Ausmaq’s development of its spoke-and-hub solution for IFSA’s MfundEC standard will not happen unless it wins support from more than 50 per cent of the financial services industry, says chief executive officer Richard Burrows.
“If we get 50 per cent of the industry and the crucial players, we will develop our MAINhub solution,” he says.
Ausmaq is looking to launch a pilot program for the hub running next month and Burrows says they already have tentative support from one Sydney-based fund manager, master trust provider and a custodian company.
“We would like to get similar support from some Melbourne companies for the pilot program,” he says.
For low-volume users, there is a web-based interface to the hub, but large-volume users will need to be fully integrated into the system.
Ausmaq has developed its MAINhub proposal in partnership with Microsoft and IT&e Network.
The MAINhub solution will enable funds managers, master trust and wrap providers to handle transactions electronically through a central processor. Orders, confirmations and asset allocations will be sent electronically, cutting out faxing.
Burrows says the hub-and-spoke operation will create efficiencies in the system, which will lead to savings for both fund managers and master trust operators.
“According to IFSA, it is estimated the fund management industry spends $3.5 billion in back office expenses,” he says.
“By cutting out inefficiencies, the industry could save $700 million a year.”
Initially, the pilot program for MAINhub will be for the wholesale industry, but the retail version is expected to follow quickly after an official go-ahead, which is scheduled for June. This version would also include advisers in the system.
The next stage would see banks and insurance companies involved. The eventual aim is to expand the system offshore. Two similar systems are already operating in the US and the UK.
This is no firm pricing scale as yet, Burrows says, but he expects it to be competitive.
“There will be significant savings for those participating and we will provide a 24-hour support service,” he says.
“We need to look at the volumes of traffic, but I expect there would be a transaction charge and some annual fee, but this is open for discussion.”
TheASXis also proposing a similar concept for the financial services industry based on the CHESS concept. Burrows says Ausmaq is not worried about this competition as it has a system which will be operational next month, possibly 18 months ahead of an ASX scheme.
“The ASX scheme doesn’t exist, whereas ours is up and running and is using industry standards – which is the way the industry is going,” he says.
