder to make that business case by just going by. You're putting budgets to places, budgets are spent. There's cyber and regulation like that's the two key drivers. So within our firm, cyber, cyber, cyber, then other stuff that that's the way we are currently looking at it. We are investing a lot and and their protection in cybersecurity and and solutions that in the event the the are hacked that they can come back up quickly and we're not out of business for our clients as key within our books and make us platforms that we can do that and it's quite an interesting time for us as well with because of Dora. So the European regulation that your Operation Sea Resiliency Act, which is mandating these things are provided along with some other things as probably setting the benchmark for what standards will look like in 12 months time. So if you don't provide standard in 12 months, you don't really sell because people will only buy what the regulator is telling you you need to buy. So there's a lot of investment within the banks themselves. So BNP, HSBC, JPMorgan will all be investing a lot of money in cyber resiliency to meet their daughter requirements, but that's going to benefit them for many years forward because it becomes a tech in the box for them and that's what we are trying to get to with them. Broadridge Yes, it's table stakes. In 12 months time, you must have these things available to you. So a lot of time, money and budget is being spent towards that. Just to make sure you're setting yourself up for the next five years.

Speaker 1 [00:00:22] So talking about Saudi Arabia. I mean, you know, we have obviously, we want to talk about our region with Saudi Arabia's been a very spectacular example of how when there's a will, there's a way. There's lights popping up all over the place, things happening, numbers growing. Be sure if we do this in two years time, those numbers will be significantly higher. There's three SBM models and with different avenues maybe you can have globally. These are the models that you see active at different kinds of firms and different kinds of service providers. And the first one or easiest one we usually see is agency lending. It has the least amount of risk. It has the least amount of balance sheet impact on on the participants. And it's a model that we see most active in developed markets. It's the model that we see our clients using when they lend their international assets. And the other two models that we've seen that have based in Saudi and will continue to one is what we're using, which is a pooled principle model. So we're facing multiple qualified clients as principal. We're borrowing to shares and then onward lending to another counterparty or another client. So that model allows us to face multiple counterparties through S&P Capital. They're generally comfortable with our balance sheet and our risk, and it allows people who maybe wouldn't have access to those counterparties directly to enter into those transactions through us. And then the last one is maybe what we started seeing initially when the stock loan regulations came out, which is purely bilateral trades. The challenge obviously with bilateral trades is if one side wants to return a call back, it's hard to get those securities reused or to substitute that loan out. Whereas in agency lending in full principle, even if the lender wants those shares back, we can substitute that out with another lender potentially in the queue or in the pool. So it gives borrowers more stable inventory, more stable supply. From a practical perspective, we think all of them need to exist in Saudi. We don't think it's going to be just agency lending. We think there's a place for each one of those. Saudi's a market. When you look at demographics that's similar to some of the large Asian markets where you have 60, 70, 80% ownership in activity from retail and high net worth investors that used to be 90%. So that kind of investor isn't going to be able to go into the institutional agency lending programs. They need a pool principle program to be able to work. And we think all of those models are going to be active in different sets of lenders and different sets of borrowers in the Saudi market. What the represents to the international community think about this.

Speaker 2 [00:03:01] Think obviously for us, the agency model is the one we'd always push, given that that's the business we're in. And so interesting, actually, I'm going to go back a little bit because on the agency model, I think we talked earlier about client education, investor education. And when you're going in to talk to a community who maybe this is a new practice for, I think the agency model, as you mentioned, covers domestic carries the least risk. Easier to get can dip your toe into the water understand the market are essentially outsourcing function. So you have so guardrails that your program's going to be run by makes it easier for you to enter the market. So I think that's one which will really see the agency model pick up and maybe hopefully drive ahead versus the other two point you made around. And that's a really interesting point because since moving to the region, I often get messages from my bank, etc., telling me to invest in this and invest in that. From the IPO perspective, which you don't get from NatWest in London. Right. So the retail market's big, but I'm not sure if you've seen this, but we've seen a big push for what we call the aggregator model. So kind of what you call the pooled principle that where you have the broker or the client's broker and they almost act as the principal, but through an agency structure. So they essentially sit at the top, they aggregate all that retail fleet, and then they face off as the kind of lender or the beneficial owner and then make their assets available. And we've had a lot of success with that model kind of within Europe and in Asia. And one of the things that's always ticking off in the back of my mind is the DCC countries are primed for that sort of model. You've got multiple of these retail brokers that are out there making or giving access to stock markets to their underlying retail clients. If we can tap into almost you see that as the beneficial owner, we can access a large part of the supply in the market but only have one client. So I don't know if you. So this is.

