Strate, South Africa’s licensed central securities depository and Euroclear, provider of cross-border settlement and services for bond, equity, derivatives and fund transactions, have signed a letter of intent to explore a new way to automate the processing of mutual fund transactions in South Africa.
The initiative is strategically aimed at establishing a fully electronic environment for the industry and investors in local funds.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
According to Strate, the current administrative process related with the South African mutual fund industry is fragmented as there is no automated way to link cash payments with fund unit orders in a low risk environment.
With the partnership with Euroclear, Strate plans to develop an electronic and centrally hosted mutual fund settlement and custody platform for the South African market.
Through the platform, mutual fund transactions are processed on an automated basis from order routing to settlement and asset servicing.
Strate and Euroclear will also investigate options to centralise recordkeeping as well as create added benefit by improving settlement and payment efficiencies.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe firm added that the new end-to-end solution would be robust and resilient to serve as an infrastructure for both domestic and international market participants, with settlement conducted in central bank money for South African investors.
Monica Singer, Strate’s CEO, said: "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.
"Our next steps include engaging with local stakeholders to define the required functionalities as well as the timing for implementation," added Singer.
Singer added that Strate and Euroclear would be exploring a process that could potentially centralise fund ownership registrations as well as deliver a safer and more efficient means to grow the South Africa’s local fund industry.
Lieve Mostrey, chief technology and services officer of Euroclear, said: "Sharing our decades of experience in fund processing for domestic and cross-border transactions with Strate and its clients is an efficient and cost-effective way to add value to an important emerging fund market.
"As we begin a new partnership with Strate, the South African market can be sure that the primary objective of our collaboration is to deliver greater operational efficiencies while reducing risk. We also envisage that this initiative will attract other markets to share the same technology in order to achieve economies of scale for their fund markets," Mostrey added.
The South African mutual fund industry is valued at around ZAR1.3 trillion (91 billion, $120 billion, £77 billion), comprised of 42 fund management companies with over 1, 200 active funds.
