ASX proposes funds transaction system

TheAustralian Stock Exchange(ASX) intends to proceed with a plan to develop a transactional processing service for unlisted managed funds.

The ASX has spent a year consulting with fund managers and financial services professionals and has completed a feasibility analysis of the provision of a more efficient electronic transaction process between fund managers, custodians, master trusts and distributors.

The idea is not new within the industry, as there has been previous acknowledgement from within the industry of the need for a system to simplify the transaction protocol between fund managers.

But the ASX says it believes it has enough support for such a system from industry players, and that the ball is now in their court to get the system started.

It says the first phase of the project will begin immediately and will involve getting industry commitment to the proposed service by ensuring the business model and functionality meets the needs of all participants.

“The first stage is particularly important because the service can only succeed if it genuinely meets the needs of industry participants,” ASX managing director and CEO Richard Humphry says.

“We regard this initiative as a key step in ASX’s long-term strategy of supporting markets across different investment products.”

The ASX says its existing competencies in transaction processing as exemplified by the SEATS and CHESS platforms is acknowledged by the industry, and would be a distinct advantage to the ASX in providing this service.

A commentator for a fund manager who does not want to be named says that his initial feeling is that the ASX’s proposed system adds another layer, and therefore costs, to the transaction process between fund managers. He says that at present transactions take about two days to complete, and questions whether the move to the ASX proposed system will be worth the additional costs.

ASX investor relations manager Chris Williams acknowledges that this might be the biggest sticking point among fund managers. However he says that in the course of their consultations, there was general agreement in the industry for the need to change from a process which is entirely paper based and involves multiple transactions per day and a high volume of money. He also says he understood transactions presently can take weeks to process.

But he says it’s foolish to deny the ASX has a commercial interest in it, but what’s important is that the system would be a natural fit with the ASX’s strategy which already provides business to business services, not just individuals.

As to particulars about what the ASX plans to rake in with such an initiative, Williams says that the idea has not been developed to that level of detail yet.

“We already have fee-per-equities trade for securities, so it would be no surprise to have a similar system for charging for this [new transaction system].”