 Speaker 1 [00:04:51] Basically that's the model that we're doing. I think the challenge in Saudi is that for me to enter into a securities lending trade with a counterparty, if I'm not a qualified investor, I have to have a lending agent. So we couldn't act as lending agent and principal at the same time. So we have to only face lenders who are qualified, which is a relatively low asset. So you're talking about around 5 million reales or $1.3 million. So a lot of clients meet that requirement, obviously. And we think, again, that's that's what's allowing us to tap into a different liquidity pool than an agency model might ever be able to attract. Yeah. Dmitry, just to just add to that, because I think it's a really interesting point on supply and given the ownership structure here as well and taking on board everything you said as well. What we're seeing from a global perspective is that fully paid lending or we call it client asset lending as I could. And that's that's a huge growth market for us. So it started with the likes of Robin Hood in the States, and it's growing significantly in the States. We're now seeing that in Europe as well. And the number of conversations I've had with people in the region about client asset lending or fully paid lending is growing each week. I think technology has a huge part to play in that because the challenge with mobilizing that supply where retail brokers could have thousands, millions of underlying accounts trying to aggregate all of those up into something that, you know, a broker dealer is going to be happy to to borrow from is the challenge. But again, the technology exists for that to happen today. And then also not just the aggregation piece to lend out, but then the income piece to distribute again. So technology plays a huge part in what you've suggested there. And I think it's only a matter of time before we see that move from the states to the to Europe, to Asia and to the region as well.

 Speaker 2 [00:06:46] Ali, we wish you an exact same you and be in the Philippine lending programs. Thank you. Andrew and I have a joint client using technology to do it. It's and it's an extra layer of application. It's an extra layer of fee distribution as an extra layer of client allocation that you need to take down to underlying retail investors with small amounts of shares in each one. So there's a lot of data children, there's a lot of for and based on where you are in the world as well, there's a requirement in some cases to report to the regulator about those trades that was never there three, four years ago. So there's a real technology shift to be able to do that. But the the benefit that the funds get your technical bringing in more revenue, you know that upfront investment in the technology. The additional revenue come in and even your business partners in Asia we speak to on a regular basis about exactly the same thing. How do we help with those technology shift? And I think just to kind of run that out, Dimitri mentioned at the beginning about the stats around the available inventory versus the online. I said, well, in fact the street is any market for a very long time has been significantly oversupplied in terms of blendable versus online. And it's these sorts of things that give you a new source of supply that allows you to drive that on loan balance without kind of having to really drive up the lender.

 Speaker 1 [00:08:03] And just ask that. Because just to take your last point as well, that those pools of assets are often more in demand from the dealer community because they are quite unique. I mean, we see it we see it in Scandinavia as well. When you get some of these lenders in Scandinavia who have access to domestic own supply, they're immediately in demand from the broker dealer community because what they bring into the table is very different from what they're saying in the supply terms. So we have a win win, win, win, win, win solution like. Right. So I think everybody's a winner on this one is sufficient terms of go back to the initial point regarding the initiative. So yeah, so I think the next thing you sort of have to look at is the demand, right? So it's great we can capture all of the supply, but if there isn't enough demand and there isn't products that need those shares, as a borrower, you're not going to have enough to have, you know, a fair and a balanced market. So I think that's where we're starting to see growth, the exchange traded derivatives and market making, while they might look great on the surface, market makers are the worst clients for a stock loan because they literally know you want to go on record as saying that they literally take the stock for one day or two days and they return it. So from a lenders perspective, we're it's a new market and you're trying to get them active. They don't want to lend their shares out for a day or two. Right. That's not going to generate anything meaningful for them. So then you have to start looking, saying, well, who are the kinds of counterparties that would be good borrowers, that would have good utilization, that would be paying good rates. And then you start looking at long short you start looking at other strategies that have those kinds of horizon. And I think what's interesting is that in the region, especially where in the UAE today, there's a huge amount of funds now that are set up with regional bases. And they're not just trading globally, they're coming to Saudi, they're coming to other regional markets and seeing how they can be part of the capital market activity. And that includes IPOs and includes stock loan. It includes even strategies that we don't see elsewhere, like corporate action arbitrage, like merger arbitrage that we've started seeing demand to borrow that didn't exist a year ago. It didn't exist two years ago. Aly This must. Music to your ears.

