Charles Schwab & Co. has asked the Depository Trust and Clearing Co. (DTCC) to add the capacity to automatically process short-term mutual fund redemption fees to Fund/SERV. "We received a concept paper from Charles Schwab, and the next step is to discuss it with the ICI broker/dealer advisory committee," said Karen Gregory, spokeswoman for DTCC.
Even no-load funds are adding redemption fees to deter market-timing activity. However, DTCC, which clears funds for many fund complexes, has not yet added that service because the practice has become more popular only recently. Broker/dealers handle redemption fees.
Also, rather than establishing clear-cut trading rules, many fund complexes and variable annuity providers elect to use a manual process to deter market timing. For example, some companies force timers to conduct trades by mail, cutting off access to Web and phone trading.
DTCC has not yet decided whether it will go ahead with plans to add redemption fee processing, and the committee will undergo its review as it does with all new services. "Depending on the committees analysis, well proceed from there," Gregory said.
Lately, DTCC has focused its servicing expansion efforts on 529 plans. At the end of March, the company will add new data fields to Fund/SERV and include codes to identify the type of proceeds (IRA, savings bonds, etc.) to both Fund/SERV and Commission Settlement. This round of enhancements follows an upgrade in November of 2002.
DTCCs decision to commit so much effort to its 529 plan processing stems from anticipated growth in that area. In June of 2002, 529 assets had grown to $11 billion, a 40% increase year over year, according to the company.