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Euroclear UK & Ireland and EMXCo have launched a fully electronic and integrated order routing and settlement solution for UK fund transactions.

According to HM Treasury, the UK funds industry could save GBP70m to GBP290m per year by embracing processing automation in place of paper-based fund unit settlement.

A typical distributor settling around 10,000 transactions a month may today expect to pay up to GBP50,000 per month for administering these settlements and subsequent reconciliations.

Under the new automated service, the same distributor doing the same levels of business can expect a monthly bill for all balance reconciliation, transaction management and communication charges of less than GBP8,000.

Clients processing lower volumes of transactions can also expect to make significant savings.

Firms including Brewin Dolphin, Cardale, Charles Stanley, Direct Sharedeal and Rathbones have already signed up to the service.

Yannic Weber (pictured), chief executive officer of EMXCo and Euroclear UK & Ireland, says: “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. What is more, we are live now. And 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, adds: “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.”

In addition to cost savings, the new service aims to deliver decreased settlement risk and fewer errors in processing and transaction reporting; up-to-date fund balances based on processed transactions at Euroclear UK & Ireland which are reconciled with the fund register on a daily basis; settlement within four business days, as compared with up to ten days today; and electronic exchange of key transaction information among all relevant fund market participants.

Initially, funds domiciled in the UK, Channel Islands and Isle of Man are eligible for this service. The coverage of funds is intended to be expanded in the future.

Euroclear acquired EMXCo in 2007.


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