 Speaker 2 [00:10:20] In fact, unlike my my and my my colleagues here, I'm in fact, I don't sit on the custody side. So I sit on the investment banking side. So mainly on the on the borrower side of the market to implement some derivative derivative solution. I fully agree. What was what general mentioned the demand is is picking up. This is held by. New asset managers, hedge funds coming to the region, definitely. But it does help as well by the market contacts, by the by the actual economy. We are in an environment where, there is volatility on the equity market. We're no longer in our, one directional, the equity equity market that is growing for, for a decade. Volatility is here. Investors, our asset managers are looking for hedging solutions or charging solutions. You need to be able to look at an efficient as we have look at you have inflation. Inflation is here is getting part of the returns of the asset managers. They are looking for some pickup solution you'll pick up by call of writing, by lending, etc. on call of writing. You can do it without an SBA or access to an inventory. You have high interest rate environment, right? And then 3 or 4 years ago you to have access in the market here to to cash in a free and abundant way. So don't go to the case. Now, funding is very costly, So investors are looking for cheaper, more optimized financing, funding solution using derivative instrument. It's not possible to implement without an operational framework as well as well. Framework and the borrowed were always needed. So yes, definitely. The supply are here, but the bottle side will follow. We'll follow the supplier. That's why we need a diversified and and stable supply info.

Speaker 1 [00:12:11] So we're going in the right direction. So you have a few things to say. So you're on the receiving end here. Are you are you feeling these knocks on the door, seeing more and more and more.

Speaker 3 [00:12:21] If we speaking in general about the growth here and in Saudi. So there is a capital market. So the capital markets baby activities has grown exponentially in the in the recent five years. And the reason is that due to the changes that is happening in the market. So maybe Jalal Bandhu and Dimitri has mentioned before that there are changes in the market that would actually have to qualified foreign investors to enter into custody. All the listing, the IPOs and the Post-trade enhancements, introduction of CCP, CST. I think this also helped positioning that the Saudi exchange with the Tadawul to be the 10th globally, the 10th global.

Speaker 1 [00:13:04] Capital are just the.

Speaker 3 [00:13:05] 10th largest global exchange in the global in the market capitalization. So I think this has encouraged strong demand and the growth both from the market and the investor side.

Speaker 4 [00:13:16] That has a knock on effect as well. So, you know, all of those points have been led more investors to start on the buy side, to start taking positions in the market. And then that's where HSBC is one. But we hear from all of our borrowers now. They're having conversations with their clients about access to the region, access to Saudi Arabia particularly. So whilst we said earlier, we took a bit of a leap of faith to try and go live in lending in Saudi Arabia, it was only because we're getting a huge knock on the door from from all of our borrowers and they're getting the same conversation from their clients.

Speaker 1 [00:13:45] I mean, knock on effect goes to Diamond and the few firms that have the capability of offering the the know how from elsewhere. This means that I.

Speaker 2 [00:13:55] Used the phrase earlier when when When it's at what? At what cost? And that's the thing that we've really had to work hard with our clients on, is understanding the cost of getting into the market to begin with around, let's call it the build that implement stage versus the run and operate stage quite different. So you've got an upfront build and integration cost to deal with, to do trade number one, let's call it. You've then got an ongoing run cost. Going back to, I think to Andrew's point around operationally as well. How do you manage the book? How do you manage the risk? Do you do your global team? Do you have a local team here on the ground? There's an investment to be made or not depend on if you're looking for a global bank. All of that really drives back to the quality of the assets that are available for lending and the utilization of those. You know, we've worked with a couple of clients to look at their business cases. And you if it was a book price, you know, the volumes are so small, but because their specials are high value assets allows them to do that. Investments are quite a lot of the work that we do. Let's call it at the start of any engagement with the client, as I understand them, what their operating model is going to be, how they're going to service things, helping them cost out what that would look like technology wise, offer them additional what we call business processing support. So back office for higher, you know, those types of services or educating their own teams to do those things themselves locally. That can all adds up. There's a cost of implementing all of that, which probably two years ago didn't didn't there wasn't volumes there. I think, Jill, I would say that two years ago now, there's definitely volumes there, too. Buckle up. And that's where we just don't help with technology. It's our stuff.

