Euroclear UK & Ireland. Investment funds service. The UK s leading automated funds processing solution

Transcription

1 Euroclear UK & Ireland Investment funds service The UK s leading automated funds processing solution

2 Revolutionising the UK funds industry Euroclear UK & Ireland s Investment Funds Service is the UK s leading automated fund processing solution. It provides true STP from order routing through to real-time settlement and reconciliation. Euroclear UK & Ireland s investment fund service allows you to monitor your fund positions throughout the day and manage your cash more easily. You benefit from significantly reduced delays and risk and lower costs. The UK s top 15 fund promoters are already onboard and there are more to come. The problems associated with funds processing are well known. Processes are often manual, costs and risks are unacceptably high and the date of settlement is often uncertain. This lack of standardisation is restricting the fund industry from reaching its full potential. Our decision to house unit settlement and cash reconciliation with Euroclear significantly enhances the security and automation of the end-to-end process for our customers, which are the leading UK platform providers. Christopher James, Managing Director, Wealth Services, FNZ Euroclear UK & Ireland is addressing these time-consuming, inefficient and unnecessarily expensive processes. Developed in partnership with 65 industry professionals from 39 funds organisations, our funds settlement service provides a single point of input and full automation for the funds industry. Bringing automation to manual processing Euroclear UK & Ireland funds settlement is the first integrated, electronic order routing and settlement infrastructure for UK fund transactions. The solution: provides settlement within Euroclear UK & Ireland s system on T+4 1 basis, helping you to better realise your cash management potential allows you and your clients to monitor fund positions as they settle throughout the day and reconcile in real time. You can also handle any exceptions via Euroclear UK & Ireland s system as they occur enables paperless transfers within Euroclear UK & Ireland s system and automates corporate action processes For the first time, players can benefit from the same proven efficiency and reliability of systems used for other security types administered in the UK and Ireland. This allows you to take advantage of the equivalent economies of scale this provides. 1 Transfer of legal title takes place outside of Euroclear UK & Ireland s CREST system, when the legal register is updated.

3 How the service works 1. Subscriptions/redemptions IFA order Platform/ Distributor Settlement instruction Reconciliation Retail client order EMX Message System Settlement instructions Optional direct input CREST settlement system order electronic contract note Product provider/ third-party administrator Settlement instruction Reconciliation Corporate action processing EX315 A major step forward in process automation and the mitigation of operational and credit risk. Peter Fleming, Head of Investment Administration at Skandia 1. A retail client places an order with his IFA to subscribe to or redeem units in a fund. 2. The distributor routes the order either to the EMX Messaging System or via other methods to the fund manager. 3. The EMX Message System automatically routes the order to the fund manager (product provider). The fund manager completes the order by sending an electronic contract note to the distributor. 4. Settlement instructions are sent to Euroclear UK & Ireland, either bilaterally or automatically via the direct input option through the EMX Message System. 5. Euroclear UK & Ireland processes the instructions (both the cash and unit aspects) and electronically confirms the details of the matched transaction with the fund manager and the distributor. 6. On Intended Settlement Date (ISD), Euroclear UK & Ireland debits and credits the distributor s and fund manager s securities and cash accounts. It reports the settled transaction to the fund manager and the distributor. The distributor then informs the retail client. The movement of securities in Euroclear UK & Ireland s system is made simultaneously against the movement of cash on the books at the settlement banks.

4 7. A Register Update Request (RUR) is sent to the fund manager. Registrars and fund managers are allowed a two-hour period for RUR acceptance. 8. Transaction status reports, open and settled balances and open and settled transaction reports are available in real time via Euroclear UK & Ireland s system. This allows distributors to plan present and future cash requirements and to handle any exceptions. 2. Reconciliations/account holdings Member account Member account Member account A B 25,000 6,500 A B C 5,000 6,500 8,500 A B 19,000 4,000 M&G BNY Alliance Trust CREST system Member accounts Created by the participant Reflected on the register Member PART ID: CREST Member (Participant) A B C M&G 25,000 BNY 5,000 M&G 6,500 BNY 6,500 CAZ 19,000 BNY 8,500 CAZ 4,000 EX316 The accounts held in Euroclear UK & Ireland s system reflect the balances held by the fund manager. Distributors holdings are held in member accounts which are reconciled nightly with fund managers. At any time during the operational day, real time balances of your entire holdings are available. Regulatory distributor asset reconciliation obligations, as laid down by the FCA, can be fulfilled by using the balances held within Euroclear UK & Ireland s system.

5 3. Corporate actions Income distributions will be credited to your Euroclear UK & Ireland member account 2. Fund managers can credit securities and cash distributions directly to the distributor s member accounts. Distributors and fund managers can monitor their distributions via Euroclear UK & Ireland s system. Securities movements made as a result of fund mergers and wind-ups are applied to distributors accounts on the merger date of the event. 4. Transfers Unit movements between Euroclear UK & Ireland member accounts as the result of re-registrations are performed by matching distributor instructions. Fund manager registrar updates are acknowledged as with subscriptions and redemptions. Switches and conversions are actioned on Euroclear UK & Ireland member accounts as the result of fund manager or matched distributor instructions. Your member account stock balances are kept in alignment with the legal register. This is updated as a result of conversions or transfers. 2 All securities in Euroclear UK & Ireland s system are held in member accounts within a Euroclear UK & Ireland membership.

