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Investment fund network for investment funds Calastone, a founding member of the Hyperledger project led by the Linux Foundation, is moving the entire system on the blockchain.
The company, which assists its client to sell their funds worldwide through banks and financial advisors, expects to complete the move to what he calls Distributed Market Infrastructure (DMI) next year in May .
Calastone launches to the world #blockchain global fund market strengthened in May 2019 pic.twitter.com/fd7UhGYfdE
– Calastone (@CalastoneLtd) 3 December 2018
The move is expected to radically transform the way funds are traded, especially at a time of rising costs, creating a global market of funds that allows both buyers and sellers to connect and negotiate.
For a press release, Calastone's customer list includes over 1,700 organizations for which it offers back office and even middle office services in 40 global markets. Characters like JP Morgan Asset Management, Invesco and Shroders are some of his clients.
Improve efficiency
Calastone's move to adopt distributed ledger technology will see over 9 million messages regarding past transactions between various counterparties completed on blockchain. At the moment, the process involves sending three separate messages: a message to place orders, a second to confirm receipt of the order and another to confirm the price.
The process is also laborious and inefficient as companies ranging from wealth managers to transfer agents have to enter the same data and this is time-consuming, costly and error prone.
According to Calastone, the adoption of blockchain technology could save the global fund industry about $ 4.3 billion in annual costs outside the US market – there is already a centralized system for the regulation of trade in United States known as Depository Trust and Clearing Corporation.
Investor pressure
Cost savings, which come at a time when industry is under pressure from investors to reduce commissions and tame rising expenditures, will be achieved by pooling negotiation and settlement processes. Investor pressure is not unjustified because the fund industry is lagging behind other sectors of the financial services category with regard to the adoption of new technologies. According to the CEO of Calastone, Julien Hammerson, the existing system is not sustainable:
"The funds remain a vital investment vehicle, even if they remain hampered by ever-increasing costs and the threat of competition, ultimately making the current system economically and operationally unsustainable." By leveraging blockchain technology, DMI transforms the way funds are they are traded, allowing an investment management community to meet the changing needs of investors. "
In addition, investors are looking for faster transaction speeds and transparency, and the DMI should improve investor experience in the broader value chain.
Shutterstock foreground image.
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