Brussels-based depository Euroclear has signed an agreement to acquire the UK's EMXCo, a provider of electronic messaging technology that automates the dealing and settlement of mutual funds. Financial terms of the transaction were not disclosed.
EMXCo provides a single interface for fund distributors, transfer agents and fund providers to communicate mutual fund purchases, sales and valuations.
Euroclear says the acquisition, which will combine EMXCo's automated order-routing capabilities with the real-time settlement capacity of its settlement system Crest, could cut UK fund settlement costs by 50%.
As well as lower tariffs Euroclear says the integration will deliver STP for fund issuers and intermediaries through increased processing automation and standardisation of market practices in the UK, quicker cash payments and reduced operational risks.
"Processing for UK mutual funds is plagued with inefficiencies, high costs and risks largely due to manual intervention," says Tim May, CEO of CrestCo, who will become chairman of EMXCo. "Together, Euroclear and EMXCo intend to eliminate the operational burdens impeding the UK fund market's ability to operate efficiently and cost effectively."
Euroclear says the major shareholders of EMXCo - Fidelity International, Hargreaves Lansdown, Invesco Perpetual, M&G, Skandia and Threadneedle - are fully supportive of the acquisition, which will take effect in January 2007.
Upon completion of the transaction, EMXco CEO Max Wright will become a member of the Euroclear Group management team. The existing EMXCo management team will continue to operate the business as a separate subsidiary of Euroclear for the foreseeable future.
Longer term, Euroclear says EMXCo will contribute to its aim of providing an efficient single platform for the order routing, settlement and asset servicing of fund transactions across multiple markets.