Highly Confidential. Not for general public
distribution
UK Fund Trading and Settlement initiative
Progress update
8 December 2016
FTS Programme team
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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
|2 UK Fund Trading and Settlement
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
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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
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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
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Provider firms
Over 20 leading providers supporting initiative
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Supporting firms
Coordinating with the 5 leading Trade Associations
Supported by 3 professional services firms
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Current structure
Steering Group Executive Group
Industry Delivery
Platform Limited
Working Groups
All firms
represented
under NDA
Trade associations
provide oversight
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Success principles8 principles underpin the initiative
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5
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7
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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
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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
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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
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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
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How the solutions varied
New entrant /
existing model
Incumbent
New entrant /
new model
Consultancy /
support servicesPartial scope
(mainly trading)Fuller scope
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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FTS membership
Extending FTS membership in 2017
Opportunity to join the FTS Steering Group
Contact Ed Dymott, Phil Hine or Charles
McCready
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Questions ?