uk fund trading and settlement initiative fund trading and settlement initiative progress update 8...

Highly Confidential. Not for general public

distribution

UK Fund Trading and Settlement initiative

Progress update

8 December 2016

FTS Programme team

|1 UK Fund Trading and Settlement

Agenda

00:00 – 00:05

00:05 – 00:15

Welcome and Introductions Ed Dymott

Reminder of FTS initiative Ed Dymott

00:15 – 00:30 Overview & conclusions from RFI process Ed Dymott

00:30 – 00:35 Introducing next steps Ed Dymott

00:35 – 01:20 2017 programme structure and up date Programme

leads

01:20 – 01:30Wrap up Charles

McCready

01:30 – 02:00 Open Q&A session Charles

McCready


Objectives of this session

1 Remind you of why this initiative was set up

2 Update you on progress to date

3 Outline next steps

4 Get your support

5 Answer any questions or concerns

Project overview


Why did we start FTS?

Drive efficiency in the distribution of mutual funds

within the UK

High levels of complexity and still manual

processing in fund distribution

Lack of agreed common standards

Adoption of solutions is slow and challenging

Need to reduce cost, complexity and risk


FCA Asset Management Market Study

• The FCA initiative AMMS is

focussing on competition and

market efficiency

• There is a need for the industry

to respond Drive efficiency in lower fee world

Demonstrate it has the infrastructure

and initiatives to take action

• The FTS initiative is helping to

drive efficiency and industry

collaboration around fund

distribution


Provider firms

Over 20 leading providers supporting initiative

http://thetaforum.co.uk/

http://thetaforum.co.uk/


Supporting firms

Coordinating with the 5 leading Trade Associations

Supported by 3 professional services firms


Current structure

Steering Group Executive Group

Industry Delivery

Platform Limited

Working Groups

All firms

represented

under NDA

Trade associations

provide oversight


Success principles8 principles underpin the initiative

1

2

3

4

5

6

7

8

Increase operational

efficiency

Reduce total industry costs

Reduce risk

Enable different business

models

Drive common standards

to improve accessibility

Create future proofing

Deliver quick, incremental

benefits

Put in place appropriate

governance


Timeline of progress to date

February

Agreed with trade bodies to launch initiative. Set up IDPL company

April

Launch confirmed to market. 25 founding firms

June

RFI launched to look at fund trading and settlement solutions

August / September

Analysis of RFIs

October / November

Development of programme structure and next steps

2016

RFI Overview


Background

• RFI was set out to

engage with potential

suppliers of services

• Process ran from 13th

June to early August

• Open to any provider

who was interested in

engaging in process

• Looked to ensure

broad participation

Scope

• Fund trading

• Settlement

• Corporate actions

• Asset servicing

• Fund data

• Legal Agreements

Other requirements

• Disaggregated trading

• Net settlement

• Linking trading,

settlement and

reconciliation

processes

• Non functional support

RFI background


15 providers expressed an interest, 13 responded formally

Mixture of existing providers, providers from other

markets, and completely new start ups

Around 2000 pages of content (thanks!)

Mixture of responses – some very full comprehensive

solutions – some more discussion led

What we got back


How the solutions varied

New entrant /

existing model

Incumbent

New entrant /

new model

Consultancy /

support servicesPartial scope

(mainly trading)Fuller scope


How the solutions varied

New entrant /

existing model

Incumbent

New entrant /

new model

Consultancy /

support servicesPartial scope

(mainly trading)Fuller scope

Helpful to the

process, but not a

solution

Partial solution

but not complete

Interesting, but all

different solutions

Real potential but

implementation will

be highly complex


Key learnings

Alignment around problem / opportunity

No complete solution in the market today

Mixed maturity in different offerings / scope

Previous attempts to do this haven’t worked

Limited innovation and lots of debates around

future technology solutions e.g. Blockchain


What RFI responders told us

Desire for more common open standards

Concerns over single utility model limiting

innovation and competition

Most of the solutions already exist – and

should be leveraged to get quick benefits

Adoption is critical issue to solve to create

scale and efficiency

Industry governance and decision making

needs improvement


Hugely valuable exercise as it has enabled

– Awareness of opportunity and engagement with the industry

– Understanding of different business models

– Understanding of key issues

– Started to think about potential future state

Scope of initiative was very broad (possibly too broad)

– Allows next steps can be focussed on to specific high priority issues

Some areas of scope no longer required

– Disaggregation not required – but more flexibility definitely an area of

interest

Conclusions from RFI process

Introducing the next steps


The FTS initiative will continue to progress in 2017

1. More tightly focussed scope

2. Move to “implementation”

3. Seeking to develop quick wins in 2017

4. Broaden membership


Programme will be broken down into 6 key initiatives

1. Industry

standards &

governance

John Salmon

(Hogan Lovells)

2. Fund trading

Phil Hine

(Old Mutual)

3. Fund

Settlement

Christopher James

(FNZ)

4. Fund data &

pricing

Jon Thompson

(Zurich)

5. Service level

agreements

Danny Wynn

(Fidelity)

6. Future

technology

application

Charles McCready

(FTS)

Overview of initiatives and approach


Background

• No industry body to

develop, manage and

implement standards

• Industry has no real

means to “join up” to

collectively work on

common solutions.

