LONDON – Calastone, the global fund transaction network, on Monday announces that its entire global network of more than 1 700 financial organisations, across 40 global markets, would 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 $4.2 billion (R57bn), achieved through the technological mutualisation of the trading and settlement processes.
Significant long-term value
Campbell Brierley, Calastone's Chief Innovation Officer, comments said: “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The funds industry trails other financial services sectors, still beset by manual processes, outdated systems and technologies.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.