Calastone, the global fund transaction network, announced that its entire global network of more than 1,700 financial organizations, 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 organizations 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.
Calastone believes that the overall global cost of fund distribution could be reduced by as much as £3.4 billion (USD$4.3bn), achieved through the technological mutualization of the trading and settlement processes. This calculation represents potential cost savings of moving to a distributed and mutualized 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.
Campbell Brierley, Calastone’s chief innovation officer, said in a statement: “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.”
The funds industry trails other financial services sectors, still beset by manual processes, outdated systems and technologies.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.