Calastone switches mutual fund trades to blockchain
Calastone, the global fund transaction network, today announces that its entire global network of more than 1,700 financial organisations, across 40 global markets, will be migrated to blockchain in May 2019 via the company’s new Distributed Market Infrastructure (DMI).
The migration, a world-first, connects one of the largest communities of global financial organisations using distributed ledger technology, marking a significant step for the digitalising of the funds sector.
The DMI creates a global funds marketplace, in which buyers and sellers can connect and transact. It creates an ecosystem within which the trading, settlement and servicing of funds is friction free, eliminating ever-growing risk and costs for fund managers and investors, embedded within the current system.
At the same time, organisations can leverage the open technology on which the DMI is built, allowing them to innovate, stay competitive and offer new services and investment opportunities better suited to the changing, more sophisticated needs of modern investors.
Calastone believes that the overall global cost of fund distribution could be reduced by as much as £3.4 billion*, achieved through the technological mutualisation of the trading and settlement processes.
Campbell Brierley, Calastone’s Chief Innovation Officer, comments;
“Calastone’s DMI will totally transform the trading and servicing of funds and has the potential to realise significant long-term value.
By bringing all trading relationships together, within our shared blockchain-enabled infrastructure, all participants benefit through the real-time view of each record and powerfully, from a data perspective, a single version of the truth. Instantly this alleviates common friction points that exist today, including areas such as reconciliation and settlement, which are resolved automatically with all transactions being performed in the same environment. By making friction-free trading accessible to all parties in the value chain, we are creating an environment that marks an inflection point for the future of the funds sector, optimised to meet the needs of customers and investors now and in the long-term.”
The funds industry trails other financial services sectors, still beset by manual processes, outdated systems and technologies. This has led to a high cost of distribution which ultimately impacts the investor and marketability of funds, which themselves compete with other forms of investment.
This largely results from the traditional way funds are traded, which is opaque, fragmented and doesn’t work in the interest of investors. There are significant pressures on the industry to adapt to meet investor demands for greater speed, transparency and return on capital.
The DMI addresses this directly, in creating a platform that digitalises the trading, settlement and distribution of funds by bringing together all market participants and equipping them with the tools to innovate, grow and differentiate. Clients using the DMI will be able to leverage the benefits of the technology through a range of new services and capabilities, alleviating risk, cost and improving investor experience across all parts of the value chain.
Stephen Leggett, Calastone’s Chief Operating Officer, comments;
“Our commitment to innovation drives our continued investment into our technology. Migrating our global transaction network onto the new DMI will be a seamless experience for our customers, all of which will quickly and easily be able to leverage the advantages that distributed ledger technology affords. We are already working with a number of clients who recognise the capability that the DMI can offer immediately and for the long-term.”
Julien Hammerson, Calastone’s Chief Executive Officer, comments;
“The launch of our DMI marks an exciting step for the industry in accelerating the digitisation of the funds sector and is a significant achievement for Calastone. The migration of our global network is the culmination of years of hard work and continued investment in innovation.
Funds remain a vital investment vehicle, though remain hampered by continually rising costs and threat of competition, ultimately rendering the current system economically and operationally unsustainable. Through leveraging blockchain technology, the DMI transforms the way in which funds are traded, enabling an investment management community that can meet the changing needs of investors.”
*Calastone has calculated the potential cost savings of moving to a distributed and mutualised market infrastructure using data from Deloitte’s study “Europe’s fund expenses at a crossroads; The benefits of mutualizing the cost of distribution.”, alongside data from the 2018 Investment Company Fact Book. Calastone’s calculation has been applied to mutual fund assets under management for the global funds market, excluding the USA.