Ireland Lags Luxembourg in Standardized Messages
December 7, 2011
The use of automated communications for subscriptions, redemptions and switches in Ireland and Luxembourg – is on the rise but Ireland is still far behind its rival when it comes to using standard message types.
That was the conclusion of a study just released by Society for Worldwide Interbank Financial Telecommunications (SWIFT) and the European Fund and Asset Management Association (EFAMA) on the level of automations and standardization for orders on Irish and Luxembourg domiciled funds. Ireland and Luxembourg are considered the biggest cross-border markets for investment funds in Europe.
The study surveyed 31 transfer agents in total between January and June 2011 covering over eighty percent of order volumes in both locations. Of those 31, 20 were based in Luxembourg and 11 in Ireland.
The EFAMA, the Brussels-based trade group representing the European investment funds industry, has endorsed the use of ISO message types since 2005. The joint survey with SWIFT was based on orders, redemptions and switches received by transfer agents who provide recordkeeping services for investment funds. The orders are coming from distributors worldwide – such as banks, investment managers, custodians and brokerage firms.
About 70.1 percent of the orders and subscriptions for Luxembourg-based funds were sent in some electronic fashion – either proprietary file transfers or using International Organization for Standardization (ISO) compliant message types. About 75 percent of the automated communications was done using either older ISO 15022 or newer ISO 20022 messages. Messages in those formats are sent over the network operated by SWIFT, headquartered in La Hulpe, Belgium.
About 84.2 percent of the orders and subscriptions for Irish-domiciled funds were sent in some electronic fashion. But only 11 percent of the automated orders were sent using ISO 15022 or 2022 messages.
The figures did show some progress from the 2010 results. For the first half of 2010 about 69 percent of the orders for Luxembourg-domiciled funds were sent in electronic fashion. Of those about 70 percent were sent using ISO 15022 or 20022 message types.
For Irish-domiciled funds about 85.3 percent of the orders and redemptions were sent in electronic fashion. Of those electronic orders and redemptions only 8.5 percent were sent using ISO 15022 or 20022 message types.
The reason: investment funds and transfer agents in Luxembourg have taken a common stance in favor of standardization and have been successful in pushing for the adoption of ISO messages in Europe or other parts of the world.
“The Luxembourg market has been at the forefront of adopting EFAMA’s recommendations to use ISO 20022 standard messages and Ireland is actively following suit,” says Marco Attilio, head of funds for securities markets at SWIFT. “However investment funds active both in Luxembourg and Ireland are crucial in pushing for further standardization as it allows them to reduce their costs. Distributors of both Irish and Luxembourg investment funds are also starting to see the benefit of using ISO standards with multiple counterparties and across multiple business lines.
Although SWIFT has permitted of its network to use either ISO 15022 or 20022 message types such will not be the case for long when it comes to the investment funds industry. In line with EFAMA’s recommendations to use ISO 20022 as the single standard for funds processing in Europe, orders, subscriptions and other communications between distributors and transfer agents will have to use the ISO 20022 message types as of end 2015.
