As the mutual fund industry approaches the first anniversary of the compliance date for SEC Rule 22c-2, it's an ideal time for a retrospective on the services, systems and processes in place to comply with the data-sharing components of the rule.
The industry has come a long way since last October and today is effectively exchanging data in a number of fashions.
Many intermediaries implemented proprietary web portals or instituted the secure exchange of sub-account level trade detail either on-demand or in aggregated files arriving on some scheduled frequency. The mutual fund supermarkets were also quick to adapt their fund partner portals so that the needed trade data could be downloaded over a variety of date ranges in convenient file types and well-known, industry-standard formats.
The creation and enhancement of numerous intermediary data sources, combined with the advent of the NSCC's Standardized Data Reporting (SDR) service, has made the delivery of sub-account detail a streamlined and secure process. Data is being exchanged in large volumes as evidenced by the recent statistics released by just one source of data-the NSCC's SDR service. July statistics for SDR showed that almost 17,500 requests were made, resulting in responses containing almost 5,000,000 lines of transactional records. At the time, over 250 fund families and almost 100 firms were utilizing the service. This total doesn't include the non-member, underlying firms that participate indirectly via their clearing entity.
As a leading provider of systems and services supporting rule 22c-2 and related compliance services, Access Data has developed a case study based on our work with fund families in production since October of 2007.
Analyzing the Growth of
Shareholder Holdings
To present the analysis in a way that can be easily interpreted, the data has been segmented and analyzed in three distinct groupings of eight fund complexes-fund complexes with AUM at $10 billion or less, AUM between $10 billion and $50 billion, and AUM over $50 billion. For each of these three groupings, two sets of metrics are presented followed by a brief analysis of the data. Chart 1 provides a view of the total number of individual shareholder-level holdings analyzed from all platforms, including the transfer agency, in the month of August 2008.
Charts 2 and 3 provide a time-series examination of the growth trends in the number of individual shareholder-level holdings analyzed per month from the two major sources of sub-account detail since October 2007. The two sources include direct data feeds from sub-transfer agency systems including web portals, and responses sent via the NSCC SDR service or manual request/response mechanisms.
Chart 2 tracks sub-transfer agency shareholder-level holdings from direct data feeds and shows a robust growth trend indicative of the intermediaries' improved ability to share data via proprietary data extracts and web-based portals.
Shareholder-level holdings analyzed from responses to ad-hoc data requests in Chart 3 begins relatively flat but displays a large upward spike between the months of January and February. This coincides with the large upswing in the number of intermediaries that could respond to requests sent via the NSCC's SDR process. This is followed by a fluctuating but continuing growth in responses throughout the summer months of 2008.
Analyzing the Growth of
Shareholder Transactions
The second set of metrics examines the number of detail-level transactions analyzed since October 2007. Chart 4 displays the total number of individual shareholder-level transactions analyzed from all platforms in August of 2008.
Chart 5 of sub-transfer agency shareholder-level transactions from direct data feeds shows a slow but steady growth trend interrupted by upward spikes that represent large amounts of historical data reviewed as many new data feeds are put into production for the first time.
Chart 6 of shareholder-level transactions analyzed from responses to ad-hoc data requests also trends gradually upwards over the year except for a large spike in March. During that month, two of the funds with over $50 billion in AUM initiated large-scale, risk-based request policies and requested up to three months' worth of trade data from many high-risk intermediaries.
In Charts 5 and 6, monthly volumes highlight a growth trend indicating the number of sub-account transactions analyzed increased to approximately 75% of the
total transactions analyzed from all platforms. Most likely, this can be attributed to the large number of new holdings
being analyzed and the fact that many of the transactions from these holdings are historical.
Mr. Niedt works with financial services clients to develop and manage compliance programs using Access Data SalesVision and Insight Services outsourced solutions.
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