Today Calastone, the fund transaction network, announced plans to migrate to a blockchain-based platform in May 2019. The London-based company has 1,700 clients across 40 countries and processes £170 billion of transactions per month.
In a bold claim, the company estimates that blockchain or distributed ledger technology (DLT) could reduce the cost of fund distribution by as much as $4.2 billion a year. That excludes the U.S. fund market.
In a statement, the company notes that the funds industry still uses many manual processes and outdated technologies. Hence there’s a high cost of distribution. It believes the new system will enable friction-free trading, settlement and servicing of funds.
“By bringing all trading relationships together, within our shared blockchain-enabled infrastructure, all participants benefit through the real-time view of each record and powerfully, from a data perspective, a single version of the truth,” said Campbell Brierley, Calastone’s Chief Innovation Officer. “Instantly this alleviates common friction points that exist today, including areas such as reconciliation and settlement, which are resolved automatically with all transactions being performed in the same environment.
The company is hoping to create an ecosystem as it states that its open technology will help organizations to innovate and offer new services and opportunities targeted at the sophisticated needs of modern investors.
There are moves elsewhere to leverage blockchain for funds but in a more fragmented manner. New York startup Symbiont is working with giant fund manager Vanguard to use blockchain for distributing trade index data for tracker funds. London-based SETL has a blockchain record-keeping system for funds called IZNES. Its public announcements indicate some traction in France.
In September last year Swedish bank SEB teamed up with Nasdaq to test a fund trading platform. In the announcement, the bank noted the lack of a Central Securities Depositary (CSD) compared to the stock market means there’s greater administration in the fund sector.