1. Mutual Funds’ Order Routing Platform
25th AMEDA Conference
10-13 April 2018, Kasane
Ridouane AZAGROUZE
Chief Information Officer

2. SUMMARY 1 Introduction 2 Background 3 New mechanism
Functional Architecture
Cut off time
Settlement process
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3. Mutual Funds SICAV ET FCP?
1. Introduction
Mutual Funds
Mutual funds are portfolios of securities managed by professionals and held collectively (in the form of units or shares) by large public or institutional investors. There are two major legal types of mutual funds: SICAV (Variable Capital Investment Company) and FCP (corporate mutual funds). There is no difference in their mode of operation, only their legal nature is different.
SICAV ET FCP?
SICAV are constituted for the management of a portfolio of securities and cash, which issues shares and subscription . Thus, any investor who buys its shares becomes a shareholder.
The Fund is a joint ownership of securities and cash, whose units are issued and redeemed at any time at the request of any subscriber or Unitholder. But It does not give any rights to shareholders.
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4. Mutual Funds capitalization 40 Billions USD
1. Introduction
Capital Market Capitalization 173 Billions USD and GDP 110 Billions USD
Mutual Funds capitalization 40 Billions USD
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5. 2. Background and context Main actors of mutual funds
Investor
The investor is the person or entity that allocates capital with the expectation of a financial return. The investor attributes the Power of Attorney to the Distributor who deals on his behalf.
The distributor is an agent between two parties (the AMC and the investor) but acts on behalf of the investor. He provides fund information to potential investors, accepts orders on behalf of a fund and implements order transfer as well as flow of information between the fund, the investors and their intermediaries.
Distributor
Asset Management Company
The AMC invests its clients’ pooled funds into securities that match its declared financial objectives. Asset Management Companies provide investors with more diversification and investing options than they would have by themselves.
Transfer Agent
The transfer agent is responsible of the compliance of the fund’s investment policy and the calculation of the NAV by the AMC.
Depository Participant
The depository participant ensures the settlement/delivery and custody of fund assets. He maintains custody of fund assets, keeps up-to-date security and cash accounts, receives settlement/delivery orders and executes them in conjunction with Maroclear.
CSD is responsible of routing the orders, performs control over the information that it receives in the orders by referring to the Fund Database and ensures the settlement.
CSD
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6. Distributor of Mutual Funds Client Depository Participant
2. Background and context
Description of the current mechanism
Private investor
Account Agreement
Subscription/Redemption/Switch Orders
 Orders
Distributor of Mutual Funds
Banks, Asset Management Company, insurance company…
AMC
Create & Issuer of Mutual Funds
Calculation of the NAV
Distribution Agreement
Confirmation
Notification of the subscription / Redemption orders
Contract
Subscription/Redemption/Switch Orders
NAV
Contract
Transfer Agent
Verifying the regularity of the Fund
Verifying calculation of the NAV by the AMC.
Client Depository Participant
Routing of the order
Delivery versus payment
Notification of the subscription /Redemption orders
Confirmation & NAV
Instruction to sell or buy
Instruction to sell or buy
CSD
Central Bank
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7. ! 2. Background and context Description of the current mechanism
Distributor A
AMC A
Gestionnaire A !
Distributor B
Depository Participant 1
Transfer Agent 1
AMC B
Gestionnaire B
Distributor C
AMC C
Gestionnaire C
Distributor D
AMC D
Gestionnaire D
Distributor E
Depository Participant 2
Transfer Agent 2
AMC E
Gestionnaire E
Distributor F
Gestionnaire F
AMC F
Distributor G
AMC G
Gestionnaire G
Distributor H
Depository Participant 3
Transfer Agent 3
AMC H
Gestionnaire H
CSD
Distributor I
AMC I
Central Bank
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8. Order routing platform
new mechanism
THE NEW PROCESS
Distributor A
AMC A
Client DepositoryParticipant 1
Order routing platform
Transfert / Agent 1
Distributor B
AMC B
Distributor C
AMC C
Fund selection
Distributor D
AMC D
Identification of the distributor
Private investor
Client Depository Participant 2
Transfert / Agent 2
Distributor E
AMC E
Routing of the order
Distributor F
AMC F
Settlement
Distributor G
AMC G
Client Depository Participant 3
Transfert / Agent 3
AMC H
Distributor H
AMC I
Distributor I
Central Bank
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9. CLEARFUND new mechanism ADVANTAGES Reducing back office costs
A secured, standardized and harmonized process
CLEARFUND
Visibility of Funds across the market
Single point of access to all funds
Operational management and facility of distribution of funds
Reducing operational risk and errors
An automated process: from the order routing to settlement finality
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10. MF Order Routing and Execution Reference Data and Administration
4. Architecture of the Platform
Distributor
AMC
Transfert agent
Depository Participant
CFT
SWIFT Network
HTTP/HTTPS
Mutual Funds
MF Order Routing and Execution
Corporate Actions
Reports
Trade Management
NAV Management
Statement of Holdings
Order Creation
Order Modification
Name change
ISIN Change
NAV Capture
Corporate Actions
Order Acceptance
Order Confirmation
Merger
Stock Split
NAV Validation
Transaction
Liquidation
Reverse Stock Split
Order Rejection
Order Cancellation
Cash Movement
Order Monitoring
Settlement
Cut Off Time Management
Fees & Billings
Static Data
Reference Data and Administration
Business Relations
Calendar
Instruments
Parameters
User Administration
Accounts
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11. 4. Architecture of the Platform
Reference Data
The Reference Data component contains all information that fund manager should provide on their investment funds in order to facilitate their routing. The information covered includes ISIN code, contact details, subscription/redemption rules, settlement details, cut off times, etc.
