Euroclear and South Africa’s CSD plot fund platform
South African central securities depository Strate and Belgium’s Euroclear are planning a new collaboration to make South Africa’s mutual fund transactions more electronic – including the creation of a centrally hosted mutual fund settlement and custody platform.
According to the two firms, current administrative processes for the country’s mutual fund industry are fragmented, with no automated way to link cash payments with fund unit orders in a low-risk environment. Strate and Euroclear are also looking at a number of other measures, such as options to centralise record keeping.
The central idea is to reduce costs and diminish risk by developing a more efficient platform for fund transactions. The new platform would feature automated processing from order routing to settlement and asset servicing. Settlement would be in central bank money.
“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,” said Monica Singer, chief executive at Strate. “We will investigate how Strate can improve this process, potentially centralising fund ownership registration and delivering a safer and more efficient means to enable our local fund industry to grow.”
The South African mutual fund industry is valued at around €91 billion, spread between 42 fund management companies and 1,200 active funds. At the same time, in South Africa an estimated 22 million people earn less than €227 a month. Of these, 66% do not have bank accounts.