A fragmented, inefficient and potentially risky market, South Africa may soon get an electronic and centrally hosted mutual fund settlement and custody platform.
The local central securities depositary Strate and Euroclear, a settlement system for securities transactions, have joined forces to explore a new approach to automate the processing of mutual fund transactions.
They say their aim is to establish a fully electronic environment for the industry and investors in local funds with a centrally hosted mutual fund settlement and custody platform.
In South Africa, the market is fragmented, with no automated way to link cash payments with fund unit orders in a low-risk environment.
Furthermore, Strate and Euroclear will investigate possibilities to centralise record-keeping as well as create added benefit by improving settlement and payment efficiencies.
Monica Singer, chief executive officer of Strate, says there are inefficiencies and risks at present in the mutual fund industry.
“The fund unit and cash components of mutual fund subscriptions and redemptions in the South African market are credited or debited several days after cash has been received for settlement,” she says.
The South African mutual fund industry is valued at around 1.3 trillion South African rand (€91 billion); its 42 asset managers offer 1,200 active funds.
Lieve Mostrey, chief technology and services officer of Euroclear, says she hopes the initiative will attract other markets to share the same technology.
©2013 funds europe
