How did the idea for Calastone Trade Notification come about?
We were initially approached by a client who had realised that their settlement instructions to custodians were both time consuming and costly. This was because they were communicating with a large number of custodians, through a variety of different formats. As they were already a user of Calastone Order Routing, we were well positioned to help them automate this part of the transaction lifecycle.
The product we built automates settlement communications for distribution to domestic and cross-border custodians. This helps to complete the automation of the transaction lifecycle, further improving efficiency and reducing the costs associated with post-trade processing.
Calastone Trade Notification has been designed to handle a wide variety of messaging formats and standards. Irrespective of format, the message reaches the custodian on the designated trade date, ensuring that timely settlement can take place.
So how exactly does it work?
The order is sent from the distributor to the fund manager in the usual way, comprising of three messages – order, receipt confirmation and price confirmation. Trade Notification follows receipt of the price confirmation. We then take the information contained in the price confirmation and combine it with static data that we hold. This static data contains information such as the register account, custody account and identifiers for the fund manager and custodian. This data is managed by the distributor, who hold responsibility for its accuracy.
Calastone Trade Notification is therefore a combination of price confirmation and static data, enabling the custodian to settle the trade.
What does Calastone’s Trade Notification product mean for the funds industry?
Calastone Trade Notification gives clients full straight-through-processing by routing trade settlement instructions seamlessly as an integrated part of the order routing process, negating any need to create additional instructions for the custodian. Therefore it enables the fund distributor and the custodians to improve speed of information exchange. Additionally, risk is reduced as the potential for human error manually creating and sending settlement instructions is eliminated.
How much development work is required to implement Calastone Trade Notification?
Implementation is also easy, with no development work required by either the institutional client or the custodian as the whole process aligns with their messaging preference. All the distributor needs to do is provide us with the static data.
How do you see the landscape for Calastone Trade Notification developing in the future?
We have seen a growing interest in this product during 2016 with discussions from both distributors and custodians. We are continually improving the product in order to meet our clients’ ongoing need to achieve the greatest levels of operational efficiency.
Calastone Trade Notification will be important for clients looking to achieve complete straight-through processing (STP) for their trades, resulting in a reduction of risk and an overall beneficial increase in processing speeds.