Euroclear announces today a major new FundSettle initiative, with Europe's leading fund promoters, to entice fund distributors still processing fund transactions manually to automate and standardise their back-office practices. Fully automating transaction processing in the fund industry will save the market an estimated EUR 300 million.
With only about half of all fund transactions in Europe currently processed using automated solutions like FundSettle, overall costs and risks for end investors remain unnecessarily high and the growth potential for funds is restricted. Euroclear Bank, together with fund promoters that are eager to eliminate manual processing with all of their fund distributors, will provide financial incentives to fully automate.
Effective 1 September, savings will be realised across all FundSettle services: order routing, settlement and asset servicing. All asset servicing and custody-related services for distributors using the new FundSettle offer will be free of charge. Fund distributors using FundSettle’s automated STP services will pay fees as low as EUR 0.75 per transaction to route and settle a subscription or redemption order, compared with an average of EUR 7 today. Altogether, the new offering represents a price decrease of up to 85%. The cost of these incentives will be shared by fund promoters that make their funds eligible for fund distributors to benefit from these sizeable savings.
Gary Janaway, Head of Operations, Schroder Fund Services Luxembourg, highlighted: “FundSettle set the benchmark for service quality in the industry with the introduction of the FundSettle Premier label one year ago. The new pricing terms make for a compelling offering that is designed to appeal to distributors of investment funds operating across the globe. Euroclear’s FundSettle platform is now positioned to deliver higher levels of automation that will result in cost savings throughout the value chain.”
Also a supporter of the new initiative, Dan Watkins, Head of European TA at JPMorgan, said: “We are one of the FundSettle User Group participants that influenced Euroclear’s decision to rebalance FundSettle’s tariff. Although many efforts have been made, we need changes as bold as this to motivate the market to adopt full automation from routing to settlement and asset servicing. We remain very keen on being a driving force to a fully automated industry where manual intervention is the rare exception in processing transactions.”
Niek Molenaar, Member of the Management Board at Robeco Asset Management, added: “The time has come to make STP an everyday occurrence in fund processing, providing fund distributors with such an attractive offer they cannot refuse. We look forward to making fund operations easier and cheaper for distributors and fund managers alike.”
Ivan Nicora, Director and Head of Investment Fund Product Management at Euroclear, added: “This initiative is part of Euroclear’s strategy to create a highly automated pan-European order routing, settlement and asset servicing infrastructure for funds, similar to what Euroclear clients already have for their fixed income and equity transactions. Euroclear is the natural solution to eliminate fragmentation inefficiencies by consolidating European fund processing, as we already cover more than 60% of all fund assets via the five countries that are directly served by the Euroclear group and the cross-border fund business, such as Luxembourg, served by FundSettle. Our international client base processes more than 8.5 million fund transactions per year with us.”
By the end of 2008, Euroclear will have launched a single settlement solution for Belgium, France and The Netherlands called ESES (Euroclear Settlement of Euronext-zone Securities) upon which Euroclear plans to offer a single processing solution for fund transactions within, and between, these countries. Euroclear UK & Ireland and EMXCo are a few months away from launching the first comprehensive STP order-routing and settlement service for funds domiciled in the UK, Ireland and the Channel Islands. In addition, as economies of scale permit, we will continue to reduce our tariff accordingly. EMXCo recently announced a 15 to 24% fee reduction, depending on volumes, for its order-routing services.