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Onshore Fund Centralized Clearing Platform Drives Market Upgrades

2022/07/29

To enhance the overall operational efficiency of fund payments and help the local trust fund market gain a competitive edge, the Financial Supervisory Commission (FSC) issued an order on May 12, 2022. Since the new order aims to promote a centralized settlement and payment mechanism for funds, the Taiwan Depository and Clearing Corporation (TDCC) was required to establish the Onshore Fund Centralized Clearing Platform. The new system will help promote standardization and automation, aiding our efforts to align the local market with advanced economies like Europe, the USA, and Japan. The system will be officially launched on a phase-by-phase basis in Q2 2023 and all players in the fund market will be included within a year after its launch. On the road to total transformation, TDCC, Securities Investment Trust Consulting Association (SITCA), Trust Association of the Republic of China (TAROC), and related businesses are all active participants.

The Onshore Fund Centralized Clearing Platform is one of the important pillars of the Capital Market Roadmap. The purpose of the new mechanism is to process all the data flows and cash flows involved in subscriptions and repurchases. In just one day, thousands of fund subscriptions and repurchases are being made by more than one hundred institutions, including investment trust companies, mutual fund custodians, and distributors in the onshore fund market. The Onshore Fund Centralized Clearing Platform can serve as a platform that provides services such as centralized processing, payment consolidation, standardization, and automation. With the process being streamlined, the many-to-many relationship will evolve into many-to-one or one-to-many relationship. The fund market system is also learning from the stock market system as it adopts a centralized settlement mechanism which can help overhaul the fund market and make it more efficient.

In recent years, people have become increasingly interested in fund products. Most companies in the industry have agreed to promote the new system as they have high expectations for it. Under the FSC’s instruction, TDCC has been actively introducing the new system to companies. Moreover, TDCC employees have visited more than ten investment trust companies and distributors. In May, TDCC started a task force specifically for this project and invited businesses such as investment trust companies, distributors, and custodians to discuss relevant matters. Since then, these businesses have become active participants in the planning process and will also join future joint trial runs.

TDCC Chairman Han-Chiang Chu (朱漢強) explained that the FSC has been instructing and supporting TDCC as it serves its role as an intermediary institution in the fund market. As the hub in the market, TDCC will continue its efforts to improve the market’s efficiency and competitiveness. In fact, the Onshore Fund Centralized Clearing Platform was set up to help notch up the market by providing more efficient back-office services. To encourage more users to join ahead of time and enjoy early access to the platform, investment trust companies that join and do their part by the end of 2023 can enjoy an early bird pricing. Apart from the super early bird discounts, TDCC has also partnered with SITCA and TAROC to formulate and revise relevant regulations and contract templates. As companies save more time and conversion costs, a win-win situation is thus created for all parties involved.

While investment trust companies were already a part of the plan, most distributors and custodians have said that they will follow suit and join the launch as scheduled. Under the instruction of the FSC as the competent authority, TDCC, SITCA, and TAROC will continue to work together, for we believe a successful transformation for our fund market will come to fruition in the near future.