Small fall in Lux/Ireland fund automation rates

The level of automation in cross-border fund transactions has fallen slightly in both Luxembourg and Ireland.

Manual processes – seen as expensive and prone to errors – have increased, albeit by only a percentage point. The increase was linked to fund orders stabilising.

The European Fund and Asset Management Association (Efama) and Swift, which promotes standardisation in financial messaging, track automation rates. Rates have broadly increased over the last few years and now stand at 84.4% of the 16.6 million orders through transfer agents monitored by the end of June.

However, this was a slight fall from 85.4% at the end of 2015.

Messages using an International Organization for Standards protocol fell from just over 51% to exactly half.

Fabian Vandenreydt, of the Swift Institute, said: “With funds order volumes stabilising across Luxemburg and Ireland, it is not surprising to see the automation rates level off as well. Over the years we have seen a consistent increase with automation and adoption of ISO 20022 compared to proprietary formats.”

Automated fund processes are promoted as way of lowering costs and are under the spotlight as part of the wider debate about fund fee levels.

In the UK, a project called UK Fund Trading and Settlement (UK FTS) is reviewing how the £1 trillion domestic mutual funds industry trades and settles. It aims to “drive efficiency, remove costs and reduce risk” using a common set of standards. Emerging technologies and a common settlement utility are being considered.

The ‘Joint Efama/Swift Standardisation Report’ highlighted Italy, where 42% of orders for Italian funds and 18% of ‘round-trip’ funds are exchanged via ISO 20022 messages sent by distributors to asset management firms or payment agents.

Peter De Proft, Efama director general, said: “The report confirms that further increases in automation rate levels for fund orders and switches towards the ISO 20022 standard will depend on the efforts made not only by fund managers to adapt their technology and operational structures, but also by the fund distributors sending the fund orders.”

Ian Lyall, chief operating officer of financial technology firm Idea Group, told Funds Europe: “The tools for near comprehensive automation of these processes are now available in the shape of standards, market practices and technology solutions.

“However, firms need to allocate resources in order to implement them properly. With the increased regulatory focus on operational processes, the rationale behind doing this should be obvious.”

©2016 funds europe

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