Since the South African mutual fund industry is fragmented, with fund unit orders in a low-risk environment, the initiative aims to form a fully electronic environment for the industry and investors in local funds.
Further, Strate in collaboration with Euroclear is exploring opportunities so that they can work with the local industry to explore the implementation of an electronic and centrally hosted mutual fund settlement and custody platform for the South African market.
By boosting settlement and payment efficiencies, Strate and Euroclear will also investigate alternatives to offer centralized recordkeeping as well as create added benefit to the local fund market.
While reducing operational cost and thwarting associated risks, the main purpose of this planned initiative is to offer a platform where mutual fund transactions can be processed automatically, from order routing to settlement and asset servicing.
The robust and resilient platform will serve as an infrastructure for both domestic and international market participants, with settlement conducted in central bank money for South African investors.
Strate CEO Monica Singer said that 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," Singer added.
"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."
