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The service targets industry inefficiencies, estimated by SWIFT to reach as much as EUR 5 billion per annum, and will provide benefits to all major European investment funds markets by delivering a low-cost solution for domestic markets and a full service level for cross-border distribution within one platform. Clearstream estimates that investment fund industry participants could save as much as 35% from their current cost base by fully utilizing the new Vestima service.
The key evolution is an open order routing platform that enables customers, for the first time, to select where they wish to settle and whether to use or not Clearstream's centralized settlement and custody services. Fund distributors may elect to choose a direct settlement and custody functionality with the fund, or use their own existing settlement processes and keep custody with the local CSD or to utilize the Clearstream settlement and custody facilities. Clearstream will be building upon its success of offering order-routing, settlement and custody services to the offshore market and will now be offering the new low-cost service to the major European investment fund domestic markets. The initial target markets of France and Germany represent the largest domestic fund markets in Europe and account for almost 40% of the market.
The new service will provide to fund distributors a single solution for multiple fund markets, enabling them to increase efficiency in any type of transaction whether internal, domestic or cross-border. This functionality is made possible by the combination of the FORS order routing technology and Vestima's current STP capabilities to provide highly flexible services on a transaction per transaction basis, in real-time, or in batch mode. This flexibility enables any market participant to process funds as similarly as possible to other financial instruments and to leverage existing and already used infrastructure for every part of the value chain. Additionally, the intensive usage of XML formats enable customers to continue to use their specific formats and to minimize implementation costs.
Clearstream was the first to launch an STP investment fund processing service, called Vestima, in October 2000 and has been enhancing this service ever since. In late 2002, Clearstream then acquired the Filinks company with its proven FORS order routing technology. These two elements have now been integrated and will combine to deliver the new 'multi-domestic services' to the investment fund industry. Additionally, Clearstream processes orders in the SWIFT ISO 15022 messaging standards and is studying new functionalities offered by new XML messages.
Bruno Zutterling, Director Investment Funds at Clearstream stated, "What we have created is a solution that recognizes the difference in markets within Europe. With our new platform, we are delivering solutions to each market accordingly which is why we have termed this a 'multi-domestic' solution. Furthermore, we have investigated in detail the differing needs of the various players in the industry and we will deliver to their specific needs thereby easing the implementation process and reducing costs for the whole industry."
Volker Potthoff, Managing Director Banking and Custody Services at Deutsche Börse Group added, "We have used our Group's expertise in efficiently processing transactions and our ability to create cost-effective technology to launch this new and innovative solution which the investment fund industry has needed for some years now. We are delivering a very flexible solution where domestic and offshore market participants can elect which elements of the service they prefer in order to minimize their own costs and ultimately reduce the costs incurred by the end-investors."
