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• In the UK EMX has about 55% of the STP market, Calastone around 25%,
fundsettle and vestima about 10% and file transfer the remaining 10%.
• Funds are not assets they’re products
• Funds are complex to process - initial and trail commission, rebates
• Funds are highly regulated, e.g. KYC and AML obligations
• KIIDs requirement (Key Investor Information Document) as part of UCITS IV
will make STP more complicated
• How to automate in the UK? The problem is not transfer agents or promoters –
all have invested heavily in systems. There are plenty of solutions
• The problem is getting the distributors to use them
• In the UK we have a variety of distributors – stockbrokers who prefer Crest
and smaller IFAs who are much less keen to automate
• Distributor systems (such as 1st Software or Adviser Office) need to be linked
in to automated solutions, but too many small IFAs are not prepared to make
the investment
• At the end of the day the bodies that will drive automation are the distributors
not the product providers.
• So to answer the question, Is the fund industry still in the 20th century?
Hopefully I’ve shown it’s not, but I would suggest that some distributors and
regulators still are!
The industry has one foot in 20th and one in the 21st century.
Why? Although there are industry standard protocols for funds (messaging and
processing) they have not been adopted as they could have been by the industry.
Young, vigorous fast growing organisations with more agile development can bring
and have brought change to the industry faster than the incumbents institutions.
To compensate for the lack of progress at the core of the funds industry, intermediate
bodies, such as Cofunds, are providing C21st funds processing:
Witness: When dealing with Cofunds 99.8% deals in funds are STP; settlement
is contractual and netted to a single payments as is the payment of
distributions on fund manager pay date, off market transfers complete in 24hrs
in many cases, holdings can be reconciled daily, and trail is calculated daily.
Messages are ISO compliant but other formats are also available. Cofunds has
days of 750,000 transactions.
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