Aequitas and Invesco to provide industry-wide access to PTFs

Aequitas PTF Connect, a new trading platform developed by Aequitas Technology Services Inc. of Toronto, will be providing the industry-wide access when it goes live by the end of the first quarter of 2016. Any Canadian mutual fund provider that signs up with PTF Connect may offer the benefit to clients.

Given the industry reaction and client demand that Invesco Canada has seen in the wake of its introduction of PTFs in September, it decided to share its low-cost access to actively managed mutual funds.

“Based on discussions we have had with other fund companies, we investigated multiple avenues to make PTFs available on an industry-wide basis for the benefit of all clients,” says Peter Intraligi, president of Invesco Canada, in a statement. “The values Aequitas stands for, combined with its ability to act quickly in building out a shared-services platform to make PTFs available to the entire industry, led us to rapidly conclude that we preferred to partner with them.”

Like a stock, each PTF has a trading symbol; but the PTF does not actually trade on a stock exchange. Instead, buy and sell orders will be facilitated through PTF Connect using a streamlined process that eliminates unnecessary layers of cost.

As a shared service, PTF Connect will be available to all mutual fund companies and firms that are members of the Investment Industry Regulatory Organization of Canada (IIROC).

Aequitas Innovations Inc., the parent company of Aequitas Technology Services, was originally established by a consortium of financial services firms — including Invesco Canada, CI Financial Corp., Royal Bank of Canada and various pension funds — to create an alternative stock exchange that offers all market participants a level playing field to participate in capital markets.

“Investment advisors will be able to use actively managed mutual funds in fee-based accounts in a much less costly and less cumbersome manner,” says Jos Schmitt, president and CEO of Aequitas Innovations. “With regulatory initiatives like CRM2, there is an underlying trend to lower costs. At the same time, PTFs allow fund companies to expand their distribution capabilities and access more fee-based advisors.”

With PTFs, buy and sell orders are entered on a firm’s securities trading systems throughout the day by advisors on behalf of their clients. At the end of the day, orders are consolidated on behalf each firm, and within the required three days the appropriate fund units or cash payment is delivered to each firm’s account.

Trades are settled at the end of the trading day at each mutual fund’s net asset value. Because the PTFs do not trade during the day, there are no trades at bid and ask prices representing a premium or discount to net asset value.

Instead of the traditional fund system, in which multiple orders are channelled through FundSERV Inc.’s transaction system on behalf of each individual client, each participating IIROC firm is considered a consolidated account. There are no minimum investment requirements and bulk trading is also available.

Schmitt says Aequitas would be open to working with FundSERV to make PTFs available through the Mutual Fund Dealer Association network.

“The streamlined process that we have developed could be a building block for much more,” he says. “We would support working out additional solutions with FundSERV to expand into the fund dealer channel and make PTFs available more widely available.”