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Clearstream, the international central securities depository within the Deutsche Börse Group, has successfully launched the Central Facility for Funds (CFF) with the first two pilot firms, Schroder Investment Management (Luxembourg) and Pictet & Cie (Europe). CFF offers a more efficient post trade solution for investment funds domiciled in Luxembourg, the largest market in Europe for international funds with over € 1700 billion in assets under management.
All the investment fund shares handled by Schroder and Pictet, two transfer agents, have been transferred onto the new platform which provides DVP (delivery versus payment) settlement services based on synchronous exchange of cash and securities between fund distributors and transfer agents.
CFF offers for all participating firms (transfer agents, fund distributors and fund promoters) one single set of settlement and payment instructions for all eligible funds which will accelerate and simplify operational processes as well as reduce risks. The CFF service is fully integrated with Clearstream’s existing ICSD custody and settlement services on its Creation electronic settlement platform. This enables customers to benefit from the new CFF service while keeping the advantages of the full integration of their holdings in investment fund shares with those in other asset classes.
CFF provides 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.
Following Schroder and Pictet & Cie, four other investment fund firms (TAs and distributors) will participate into the pilot phase. CFF will then be open to all Luxembourg Transfer Agents as well as Transfer Agents from other markets dealing in Luxembourg domiciled funds. CFF 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).
Clearstream designed CFF as an answer to growing market demand in Europe and in Luxembourg, Europe’s largest market for international investment funds. The industry has grown 80% over the past three years but its post trade area is still characterized by high fragmentation, little standardization and thus operational risk. Several significant market participants –distributors, promoters, transfer agents and trade associations- 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, “We are very pleased to announce Today’s launch of CFF. The pilot phase is designed to test with volunteer pilot firms what we hope will be the state of the art solution for Luxembourg domiciled investment funds as well as for other fund markets similar to Luxembourg’s. Clearstream is particularly proud to put its expertise in other asset classes such as bonds or equities, at the service of the investment funds industry and to deliver on time a solution best adapted to the needs of market’s participants and best suited for the industry’s benefits”.