Speaker 1 [00:15:43] So the midstream, in order to to make sure that we we don't get too carried away. What one of the one of the dangers here what are the little things that this community needs to be able to wear or be careful in order to make sure this is continued as a success story? If that's a fair question. I think the important thing and then we will mention that today, I think it's that sort of consistency aspect is to make sure that whatever regulations we're putting in place and whatever product design we're putting in place is, is consistent and essentially leads to efficiency in the market. And because I think that efficiency in the market is key because borrowers are more likely to pay up when it's more efficient to them. Right. So globally, whichever market you're looking at and also the area, if there's no borrower demand, there's no market and borrowers and we speak to them all the time because they're on our trading platform. The one thing that they're really interested in is analytics and data around their trades and their trading activity in their counterparties. And they are more likely to trade and engage with counterparties that are efficient to them because they're under cost constraints as well. So it's really, really important to ensure that, yes, we're we're growing this market, but when we're looking at how to grow it and take it to the next step and beyond, which we all agree that's going to happen here. But that efficiency point and and trying to do things with best practice in mind is important. So if I could if I take that point maybe to close this this chart and say we are at a point now where we have some serious people around the table with a track record, which is not the case all over the world. Spectacular, maybe, But in reality there's a reality. You know, what's what's what's the outlook? Where, where, where, where do we expect further? We mentioned obviously the demand is going to be key because that will pull the grow in the chicken story. But what are what are the what's the outlook for the the region itself? Are we are we looking at Saudi going ahead and the others following or are we looking for bits and bobs to adjust? Are we looking for the Pan GTC market? Is that the solution, which is, you know, not so far away on the cards? So I'll start with Jalalabad. So I think we work at standardization and is a key point because if you look at agreements, you look at operating models, even you look at how do you what's your cutoff for archives? Are you taking same day because the Saudi is that much before UK I can take same day or am I going to take next day like I do the rest of the world? I think these are all critical things I can say from our perspective when we came and we joined is a couple of years ago to learn more about securities finance and how it works globally. We took a lot of positive feedback from the global participants and tried to say, okay, well there's clearly market standards and practices that that they are willing to to share with us and to help us learn and develop our own capabilities in our own market. And I think we have to take the same approach now for the market participants, whether it's the people in this room or wider. We have to be willing to share information, to share ideas on how we do things and try to come to common standards and common practices. Because at the end of the day, if I have my own ecosystem and another custodian has theirs and the international banks have a third one, it's going to be very hard to do things between different custodians, between different counterparties, and it's not going to allow the market to be efficient. You're going to have different pricing depending on how you're documented, depending on how you're set up. So I think market standardization is the key thing and we have to really put our own business interests aside and say, well, how do we how do we do this in a way that benefits everybody and grows the market?

Speaker 2 [00:19:36] Yeah. Before tackling the outlook of the future of the middle market or more widely, I would like to to go back to where roughly it started. In fact, 2000, 1414, there was a will from several countries in the region to increase liquidity and to bring more foreign interest and to add to the market. That's where the discussion about index inclusion started. This is what happened 20 1819, where a lot, many countries within the region were part of the emerging and global global indices. This was on the secondary side. On the primary side, we all know that IPO's and the region is very active among the most active regions and the UN. The works or so work has been done on the secondary and on the on the primary side on the cash equity. So the success was under the belt was first successful to bring more liquidity into the market and to bring more foreign investment into the market. So this is known. Having done this. You are obliged or you are requests and more and more to build an efficient capital market. What is an efficient capital? Once you brought the liquidity under capacity, the second step was efficiency. As mentioned by Jalal and Atomos, what is an efficient capital market? It has three pillars. Liquidity that's here. Derivative market. But guess what? Derivative market cannot work without and doesn't bear market. So. To be alone was any growth or vision plan to grow? The capital market was around Saudi mainly because it's the biggest economy again, etc. and other other of the region. To have an efficient capital markets, you need to show that liquidity. Derivative, efficient, derivative and derivative market and hence you need to have an efficient thus be a spare market. And we HSBC as a multinational bank well established in the region. Again, we started from the early beginning and we are very well positioned to to to participate in building the bridge, this bridge between the east and the west. We are very well engaged in any corridor between the Middle East and other region. We have been very well engaged in the corridor between Asia, Asia and the Middle East. We had some big asset managers in Asia to to to launch ETF with exposure to to the market. So, yes, we well, we are fully confident that the growth story will continue, but it needs to be to be done again in a smooth and responsible way.

