Money Market Services Q&A with Brian Duffy, Product Development, on how the liquidity fund investor experience is being transformed______

Brian Duffy, Product Manager, Calastone

How did the idea for Money Market Services come about?

The simple answer is client demand. Our success in automating the mutual funds industry’s trade, settlement and reporting processes led a major client to approach us and ask if we could automate their liquidity business and provide integrated investment data to their underlying investors. They cited, in particular, a desire to leverage our expertise in providing full oversight and an automated end-to-end user experience.

We realised this was talking to our strengths. As the leading global mutual fund network connecting more than 2,700 clients in 47 countries, we have a proven track record in connecting firms to their trading partners – often in days and without the need for an infrastructure project. Not only did we realise we were well placed to enable the liquidity industry to automate but the ensuing conversations made evident the scale of the improvements we could bring to the liquidity fund distribution lifecycle.

What we found when we investigated in depth was that the level of integration across the liquidity funds industry was low. That was not all. The flow of information was error-prone and subject to regular delays. There was a lack of visibility over the trades, an absence of reporting or regular reconciliation and uncertainty throughout the payment process.

Since those conversations, we have built a number of solutions for our distribution portal clients, enabling full automation of the orders and real-time investor reporting.

So how does it work?

Drawing on all the experience we have of automating the mutual fund industry, we were able to design Calastone Money Market Services to fully automate and accelerate the liquidity fund trading cycle. Our focus was to give liquidity investors such as corporate treasurers a more convenient way to trade liquidity funds, be it directly with their preferred fund provider or via a portal.

Now investors can track the entire lifecycle of the trade, from initial input all the way through to settlement. This gives them real-time visibility over the trade status at every stage of the process so they get greater settlement certainty.

We have also automated settlement. Investors can automate the funding payment off the back of the subscription and get full transparency of their payment status in real-time. And for treasurers using treasury systems, all the relevant reporting – from statements to fund information – is instantly sent to their treasury systems as soon as it is made available.

What benefits are investors seeing?

I am pleased to say there are a lot of pluses for investors. The most obvious one is improved oversight of their investments. This affords them a greater understanding and clarity over their positions and thus, their liquidity, because they can see their trade data in real-time while the whole trade is processed instantly.

It is worth pointing out that expediting the end-to-end investment process mitigates the chance of being exposed to unsettled trades.

Another benefit is added investment flexibility. Calastone Money Market Services obviates the need to use siloed user interfaces that do not communicate with one another. This not only provides greater control and a precise view of the investment portfolio but increases the scope for same-day value manoeuvring – extending the range of liquidity fund investment options. At the same time, investors get access to the entire liquidity fund market since Calastone runs the largest global mutual funds network.

At the same time, automating the investment process brings efficiency, transparency and certainty around the settlement process, while also reducing operational risk.

We have also made it as easy as possible for institutional portals serving investors to onboard their clients quickly and painlessly. Investors can onboard in just days, regardless of their infrastructure. Previously, it could take many weeks or months. That is quite an important gain in terms of client relationships.

How can it be implemented by investors?

We have a specialist onboarding team that guides clients through the process, from user acceptance testing to go-live. We discuss the formats and connectivity channels used by the client and from there we get them up and running. Best of all, we can do this in a few days, depending on the choice of integration. It is precisely this simplicity that has helped us establish a name for ourselves with the global mutual fund industry.

One of the benefits of being able to speak to each participant in the process in its own format and channel is that it allows us to deliver a standardised service.

Importantly, there is no need to be an existing client of Calastone to onboard quickly with Calastone Money Market Services. Whatever their business, clients can start to trade straight away.

What sort of ongoing support is offered to investors?

Our Operations Team supports clients 24h x 5.5 days a week, ensuring seamless continuity in the ability to trade, route and settle at any time. Business continuity is underpinned by state-of-the-art network capacity management, allowing us to anticipate and react to any issues before they happen, ensuring clients experience zero downtime.

How will the landscape for MMS develop in the future?

With today’s interest rates, liquidity funds are struggling more than ever. However, they still play a key part in the liquidity markets and investors use them for many different reasons, not just for yield. We therefore see a sustained appetite for our clients to open up this route to the market.

We also see scope for further progress in automating the functions related to issuance and transfer agency. Further in the future, we are looking at tokenisation and uses of smart contracts around liquidity funds, offering a potential way into more bespoke liquidity investment vehicles for institutional clients.

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