Taiwan’s financial regulator has announced plans for a centralised onshore fund clearing platform, a move that is expected to lower operational and remittance costs and boost efficiency.
The online platform, which will be built by the semi-government owned Taiwan Depository & Clearing Corporation (TDCC), will handle all onshore fund subscriptions and redemptions.
The Financial Supervisory Commission announced the initiative on May 12. It is expected to come on stream in two years starting in 2023.
The first stage of implementation is aimed at engaging all industry players, including the 43 banks’ money trust accounts, 11 securities brokerage wealth management accounts, existing fund transaction platforms, and the 39 onshore managers to join by the second quarter of next year.
Thus far, 25 onshore managers, 37 of the 54 fund distribution agents, and 17 of the 24 fund custodians have shown interest in participating.
The second stage is to have direct clients under onshore managers join the platform, a move that is estimated to save them more than NT$20 million (US$674,082) in remittance costs. This is targeted by the second quarter of 2024.
Currently, all orders in the onshore fund market must be handled separately, whether through sales channels such as commercial banks or direct clients, and all orders must be placed and remitted individually according to the types of shares in funds, such as the currency class.
This makes for a complex end-to-end process that takes up a lot of cost and manpower. According to TDCC data, the total cost of remittance and redemptions was NT$420 million in 2021.
With a centralised platform, fund clearing will be done by net value, which can sharply reduce the number of daily transactions and save on costs.
Figures from the Securities Investment Trust and Consulting Association show that the value of transactions in the onshore funds market, excluding exchange-traded funds, in 2021 was NT$5.5 trillion, with a record 16 million transactions, a 50% increase from three years ago.
*Donna Chen is with Taipei-based investment consulting firm Keystone Intelligence.
