Euroclear and EMXCo Go Live with Cash Settlement for UK Funds

EMXCo and Euroclear UK & Ireland have completed the first important phase in their joint efforts to deliver integrated order routing and STP settlement for transactions in UK, Irish, Guernsey, Jersey and Isle of Man domiciled funds. The Funds Liaison Group, comprising 15 senior executives from across the fund industry, unanimously endorses the approach after completing extensive market consultation on the solution’s blueprint.

Euroclear Cash Settlement for Funds will significantly shrink processing costs and alleviate administrative burdens as it combines a major force in fund order routing - the EMX Message System - with Euroclear UK & Ireland’s proven settlement and safekeeping infrastructure that is already used for UK equities and fixed-income transactions. In this phase, orders placed through the EMX Message System are routed to Euroclear UK & Ireland, which settles the cash movement of the transaction.

In 2009, Euroclear UK & Ireland intends to launch a second phase which, along with automated settlement of the cash aspect, will also reflect funds unit movements in notional client accounts. The actual legal record will still be maintained and updated by the fund manager outside the system. A change in UK law is also proposed that would eliminate the need for paper-based procedures in transferring title in UK-authorised funds by third-party administrators. “This is a huge step forward in bringing automation to a key asset class in the UK. We are on the way to eliminating manual intervention, decreasing settlement and market risks, and ultimately reducing processing costs to levels comparable with equities. I commend the work done by the Funds Liaison Group in driving broad market consultation and gaining market-wide acceptance so quickly for this automated solution,” said Yannic Weber, chief executive officer of Euroclear UK & Ireland, in a press release.