6 Benefits for intermediaries Reduced risk and errors our STP service automates funds processing from order routing through to settlement. No manual intervention is required. Settlement within 4 business days compared with up to 10 business days today. There is also a much greater chance of settlement on ISD because Euroclear UK & Ireland can match instructions from the fund manager and distributor from or after order confirmation. We expect to see real improvement in our transaction settlement, cash and fund unit balance reconciliations, re-registrations and portfolio transfers as a result of the electronic and automated features of Euroclear UK & Ireland s investment fund service. Gary O Brien, Head of Client Services Old Mutual Global Investors Get a real-time view on your funds holdings benefit from up-to-date fund balances based on processed transactions at Euroclear UK & Ireland which are reconciled with the fund register on a daily basis. This reduces your operational risk and helps you to provide your clients with improved accounting services. Manage your cash flow more easily and reduce funding costs our solution credits payment into your Euroclear UK & Ireland account on ISD. Cash settlement is also likely to happen earlier on ISD, because Euroclear UK & Ireland s system processes most settlements between 06:00 and 08:00. In addition, our reports make it easier to forecast your future cash requirements and meet your funding obligations. Uses existing functionality you can continue to use the same formats and mechanisms you use with the CREST system. Increased back-office efficiency automation means that delays associated with faxing and mailing documentation are eliminated. Information can be accessed quickly and easily, resulting in an immediate and substantial reduction in manual workload and its associated costs. Real-time reporting also lowers the number of processing-related queries. True exception processing of unmatched transactions and reconciliation failures increases efficiency and significantly reduces administrative workload. Fewer exceptions should be experienced due to settlement matching and resource management. Transparency of order flow and settlement process with full audit trail you see the full lifecycle of any individual trade, allowing you to recall transactions and balances quickly and easily. Paperless transfers once funds are held in Euroclear UK & Ireland s system, paperless transfers can take place via the matching of free of payment instructions. Fund providers are able to acknowledge the transfer and update the register within two hours of settlement. A range of corporate action services reducing processing time and increasing efficiency (see page 4 for more details).

7 Benefits for product providers/third party administrators Improved inventory management reports available from Euroclear UK & Ireland allow you to forecast your future cash requirements and meet your obligations. Cash settlement on ISD is likely to happen between 06:00 and 08:00, enabling you to receive cash earlier in the day. Fully automated cash settlement of funds subscriptions and redemptions allows you to automatically provide the settlement and reconciliation of your fund holdings across a large distributor base. Reduce your manual workload STP allows you to automate the settlement and reconciliation aspect of your operations. This will supersede fax, phone and other manual methods of reporting settlement status to your clients. Complete scalability increased order volumes do not mean increased settlement costs. Improved settlement efficiency by matching the orders provided by both distributor and product provider ahead of settlement date, settlement problems and failures are visible and easier to handle and less likely to occur. Transparent exceptions handling also allows you to handle fails more efficiently. Dramatic reduction in counterparty risk any cash movements made across the cash memorandum accounts within Euroclear UK & Ireland are simultaneously moved in the Bank of England between the accounts of the settlement banks involved. Finality of cash settlement is therefore achieved on settlement of the transaction in Euroclear UK & Ireland. Paperless transfers once funds are held in Euroclear UK & Ireland s system, paperless transfers can take place via the matching of free of payment deliveries. Fund providers are able to acknowledge the transfer and update the register within two hours of settlement.

8 A global funds processing solution for Europe Euroclear UK & Ireland funds settlement is another step towards fulfilling our ultimate vision of a pan-european order routing, asset servicing and settlement solution for the funds industry. We aim to offer full STP between the Euroclear group CSDs, covering all aspects of the funds life cycle. To achieve this, Euroclear launched an automated link between FundSettle, Euroclear Bank s platform for automated cross-border fund processing and the EMX Message System. This provides clients of the EMX Message System with expanded access to the cross-border market. Putting the client at the heart of what we do is one of our key principles. Together with Euroclear, we are committed to supporting the drive to improve order routing and settlement for the industry. An important component of this initiative is to offer you a choice of message formats to communicate transaction information. You will have the choice of using FIX (the UK standard today) or ISO standards (a more universal standard). This syntax-neutral solution will allow you to automatically route and settle fund transactions without needing to change your existing communications infrastructure. By developing further interoperability between the existing systems, the need for new investment will be minimised and our clients will be able to benefit in the short and medium term. Importantly, you will be able to pick and choose the services you want to use and access the funds of one or all of the markets covered by Euroclear. Mike Morecroft, Director of Client Operations, Henderson

9 Further information A wide range of documents can be found at including: Euroclear UK & Ireland funds settlement white book Definition of market practice for settlement of UK funds blue book A guideline to funds settlement pricing Migration of funds in the CREST system to enable settlement of funds in CREST Euroclear UK & Ireland operates the CREST System, one of the largest and most technically advanced settlement systems in the world. It offers real-time settlement for Irish, UK, Jersey, Isle of Man, Guernsey and international securities. Each day we receive around 1.7 million transactions for settlement in over 16,000 securities, with a daily value in excess of GBP 1.5 trillion. The EMX Message System is the leading UK-based electronic funds messaging platform. For over a decade, it has been working to reduce risk and cost in the UK funds industry through the automation of funds order routing. It is operated by Euroclear UK & Ireland. With 520 fund intermediaries and some 245 fund managers onboard, it processes in average 3.3 million messages a month. Use of the EMX Message System is free of charge to distributors for purchase, sale, valuation and reconciliation messages. Contact us For more information, please contact your Relationship Manager or the Sales Team: [email protected] +44 (0) (option 6)

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12 2014 Euroclear UK & Ireland Limited is the operator of the CREST settlement system and the EMX Message System, and is incorporated in England and Wales under registered number with its registered office at 33 Cannon Street, London EC4M 5SB MA0437 Euroclear is a carbon neutral company PAS2060 certified in