Trade Management
The ‘Order Management’ feature is related to order routing and execution. The Order Routing service enables order issuers to purchase their funds and the order handling agents to process those orders within a centralized environment.
Position Management
Position management feature is related to the balancing of the amount of securities held by a participant. This feature is used to reconcile the balances between CSD and the transfer agents.
Net Asset Value (NAV)
The NAV is the mutual fund’s price per share/part. The calculation is carried out by the AMCs and/or the Transfer Agents, and is fed to the platform in order to be transmitted to the order issuers through the confirmations.
Settlement
CSD automatically settles orders that are processed. The settlement can be Free of Payment or Versus Payment.
Fees and Billings
The order routing, management and execution service (CLEARFUND) is a payable service.
Business Relations
Each participant has its own role within the platform, in addition to the major categories.
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12. Non- prevalidated order
4. Architecture of the platform
Order types
There are two order types on the platform :
Prevalidated order
The Transfer Agent and the client DP belong to the same entity.
In this case, the authorization of the client DP is not needed for the validation of the order by the Transfer Agent. Only the validation of the asset management company remains mandatory.
Non- prevalidated order
The Transfer Agent and the client DP do not belong to the same entity.
In this case, both the validation of the asset management company and of the Client DP are mandatory.
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13. 4. Architecture of the platform Flow description
Order
Distributor
Order
Status
Status
Status
Confirmation
Create order and confirmation of the order status in CLEARFUND,
Update status
Update status
Transfert order
Transfer the order to the Asset Management Company and to the Transfer Agent for confirmation of the order status.
Create order
Transfert order
NAV validation
Confirmation
validation
Transmission order (once accepted by the asset management company) to the Client Depository Partner for verification.
Confirmation of the order status to the distributor, the asset company management and the transfer agent.
validation
Clearfund
Order
Status
Status
Confirmation
AMC
Order Processing
NAV
Calculation
NAV Introduction by the asset management company and the Transfer agent.
The system use only AMC NAV for Order computation and settlement. After the NAV validation, the order can not be modifies nor canceled.
Transfer order for provisions verification
Status
Status
Client DP
Control
Order
NAV
calculation
Transfer Agent
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14. The cut-off time definition depends on : AND
5. Cut off times
AMC
The cut-off time definition depends on :
AND
Fund type
Cut off time subscription/ redemption
Periode of subscription/ redemption h1 D 9h
Accepted orders
Orders are not accepted until the next possible date
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15. Distributor is the Client custodian or the AMC
5. Cut off times of orders
Prevalidated orders
Cut off time subscription/ redemption
Deemed confirmed by AMC
Deemed confirmed by client Custodian
orders h1 h2 h3 h4
EOD
Validation of the NAV and confirmation of the orders
Client DP refusal
AMC refusal
Creation of settlement
instructions
Distributor is the Client custodian or the AMC
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16. Non prevalidated orders Client custodian confirmation/refusal
5. Cut off times
Non prevalidated orders
Cut off time subscription/ redemption
Reception
Of orders 9h h1 h2 h3 h4
EOD
Validation of the NAV & confirmation of the orders
AMC confirmation/refusal
Client custodian confirmation/refusal
Creation of settlement
instructions
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17. Delivery /versus payment Instructions
6. Settlement process
Order confirmation are sent to the concerned parties after validation of the NAV on CLEARFUND;
After confirmation, two settlement instructions are sent from CLEARFUND to the settlement platform;
The instructions are processed in the settlement platform;
The settlement confirmations instruction are generated and sent to the to the concerned;
The officials are informed of each change affecting the status of their orders;
If the Transfer Agent and the Client Depositary Partner belong to the same entity, the generated instructions are a “Free of payment"
Otherwise, the generated instructions are “Delivery / versus payment”.
At EOD, the Issuer Nostro is updated (+/-).
Confirmation
Confirmation
Client DP
Transfer Agent
Settlement
System
Confirmation of settlement
Confirmation of settlement
Instruction Status
Instruction Status
Delivery /versus payment Instructions
Central Bank
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18. Questions?
Route d'El Jadida - 18 Cité Laïa - Casablanca Maroc
Tél.: Fax : -
Restricted usage : This material can be used only by AMEDA members for reference. Partial or complete copy is prohibited without the approval of MAROCLEAR.