Speaker 1 [00:22:19] Andrew, you moved over. You've arrived. You are the future.

Speaker 2 [00:22:24] And look, I think you'll be a brave man or woman to bat again for the successor so that the GCC as a whole on many different facets. Right? I think bring it back to kind of securities finance lending. What I think is on us as all market practitioners, global custodians, Asian lenders and the like, is to to look at how we can develop the debt, because I think there's always this, you know, this risk that we kind of go, all right, Saudi's done. And I guess to other guys, Qatar, Kuwait and really spread ourselves thin. But I think one of the the smart thing to do would be to sort of double down on, say, Saudi, for example, really look at all the different opportunities there are to explore and all the different mechanisms, services that we can put in place to help our clients. I think the big one, I think Jalal, you mentioned this earlier, is the lending side, but I think you also need the collateral side. And one of the things that we're very focused on is as we build up lending sites, also then be able to let that build out the ability to take Saudi as collateral, Saudi domestic equities, for example, as collateral. The reason being what you call these banks coming into the region. This could be a limit on the amount of business that can be able to write. If they can't, then reuse the assets that are taken. For example, if you're writing to us buying the underlying, if you can't, then redeploy that it's just sitting on your balance sheet essentially. Right? So I think for us, for instance, the build out those solutions to help we round out the ecosystem before we then start to look at other markets. I think there'll always be an element of understanding what's going on in the other countries. But to double down on Saudi and then look at the other the markets and that you see.

Speaker 1 [00:23:58] As a representative of the technology providers, a lot of positives and really had that amount of positives, a lot of caveats as well. Maybe this view of doubling down in one country, is that even a luxury you can allow yourself today or so? Yes.

Speaker 2 [00:24:17] Certainly on the banking site makes perfect sense because you want to make sure you've got something solid, a foundation for that business going forward. And because of the nature of all the other countries trying to keep pace or catch up from a technology perspective, we will have to service all of the regions no matter where they are, and they are their story, the securities finance journey. And so for us is interoperability. Andreas mentioned that a couple of times and is spot on, whether that's at the pre trade level or into the data vendor level, whether it's at the CST level. Providing all of those capabilities is key to their evolution. So by evolution, more vol whips, if they if the guys successfully bring on more clients, if they can't do them in volume because of constraints around technology, the whole thing falls apart. So as a service provider, we need to be thinking forward to not just next week's revenue, but one year or two years, three years to make sure all of those things are available and then the market will be a bit more fluid.

Speaker 1 [00:25:22] Which is what we need for revenues and next week's customers. Yeah, exactly. Yeah. Which brings us to the the closing I have for you, sir.

Speaker 3 [00:25:30] Yes. So definitely there is more work and effort that has been done by by Saudi Arabia and eventually there are more inflows into into the market. And I think the exchange is also catching up with the global market capitalization. And eventually I'm optimistic. So I would see there is more grow or exponential growth within the recent or within the next five years in respect to this bill. So as Eddie mentioned, liquidity is a key. And I think this has been ticked and been picking up also in the in the market. So there is an opportunity. There is a growth coming and there has been so many tremendous changes in the market from the inclusion of MSCI back in June 2018 to look at where we are here today. As I mentioned before, the qualified foreign investors holding is 88 billion. So this will give us like a message that the introducing new products to the market, it will attract also more investors and we would see more demand in the market.

Speaker 1 [00:26:41] I would like to ask the audience as well. What about the coexistence between conventional and Islamic finance? Where are we today?

Speaker 2 [00:26:51] So in fact, the big and there is a big percentage, if not the biggest of of assets are held by Islamic financial institutions. Right. And if we look to the fixed income report, the Islamic offering have massively picked ups in the recent years. I don't see that SBL, will be an exception. The challenge of the Islamic framework on the other side is that as well as I noticed, any transaction. So any agreements need to be done between two counterparties and any Shariah discussion needs to be validated by two counterparties separately. The key element in this and this Islamic framework is the standardization. And the same way that we have witness on the Islamic Odyssey, derivatives on the other end of the derivative world where there is a centralized key rulebook or centralized Islamic guidance that's on that guide. The the the the operation model of an Odyssey Odyssey transaction, where the documentation is Islamic is the TMA or being to to me that the whole with master master agreement which is well known and acknowledged across across the region. So we definitely need something similar on the Islamic together world. And this is even a request from international organization like this law was pushing the region here to have a common Islamic regulation, which is known and acknowledged by the by the local participants.

