Asian brokerages could see a dramatic increase in trading volumes over the next year, with costs declining apace, as they move to adopt automated trading and e-trading systems, according to trading technologies provider Reuters Securities Transactions Systems. Geoffrey Sanderson, managing director of Reuters Securities Transactions Systems, said 'going electronic' could mean a fivefold increase in trading volumes very quickly. 'Among new e-brokers, the experience has been that some of them got 100,000-plus customers trying to trade within six months,' he said. Initiatives such as the Hong Kong stock exchange's implementation of AMS/3, an automated trading platform, will move more brokerages to adopt fully automated trading systems. 'It was the experience in France and the UK, where automated trading systems have been implemented by the stock exchanges, that brokers were effectively forced to rethink information requirements and technologies,' Mr Sanderson said. 'It became not just an issue of how to interface to the exchange. How settlement systems and back-office functions fitted into the new process became new considerations,' he said. Mr Sanderson said the move to automated systems would also help pare costs as competition grows, adding that 'one of the biggest costs in the brokerage industry are failures, or mistakes, in the transaction process'. He said it was estimated that between 15 and 60 per cent of equity trades - depending on the country and the type of trade - require some form of manual intervention to correct mistakes. 'Most investors do not know it, but in most equities transactions, something is wrong that has to be corrected, otherwise, the trade would fail. Say, for example, the lot size is inputted incorrectly, or some other manual error in the trade order,' he said. The value of each transaction for the brokerage would also be greatly increased, since value per customer is an important factor in a competitive industry such as stockbroking. 'It could cost a brokerage up to US$50 to correct mistakes in some cases. That wipes out your profit right there. Brokers invest a lot of money into making sure these mistakes are caught somewhere along the order chain,' he said. 'If you can catch these mistakes early on, then you can massively improve costs and, at the same time . . . the speed and volume of transactions a firm can process.' While there is a universal recognition of the need to change, the more well-established organisations are not always first-movers. The realities of expenditure budgets and needing to make do with existing trading systems mean not all brokers are moving as quickly to adopt automated trading as they should. 'There is a certain dichotomy right now. Some small organisations enter the broking business and are doing things very efficiently through automated systems. This is forcing the bigger brokerage firms to look at going the efficient route themselves,' he said. Mr Sanderson said business processes within the financial industry should not be any different to those within the automotive industry. 'For example, Japanese industry is famous for its ability to find new ways to manufacture goods at the lowest cost while maintaining quality. Yet the same attention has not been paid to administrative processes.'