Calastone Order Routing
Calastone is the independent cross-border transaction network for the mutual fund industry.
Calastone is the only company which offers electronic order routing between fund buyers and fund managers in the format of your
choice and provides automated net settlement through trade order matching. Faxed orders introduce a level of risk which is
unacceptable to many participants in the funds industry today and the drive towards genuine straight through processing (STP) is
inevitable.
Calastone enables buyers and sellers of mutual funds to communicate orders electronically by providing a universal message
communication and ‘translation’ service. The trade is initiated by the fund buyer sending a buy or sell message in any format
(Swift, Fix, XML, .CSV, .XLS etc) to the fund provider. Three messages are sent in total and the fund provider pays a set tariff
per message which falls over time as volumes increase and the lifecycle of a trade is outlined below.
At the core of the Calastone Transaction Network is the ISO 20022 message format into which all messages are translated. Calastone
believes that ISO 20022 is the future of fund order routing and it is the preferred standard of trade bodies such as EFAMA.
By means of configurable adaptors, we are able to translate any message format into any other message format.
Straight Through Processing (STP) in the mutual funds industry is something which has been talked about for at least a decade.
However, mutual funds have unique characteristics which make them hard for equity order routing platforms and settlement systems to
handle. These characteristics include valuation points which vary by market, maintenance of the register of unit holders and the
fact that you can only buy and sell units from the issuer (unlike in equities where you can buy an equity from any broker).
The costs of this inefficiency are born by the underlying funds which are under pressure to improve investment performance and
reduce fees.
Faxes = increased cost and risk.
They cost more to process and the risk of error is far greater than with an STP solution. Common errors which occur with faxes
include duplicates, human errors, or mis-interpretation, eg around designated accounts. Calastone’s solution is complementary to
your existing order routing technology and will lead to lower processing costs. Orders never need to be re-keyed using Calastone
and there are no barriers to entry. Calastone takes care of the message translation and we do not change the meaning of the message
in any way. Please call us to discuss our indemnification procedures.
Implementation is exceptionally low touch and we can accept any message format. Finally, our web-based Execution Management System
(EMS) shows the status of the trade from beginning to end. At any given moment, a mutual fund manager or distributor will know
whether the information has been sent, received, requires any attention and will understand the status of the transaction.
The EMS is provided free of charge to Calastone clients and will, over time, become the place where settlement, re-registration and
reconciliations are handled.
There are no up-front costs when connecting to Calastone. The only information we require from fund managers and distributors is for
you to explain how you wish to send and receive information. The cost of sending a message via Calastone is free to distributors,
while fund providers only pay on a ‘pay-as-you-go’ basis. You are not obliged to send a minimum number of messages per month and the
price goes down the more messages you process: we never ‘reset the clock’ meaning that over time, all messages will drop towards the
minimum, which is £1.50 per trade (three messages). The maximum trade costs £2.70. There is no infrastructure to maintain, no annual
fees, no set-up fees and no software to purchase. Full details of the pricing structure are available on request.
We have a team of business analysts who will be available over the course of the on-boarding process and will be available to assist
you as you send your first trades. Our operations team constantly monitor trade order flow and are pro-active in highlighting potential
issues to market participants during the course of the trading day.
Calastone stores trade data for 14 days on the Execution Management System and for 7 years on its secure servers and we make no charge
for historical data requests.
Global reach can be achieved through a single pipe (see diagram above). We also have a connection to US domestic funds via Sungard’s
Transaction Network which is linked to Calastone.
Many fund providers and distributors have chosen Calastone as their preferred and sole connection to the market.
Because Calastone provides global interoperability in terms of messaging and communication mediums we also accommodate offshore funds.
Offshore fund providers saw the value of connecting to the UK distribution market without paying the hefty fees to implement a separate
system which could connect to the FIX engines which are commonly used by UK-based distributors. For distributors, certain fund
providers both on- and offshore are only available over Calastone (further information available on request).
Calastone’s service model is different to any of our peers. We guarantee and indemnify delivery of the message and offer a single
pipe to the whole of the market. Over time, the market will move towards widespread use of ISO 20022 messaging and Calastone’s model
enables our clients to benefit immediately from our SWIFT infrastructure. Calastone supports multiple asset classes and is not
prescriptive about what you trade. Provided the security has a security identifier (ISIN, SEDOL etc), it can be traded over the
Calastone Transaction Network.
Fund managers are able to restrict which counterparties they trade with. Because you are not obliged to list your funds on any
platform, this means that Calastone is used by closed funds and institutional asset classes.
"If I had asked people what they wanted, they would have said faster horses." - Henry Ford
Please call Alexander Hofmann or Anna Graziano on +44 20 7367 5920 for further information. For offshore, please call Sebastien Chaker on +352 691 888 813.
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