Taiwan Depository & Clearing Corporation

On 5 October 2012, Taiwan Depository & Clearing Corporation (TDCC) signed agreements with three international information transmission service providers, BBH, Calastone, and Euroclear, to provide automated fund order routing services for fund distributors, marking a great stride forward for the automation of Taiwan's fund industry. On 5 November, TDCC held a launching ceremony for the new service, and announced that fund industry enterprises in Taiwan can now utilize TDCC platform to enjoy standardized, automated transmission of transaction information for both onshore and offshore funds. Among those in attendance to witness this historic moment were Securities and Futures Bureau (SFB) Director-General Tien-Mu Huang, Bankers Association of the ROC Chairman Deng-Cheng Liu, Taiwan Securities Association Chairman Min-Juh Hwang, and representatives of BBH, Calastone, and Euroclear.

At the launching ceremony, SFB Director-General Huang remarked that a raft of recent government measures, including the push for a "Taiwan-centric wealth management platform," are bound to enliven and diversify the development of the fund industry in the future. Against this backdrop, TDCC's efforts to advance basic market infrastructure, such as fund data flow automation, have become all the more crucial. Director-General Huang voiced appreciation for the simultaneous launching in the Taiwan market of a one-stop service window for both onshore and offshore funds, and hoped that the industry members present would avail themselves of the service at the earliest opportunity, to enhance the operational efficiency and security of Taiwan's fund market.

At the launching ceremony, TDCC Chairman Kung-Wha Ding said that as the backroom operations center for Taiwan's securities market, TDCC is charged with creating a safer, more efficient infrastructure for financial markets. Chairman Ding expressed confidence that the automated operations will significantly raise operational efficiency and lower operational costs in the fund industry. By preliminary estimates, the service will save nearly NT$100 million in operational expenses in the overall Taiwan market yearly, not to mention millions of sheets of fax paper.

TDCC President Sherman Lin provided additional details of the new operations, noting that more than 80 percent of domestic fund issuers are already fully connected with TDCC. TDCC's cooperation with the three international fund data service providers has brought Taiwan's fund operations into synch with international counterparts, establishing cross-border connectivity with 75 fund companies in Europe, Asia, and America, to meet enterprises' needs for access to international market channels.

A number of other leading industry figures also spoke at the launching ceremony, including Bankers Association of the ROC Chairman Deng-Cheng Liu, Taiwan Securities Association Chairman Min-Juh Hwang, Securities Investment Trust and Consulting Association Chairman Henry Lin, and Asian Funds Automation Consortium (AFAC) representative and Fidelity Hong Kong Executive Director Jiahui Lin. The speakers noted that TDCC's new fund information transmission services are able to resolve complex many-to-many market operations, and achieve maximum efficiency through standardization. This model will serve as a best practice benchmark for other Asian markets that currently still rely primarily on manual operations. A number of the influential industry members present urged domestic banks, investment trust companies, and offshore fund companies to begin using the service as soon as possible, to hasten the arrival of a fully automated and standardized fund order routing system across the industry in Taiwan.

In Taiwan, banks are the primary distribution channel for funds at present. Each bank may process from 5,000 to 15,000 fund subscription and redemption transactions per month. Conventionally these operations have relied largely on manually operated connections, such as by fax machine, between the banks and fund companies. A lack of uniform communication channels and instruction formats is inefficient and carries risks. Seeing that straight-through processing (STP) had long been adopted for fund transactions in the European and American markets, TDCC began planning an automated STP platform for successive application to onshore and offshore funds, to upgrade Taiwan's capital markets infrastructure and meet the demands of the industry for greater operational efficiency.

The automated fund order routing system for onshore funds completed by TDCC in 2010 has so far been adopted by 19 investment trust companies, and provides automated fund order transmission services for over 70 percent of the onshore fund market. For offshore funds, to satisfy the need for cross-border connectivity with 75 fund companies spread across Europe, Asia, and America, and meet the diverse needs of fund industry participants, TDCC has entered into cooperation with three internationally prominent fund data transmission service providers. Order information transmitted to TDCC by fund distributors can be transmitted directly to offshore fund companies through the channels established by TDCC with these service providers. This service ensures end-to-end secure transmission of fund transaction data and eliminates errors arising from manual data entry. It can be expected to greatly reduce operational costs as well as operational risks.

The key feature of this service is the use of uniform, standardized operations to thoroughly resolve the difficulties posed by complex many-to-many operations. To achieve the maximum benefit, it requires across-the-board participation by fund distributors and fund companies. TDCC therefore has called on domestic distributors and fund companies to begin using the service as soon as possible, to collectively usher in the era of completely automated and standardized fund order routing in Taiwan.

Features of the Fund Services

1. Industry members enjoy a one-stop service window for automated order routing for both onshore and offshore funds
2. The same routing specifications are used for onshore and offshore funds, and order routing and trade confirmation operations are automated.
3. Straight-through computer automated transmission of trade information is cost-saving, fast, and convenient.
4. Cooperation with international information transmission service providers offers complete cross-border connectivity with 75 fund companies in Europe, Asia, and America, fully meeting enterprises' needs for access to international market channels.

Advantages of Fund Automation

1. Users can choose from two available interfaces: Internet browser or automated transmission.
2. The service alleviates the risk from manual operations, greatly conserves operational cost, and raises operational efficiency.
3. Data transmission is encrypted from end to end, and a comprehensive backup mechanism is in place, ensuring data security and stability.
4. Transmissions are completely archived, and the transmission process is simple and easy to control.