The move offers benefits of efficiency, security, and cost
A major global network for mutual fund transactions will become the sector’s first to migrate to blockchain technology.
Calastone’s network, which has more than 1,700 financial institutions across 40 global markets, will transition to blockchain in May 2019 in a move that it says will transform the trading of mutual funds.
The company's new Distributed Market Infrastructure (DMI) creates a global funds marketplace, in which buyers and sellers can connect and transact using distributed ledger technology, marking a significant step for the digitalising of the funds sector.
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.
Significant long-term value
"Calastone's DMI will totally transform the trading and servicing of funds and has the potential to realise significant long-term value,” said chief innovation officer Campbell Brierley.
He added that by creating a single version of the truth and automatic reconciliation and settlement, the advantage of blockchain for the funds sector is clear.
“By making friction-free trading accessible to all parties in the value chain, we are creating an environment that marks an inflection point for the future of the funds sector, optimised to meet the needs of customers and investors now and in the long-term," said Brierley.
Best interest for investors
Calastone says that the funds industry is still using many manual processes, and outdated systems and technologies; trailing other financial services.
It says that 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.
"Funds remain a vital investment vehicle, though remain hampered by continually rising costs and threat of competition, ultimately rendering the current system economically and operationally unsustainable,” said Calastone CEO Julien Hammerson. “Through leveraging blockchain technology, the DMI transforms the way in which funds are traded, enabling an investment management community that can meet the changing needs of investors."