Central securities depository Euroclear UK & Ireland and EMXCo, which provides electronic messaging solutions for automating fund transactions, have gone live with an electronic, integrated order routing and settlement service for UK fund transactions.
The service is intended to provide end-to-end, straight-through processing of UK fund transactions, from order routing through to cash and unit settlement and safekeeping. It will initially be available to funds domiciled in the UK, Channel Islands and Isle of Man, and Euroclear intends to expand coverage in the future.
The news follows plans revealed earlier this week by Calastone, the operator of an independent cross-border transaction network for mutual funds investors, to launch an alternative settlement system to for mutual funds, competing directly with Euroclear.
Euroclear said clients can expect “substantial” savings on current operational processing costs by moving from manual to automated order routing and settlement. The firm claims that a typical distributor settling around 10,000 transactions a month may currently pay up to £50,000 per month in settlement administration and reconciliations, compared with charges of £8,000 for all balance reconciliation, transaction management and communication charges using Euroclear and EMXCo’s joint solution.
The joint solution is already in use by asset management and brokerage firms including Brewin Dolphin, Cardale, Charles Stanley, Direct Sharedeal and Rathbones.
Other benefits of the new service, according to Euroclear, include a decreased risk of settlement failure, fewer errors in processing and transaction reporting, up-to-date fund balances based on processed transactions at Euroclear UK & Ireland, and the ability to complete settlement within four business days, compared with up to ten days today.
“Having worked closely with the 26 members of the UK Fund Liaison Group, representing all segments of the fund industry, we are confident that the end-to-end fund-processing service we are providing fully meets market requirements,” said Yannic Weber, CEO of EMXCo and Euroclear UK & Ireland. “Firms active in UK funds are already testing our new processing arrangements. We are eager to share with them the advantages of substantial operational cost savings and protection from counterparty and settlement risks, in accordance with the IMA recommendations for greater use of electronic funds processing.”
Peter Fleming, head of UK investment administration at Skandia, added, “This fully automated processing solution is great news for the industry and Skandia supports it. EMXCo and Euroclear UK and Ireland are in an ideal position to offer this service which we expect will remove operational risk and improve efficiency.”
Both Euroclear UK & Ireland and EMXCo are subsidiaries of European post-trade firm Euroclear.