EMX Co, the much-anticipated first UK electronic trading platform for mutual funds which is due to go live next Monday, could face challenges from a rival system within days of its launch. Out to compete with EMX, which claims to have signed up two thirds of the fund industry already, is AssureWeb, a system established by DBS Management PLC, the UK's second largest network of independent financial advisers.
The EMX and DBS systems are both designed for financial advisers who are responsible for selling about 55 percent of the funds to individual investors in the U.K.
DBS said its platform will attract more advisers because the services are free while EMX operates a tariff-based system depending on the predicted level of systems usage, the lowest tariff being the Intermediary Advisory Tariff which involves a joining fee of £500.
DBS have boundless faith in their platform. Tony Kempster, the company's co-chief executive, said 'we have 7,500 advisers signed up to AssureWeb and few companies will pass up a sales prospect like that.'
The launch of EMX has been rigorously planned since last autumn. In all, 140 fund managers have put up £1 million to develop EMX with Mutual Fund Technologies Ltd., a Kent, England- based computer consultancy owned by Fidelity Investments. The companies plan to invest another £1.4 m in EMX this year, said Caroline Lee, EMX's chief executive.
While EMX's plan to charge fees may give DBS an advantage, the long-term battle will likely take place in Europe and other markets, according to Rodney Williams, partner at European Fund Information Services, an independent consulting firm in London, who commented that 'there seems to have been little forward thinking about broadening the EMX system to make pan-European funds compatible.'
EMX does not seem to be concerned and has committed itself to building its UK presence first. Ms Lee said 'You've got to put your own house in order before you think about conquering the world.' By contrast, DBS is already working towards including European and international funds on its platform.
Whichever system emerges as the most-favoured, or if indeed they develop with an equal 50:50 customer base, it is clear that both systems will do wonders for bringing the UK up to date with the US. At present, financial advisers and individual investors in the U.K. still make most of their trades by phoning the fund manager. The fund company will then send written confirmation by post or fax. In the U.S., a much larger proportion of fund trades are made electronically.
It is not just EMX and the DBS systems with work to do. While many U.K. fund companies are signed up to trade online on June 12, most still need to make their record-keeping systems suitable for taking orders over the Internet. As Michael Fordham, head of business development of the banking and securities division of Cap Gemini, who are designing the DBS platform, puts it, companies will be 'taking vastly increased volumes of orders over the Internet and someone will be having a nervous breakdown trying to process them manually.'
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