After 12 months of operation in Europe, Euroclear is about to start marketing its FundSettle platform to Asian distributors of mutual funds. Designed to streamline the placement, processing and settlement of fund sales and redemptions, the system will be first offered in markets with high offshore fund penetration such as Hong Kong and Australia.
FundSettle allows third party distributors to process mutual fund sales and redemptions through an electronic platform using web technology. The system already gives distributors in Europe access to 13,000 funds registered in offshore jurisdictions such as Dublin, Luxembourg and the Channel Islands. By the end of this year, Euroclear hopes to offer access to a complete range of domestic funds located in Germany, France and the UK.
The system has two modules. The first processes orders from distributors by forwarding them to the relevant transfer agency. Once a confirmation has been received, the system then books the shares to the distributor's account and generates a payment. The second is a corporate action module that allows for electronic dividend payment and proxy voting for clients.
"The system is backed up by an extensive database on mutual funds from around the world," says Barbara Vuylsteke, director of Euroclear in Brussels. "The database includes both static and dynamic information. The static information includes the name of the funds, cut off times, frequency of dealing etc, while the dynamic information gives net asset value calculations." The NAV data is updated either daily, weekly or monthly depending on when a fund is valued.
Vuylsteke says FundSettle gives distributors a single point of access to hundreds of transfer agents thereby providing them with significant back office savings. "The biggest cost for distributors can be the reconciliation of the order with a cash payment," she comments. "By offering reconciliation online from one central point, we can bring the cost of this process down by 50% to 60%."
FundSettlecovers funds in all asset classes including equity, bonds, sector funds and some hedge funds. The system is real time and can be accessed 22 hours per day.
Distributors pay for the service on a fee per order basis plus a servicing fee for access to the corporate action and fund information databases. FundSettle can be accessed through the public internet or, for high volume users, through an electronic file transfer system.
The set-up cost for internet users is relatively low, requiring only the installation of a smart card reader for security purposes. "For high volume users we recommend that they deal with us by file transfer which involves a little more work on building an interface," says Vuylsteke. Users must also ensure that their back office operations have been adapted to allow for electronic reconciliation before migrating across to FundSettle.
