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.
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.