A consortium of financial services and IT companies is about to launch a free set of open standards t...
The consortium, headed by Cap Gemini and including III and Assureweb, has produced a set of protocols designed to allow the straight-through processing of investment fund transactions, including buying, redemption, switching and getting account information.
If the scheme takes off, it will mean that link-ups between distributors - especially online distributors - financial portals, fund supermarket sites and fund administrators will use standardised, XML-based protocols for transactions. Hopefully, this will make global distribution of funds easy, fast and cheap.
There are several methods of centralised trading and they all cost money. EMX in the UK is essentially a messaging hub through which requests are routed. Euroclear and Cedel are clearing houses who offer a full service, but the price of the service tends to make it only worthwhile for institutional investors with large trades.
According to 1998 figures from Autif, the UK's fund association, 43% of UK fund transactions by value came from IFAs and directly from investors. By volume, that accounted for 93% of all transactions.
Michael Fordham, head of business development for Cap Gemini, thought there were enormous potential efficiency savings to be made on the low value, high volume side. The ideal end result of the scheme would be to allow an IFA to make online subscriptions, redemptions and get account details from a financial portal. The portal would use a standard language to automatically make the transactions with all the fund administrators or managers for fast, cheap, straight-through processing.
The consortium already has the support of some of Europe's largest fund administrators - EFA and FETA in Europe and Mellon in the UK and Dublin. But despite a good deal of enthusiasm for the scheme, there is a big difference between fund managers and administrators when it comes to action.
Fordham said: "A lot of fund providers are so slow in this area it's frightening. However, third-party fund administrators generally recognise that increased efficiency gives them a real competitive edge."
Due to this disparity, Cap Gemini has been concentrating on wooing the fund administrators. In continental Europe the majority of fund product providers use them but this is not the case in the UK and UK distributors could be in danger of starting the e-commerce race later than everyone else.
Actual settlement of transactions is not yet implemented but the consortium are looking at various ways of introducing this. Adding this service should substantially enhance the project.
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