The Distribution Dilemma

Hmmm... I wondered whether it was worth blogging about anything other than MiFID this week... but then decided that perhaps someone might want to read about something else..? 

Anyway, I finished my previous blog on the funds distribution topic with Tim Keaney’s (co-CEO at BNY Mellon Asset Servicing) statement at SIBOS that “more than 80% of the transactions we get from your distributors are manual”.

In recent times, SWIFT, Clearstream, Euroclear and others, have all brought to market pieces of the eventual solution puzzle. But nearly all of the participants in the fund industry that I speak to have the challenge that either critical mass has not been achieved to the extent that it would make sense to pioneer the investment in technology to fully utilize these facilities, or the solutions are more settlement rather than distribution and order origination focused.

The other day, one of those (a large bank) facing exactly this challenge made a suggestion to me that I think is worth pursuing… Why not put together a consortium of the largest participants (rather like we have seen in the payments and securities arenas) to spread the cost and risk of being an early adopter and facilitate the inevitable period of migration and support for multiple communication types / protocols / formats in the interim?

Sounds like a plan – no?

But who should get it started?

1. A vendor or infrastructure provider – maybe, but isn’t that the tail wagging the dog?
2. A bank or financial services institution with significant fund operations and many distribution channels – maybe, but who wants to be first?
3. An association, such as EFAMA, ALFI, etc. – maybe, as they have the forum and their members have the motivation?

Actually, the answer is probably “all of the above”.

If you are reading this blog then here could be as good a place as anywhere to start – so put your name in the hat, or pass this on to someone in your organization who should…

I may be over simplifying, but what is needed for the fund distribution and order origination side is a complete infrastructure solution from one single provider, including:

• A network or web-based portal facilitating connectivity and exchange of data
• An integration and business process application providing visibility over traffic and managing connectivity, mapping format translation and workflows

These two aspects not only need to be combined and delivered on a common platform, but also need to be able to be implemented in a hosted, licensed, or hybrid configuration with the opportunity to migrate between deployment options as needs change.

Of course, such a solution provider also needs a critical mass of participants suffering with fund distribution and order origination pains.

To put such a consortium together, we need to start somewhere… why not HERE?