This evolution of service builds upon Calastone’s existing transparent settlement model, which matches over 75,000 fund transactions per month. Funds which take advantage of this new service will no longer have to settle on a many-to-many bilateral basis, but the far more efficient net basis.
By moving to net settlement, the funds industry will have the opportunity to cut significant costs from their operating models as well as reduce liquidity and counterparty risk, compared with paying gross subscriptions and receiving gross redemptions to multiple parties. The new service therefore helps a mutual fund to settle their trades at the lowest risk and at the best price, in line with MIFID Article 21.
The Calastone and Barclays Corporate managed net settlement service solution reduces the administrative burden for participants by way of interoperability and a reduction in manual processes. Moreover, participants automatically comply with industry standards such as ISO15022 and ISO20022, the messaging standards for providing bank information to clients’ cash management, treasury systems and accounting applications.
To facilitate this service, Barclays Corporate will provide a settlement infrastructure for matched trades on a net basis, through a settlement account for each participant. Barclays Corporate will also make available various options for pre-funded or provisional credit facilities without a line fee to the user. Participants will not need to change their existing corporate banking relationships to benefit from the service.
Bill Wrest, Head of Business Development at Barclays Corporate, said: “This initiative delivers real value-add to the funds industry, making transactions more efficient, cheaper, and lower risk. Our contribution to this evolution builds upon the significant investments we are making in cash management and payment technology.”
Gary O’Brien, Head of Client Services at Old Mutual Asset Management, one of the first participants to take advantage of this service, said: “As an early adopter of Calastone’s order routing and settlement services we are delighted that Calastone and Barclays Corporate have joined forces to tackle one of the main issues in processing the life cycle of a mutual fund transaction. We are fully committed to offering our clients choice of settlement venue and we are sure this new approach will deliver a simple and cost effective solution.”
Christopher James, Head of Cofunds Institutional, stated: “We are delighted to see market leaders such as Calastone and Barclays Corporate come together to solve a primary market problem. This will enable Cofunds to easily meet the high levels of demand for its full service “Institutional” offering; the in-built liquidity can only strengthen our own service offering to our clients. With the welcome addition of Barclays we now firmly believe the market utility has been achieved through collaborative and proactive thinking of the three leading providers in their respective fields.”
Hugh Evans, Head of Sales and Marketing at FNZ, added: “Our clients are continuously looking for ways to grow their business whilst at the same time controlling risk and reducing the cost of processing. We are fully supportive of initiatives like this that drives our industry towards greater automation.”
William Ismay, Director of Banking & Treasury Operations at Smith and Williamson, stated: “We are delighted to see Calastone and Barclays Corporate join forces to provide what we believe will be a major step forward in the mutual fund cash settlement process. Calastone’s order routing, mutual fund trade matching and net settlement service are currently used by Smith &Williamson and the introduction of the Barclays Corporate managed net settlement solution, alongside a sensible charging structure, will enable us to increase straight through processing and aid the reduction of risk.”
“Northern Trust is committed to supporting the needs of our clients and the industry with the continued use of straight through processing capabilities,” said Andrew Lelliott, Head of Transfer Agency for Europe, Middle East and Africa at Northern Trust. “We already have an established relationship with Calastone and the introduction of the Barclays Corporate managed net settlement solution will further enhance our service capabilities in this area.”