Fund-Technology.com

FundSettle prices to be reduced by 85 percent

Posted: 15 May 2008

Euroclear has announced a new FundSettle initiative to entice fund distributors to automate and standardise their practices. Moving away from manual transactions and fully automating processing in the fund industry will save the market about €300 million, it estimates.

Euroclear says that only about half of all fund transactions in Europe are processed using automated solutions. Overall costs and risks for end investors therefore, remain high and the growth potential for funds is restricted. Euroclear, 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 2008, 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 much reduced fees €0.75 per transaction to route and settle a subscription or redemption order, compared with an average of €7 today. Altogether, this 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 savings.

Dan Watkins, Head of European TA at JPMorgan, said: "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."

Euroclear will have launched a single settlement solution for Belgium, France and The Netherlands called ESES (Euroclear Settlement of Euronext-zone Securities) upon which they plan to offer a single processing solution for fund transactions within, and between, these countries. Euroclear UK & Ireland and EMXCo are launching the first comprehensive STP order-routing and settlement service for funds domiciled in the UK, Ireland and the Channel Islands.

Click here for more information on Ireland

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