UK Dealer Automates Fund Processing Through Euroclear
September 7, 2010
Brewin Dolphin has become the first U.K. retail broker-dealer to use Euroclear’s automated message routing system and two of its delivery versus payment settlement platforms to settle transactions involving U.K. and non-U.K. investment funds.
In a statement issued by Euroclear, Brewin Dolphin says that as a distributor of local and foreign investment funds to retail investors, using Euroclear allows it to more easily and more efficiently reach fund promoters, transfer agents and other relevant parties outside the U.K. to settle fund transactions.
“We have selected FundSettle and Euroclear UK & Ireland to settle fund transactions, as we believe the reach, automated features and comprehensiveness of their services will enable us to offer our clients more value at lower risk,” says John Beeston, director and group head of business support for Brewin Dolphin in London. “In addition to straight-through processing efficiency gains, we will be able to process a higher number of fund trades and promote a shorter settlement cycle.”
Brewin Dolphin had previously been using only Euroclear’s order routing system for U.K. investment funds, called the EMX message system, but was settling trades in U.K. investment funds outside the Euroclear settlement systems and not on a delivery-versus-payment (DvP) basis. That meant that cash and securities were not being exchanged simultaneously.
EMXCo, which owns the EMX messaging platform for investment funds, and Euroclear UK & Ireland have offered a combined order routing and DvP settlement of subscriptions and redemption in U.K. investment funds since linking their services in November 2009; EMXCo and FundSettle will connect later this month.
Euroclear UK & Ireland is the central securities depository for equities and bonds also owned by Euroclear SA; so is Euroclear Bank, the international securities depository in Brussels which operates the FundSettle platform.
That platform allows broker dealers and other firms acting as fund distributors to route subscriptions and redemptions in more than 43,500 investment funds to fund managers and transfer agents worldwide. It settles cross-border transactions and services assets in both U.K. and non-U.K. investment funds, while Euroclear UK & Ireland settles trades in UK funds between UK counterparties.
“Brewin Dolphin’s decision to migrate its fund business to Euroclear is a much appreciated vote of confidence, particularly when there are competing commercial solutions available,” says Ivan Nicora, director and head of investment fund product management at Euroclear in Brussels. Euroclear UK & Ireland and FundSettle will provide Brewin Dolphin with greater scalability and lower levels of risk through automation and DvP settlement.
Nicora did not name any competitors, but Calastone, the London-based order routing service provider for UK investment funds, has also begun offering settlement services. However, settlement is not on a delivery-versus payment basis and will not be recorded on the books of Calastone. Euroclear has previously said that, as a market infrastructure service provider, its processing services for investment funds would be more cost-effective than Calastone’s..
The U.K. investment funds industry is the fourth largest in Europe, according to the European Fund and Asset Management Association (EFAMA), a Brussels-based trade group. However, it still relies heavily on emails and faxes to process orders and the UK’s Treasury has estimated that the UK market could save between 70 million and 290 million pounds per year through automation.