Speaker 1 [00:28:29] So I think if you look at it from what we see right now in supply and demand, it's maybe not important from a borrower side where lots of the borrowers are international, but from the supply side, it's it's critical that this gets developed because the majority of clients that we deal with are looking at transacting initially a compliant manner. And we've gotten clear feedback that there's ways to do that. But I think, again, it's just getting the standard documentation, the standard terms, the standard way that those trades are processed to make sure that they are complying with those with those rules. And with that guidance from an international bank perspective.

Speaker 4 [00:29:03] Is a consideration we have to take on board when we're reviewing the opportunity. If the region as a whole, I think, you know, this is a big element of transacting within the region. I do think the work of is doing is fantastic and the trade body. So that can really help the market to get a consensus view into certain items in the region, because I think that's we rely on them to represent us and they're doing a great job at that. So hopefully that we do got some sort of standardization around that point.

Speaker 2 [00:29:33] I guess from my perspective over the last couple of years we've worked with and declined in Saudi to extend the capability of the platform to allow them to trade on a on a Sunday, which was do for us something we've not done before. And likewise in Malaysia, the boss in Malaysia have put and put in place a strong template around how Islamic securities finance will work for them. What which made us then provide system capabilities to match that. So any any other regulation it comes in in any place. You follow that same suit. And it was pretty straightforward client fish and trade confirmations to to report slightly differently. So the actual system changes are quite minimal to support. It is just that we we wait to get guidance either from our clients or from the regulator on the standardization and we were able to put it in quite quickly. And I can see the same thing happening in this region also. And we in fact, when you discuss with the stakeholders in Saudi was in Saudi or Qatar, they are they are comfortable that the framework can be Islamic friendly. But again, they need to go to their Shariah board. You have each each counterparty has a song, Shariah and cetera. Standardization is key. And I agree with you. In fact, the to do the change, even technology wise is minimal. Right. Is minimal where it's just about someone agreeing or the standards are then that can be rolled out across the market.

Speaker 1 [00:30:58] Creating two systems, one creating one system which has the benefits of both, which everybody agrees would be great. Again, I think it goes back to the question of is there one way of doing securities lending that works for every single apply that every counterparty? And I think the answer is not so that you're going to have these different pockets of liquidity and different pockets of supply. And I think that's going to exist. I think the challenge now is that it's such a new market. We still can't identify what those will look like and what what they will be. But I definitely just like we're saying, clients in Saudi or other markets in the region are interested in lending securities. I'm sure there's maybe not as many, but there's a good deal of clients that are also interested in borrowing securities and taking certain positions that they weren't able to take previously. So these are all parts of the market developing and you'll have those different pockets of of maybe Sharia compliant only and, you know, ones that face international borrowers. There's also a lot of other points that will come up, like withholding tax, like dividend treatment, like, you know, voting that all are going to, you know, create different different models and different approaches. But as long as you have some agreement and standardization, that's what will help mitigate those those risks disrupting the market.

Speaker 2 [00:32:14] And that's absolutely no different from any region quite requirements. You know, Andrew's a French bank by state, as you've got a large amount of French clients are their very specific demands and needs. It's exactly the same whether it's a UK based organization, whether it's a scan scam, their organizations, they've all got their own rules and regulations. And you know as. Mexican is fine on just another clean set that we all have to deal with and and get it to work in the interim for It.

Speaker 4 [00:32:41] Comes back to that responsible growth point that someone made earlier that, you know, we want this to grow, we want it to be a success, but it has to be done in a responsible way that, you know, takes into account the views of the regulators and the trade bodies. And we work as a collaborative to to grow this economy and help and build the market rather than try and go alone and and cause issues. So it's all about responsible growth.

 Speaker 1 [00:33:04] So if I summarize in saying there is a will, so there will be a way, I'm probably spot on. Good. Fantastic.