Needs appropriate

governance framework

• Driving adoption is

critical issue to solve.

No means for creating

“industry” demand

• Some processes have

no agreed standards –

so need to be

developed

Approach

• Create new cross

industry body

• This body will

Create and

oversee standards

Facilitate the

implementation of

new standards

Provide

governance of

best practice

Help coordinate

and manage

adoption / demand

Next steps

• New body to be set up

• Providers and

suppliers will be able

to become members

• Governance

framework to be

established to support

Funding

Competition policy

Membership

structure

Governance

structure

1. Industry standards and governance


Background

• Fund trading is well

established with high

levels of automation

• Solutions do not

currently interoperate

• Some distributors want

to increase dealing

frequency e.g.

disaggregate some

trades

• Disaster recovery

processes need

improving

• Commercial model of

fund manager pays

may not create the

right incentives

Approach

Run consultation process

covering

• Aligning behind a

common standard

• Increasing dealing

flexibility without

raising costs

• Improving disaster

recovery processes

• Alternative commercial

models supporting

Interoperability

Alternatives to

only fund manager

paying

Next steps

• Issue consultation

paper to industry on

key themes

• Engage with existing

suppliers on key

themes

2. Fund Trading


Background

• Fund settlement

currently uses multiple

rather common

standards

• Solutions do not

currently interoperate

• Benefits of moving to

central fund settlement

models in the long

term

• Distributors and fund

managers would like to

enhance net

settlement capability

• Opportunity to

enhance liquidity

management

Approach

Run consultation process

covering

• Aligning behind

common standards

• Developing

interoperability

between fund trading

and settlement

• Increasing adoption of

central fund settlement

models

• Net settlement across

all suppliers offering

settlement services

• Improving liquidity

management

Next steps

• Issue consultation

paper to industry and

suppliers on key

themes

• Engage with industry

and suppliers

3. Fund Settlement


Background

• Fund prices and data

being supplied to and

collected from multiple

sources

• High degree of manual

processing still

required across fund

pricing, standing data

and documentation

• Corporate actions

require considerable

manual processing

• Limited standardisation

for fund documentation

• Suppliers not standing

behind accuracy of

fund prices

Approach

Ongoing review of

potential benefits

• Opportunities to

standardise collection

and distribution of fund

prices, data and

documentation

• Availability of prices

from a single source

that can be used for

dealing

• Opportunities to

increase levels of

automation

• Increasing industry

control over standards

and automation

Next steps

• Engaging with wider

industry

• Engage with existing

suppliers on key

themes

4. Fund pricing and data


Background

• Very large number of

distributor agreements

with range of SLAs

that are broadly similar

• Significant industry

effort and cost

associated with

negotiating terms each

time an agreement is

entered into

• Opportunity to

standardise key SLAs

based whilst facilitating

ability to tailor to

support and encourage

USPs

• Commercial terms are

out of scope

Approach

Identify key benefits and

governance

• Define SLAs that are

common in distributor

agreements and

establish good practice

standards

• Develop mechanisms

for storage, version

control and distribution

• Develop a migration

approach to good

practice SLAs

• Develop mechanisms

to manage future

operational and

regulatory change

Next steps

• Engage with legal

support to assess key

opportunities to create

good practice SLAs

• Engaging with wider

industry

5. Service Level Agreements


Background

• New technologies

coming to market and

reviews being

undertaken individually

by firms

• Opportunity to create a

forum that facilitates

sharing of expertise

and helps firms keep

up to date with

advances in

technology

• Helps develop some

consensus views on

new technologies

• Growing part of FS

business

Approach

• Provide a forum that

meets regularly to

discuss new

technologies

• Leverage forum

membership to identify

new technology

• Collaborate to review

new technologies

• Share lessons learnt

• Provide a forum for

suppliers to present to

multiple prospective

interested parties

simultaneously

Next steps

• Establish forum in 2nd

half of 2017 as part of

new industry body

5. Future Technology Application


Next steps

Programme will progress 5 workstreams in

parallel. Future technology group is being

deferred for time being

IDPL will provide support to the project whilst

the future role of the new industry body is

defined - will also be looking across other

initiatives that involve industry standards

Consultation on fund trading to start in

January 2017

Consultation on fund settlement to start in

January / February


Next steps

Review of opportunities to standardise SLAs

to be undertaken in early 2017, followed by

wider industry engagement and proposals for

implementation

Initial fund pricing, data and documentation

review completing in early 2017 followed by

wider engagement with industry and suppliers

Ongoing engagement with FCA and Treasury


FTS membership

Extending FTS membership in 2017

Opportunity to join the FTS Steering Group

Contact Ed Dymott, Phil Hine or Charles

McCready


Questions ?

uk fund trading and settlement initiative fund trading and settlement initiative progress update 8...

Documents