CFF will provide DVP (delivery versus payment) facilities between fund distributors and transfer agents. Its single set of settlement and payment instructions for all eligible funds will simplify operational processes and reduce risks.
CFF will provide post trade services only, with an architecture open to the various order execution processes. The service is initially offered for investment funds domiciled in Luxembourg, but its business model and operating model could be applied to other funds domiciles.
CFF will be open to transfer agents for Luxembourg domiciled funds as well as domestic and international distributors or large institutional investors. It will not change the direct relationship between distributors and transfer agents and it will not provide direct access for retail customers or independent financial advisors (IFA).
The CFF initiative is an answer to growing market demand in Europe and in Luxembourg, Europe’s biggest market for international investment funds with over € 1.5 trillion in outstanding value in 2005. Although the industry is developing fast (80% growth over three years), its post trade area is characterized by high fragmentation, little standardisation and thus operational risk. Several significant market participants –distributors, promoters, transfer agents and trade associations (ISSA, EFAMA)- in Europe and in Luxembourg have been consulted by Clearstream and have contributed to the design of the CFF concept.
Jeffrey Tessler, CEO of Clearstream stated, “CFF is the result of an extensive consultation with Luxembourg’s market participants looking for a reduction in risks and costs. We are particularly pleased to have been asked to put Clearstream’s expertise in other asset classes such as bonds or equities, at the service of the investment funds industry. We look forward to continue working with market participants in developing the solution best adapted to their needs and best suited for the industry’s benefits”.
