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CFF, the Central Facility for Funds, Clearstream’s new post trade solution for investment funds, has opened up to the Belgian market with two leading institutions, RBC Dexia investor services Belgium S.A. and KBC Bank NV. Both became new clients of CFF as of December 17.
Effective January 1st 2008, the Belgian law of December 14th 2005 announced that bearer shares will no longer be in issuance. Every Belgian issuer of non listed financial instruments now has to appoint an "account holder", also known as "Head of the pyramid" (HOP). The HOP is responsible for holding the total circulation of the issue of the financial instrument in question.
In this context, RBC Dexia investor services Belgium S.A and KBC Bank NV, acting as HOP, have decided to adopt CFF in order to streamline their settlement procedures for investment funds. The operational features offered by CFF, in particular Delivery versus Payment (DvP), were seen as a distinctive advantage for building a safe and efficient settlement model, which will further enhance their capability to support cross-border distribution.
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 accelerates and simplifies operational processes as well as reduces risks. CFF provides post trade services only, with an architecture open to the various order execution processes and is fully integrated with Clearstream’s existing ICSD custody and settlement services. This allows new CFF participants to keep their funds holdings in the same custody platform as the one already used for other share classes. CFF was initially launched for investment funds domiciled in Luxembourg, but the attractiveness of its operating model allows it to be extended to other fund domiciles.
According to a study by Deloitte, a consultancy, the cross border investment funds industry could save up to 30 percent of processing costs and gain over € 300 million by streamlining the processes of cross border mutual funds distribution.
Philippe Seyll, Head of Investment Funds services, Clearstream said “we are delighted that two leading actors of the Belgian Funds market have chosen CFF. We genuinely believe that CFF will greatly facilitate the way in which they interact with foreign counterparties, and will hence improve their operational reach and capacity”.
Luc Bauduin, General Manager Order Management & Custody, and Olivier De Bruyn, Project Leader CFF, KBC Bank NV said “ since KBC Bank has been appointed as the centralizing accountholder ('top of the pyramid') for the dematerialized shares of the non-listed KBC investment funds, investors in these funds have to open directly or indirectly a securities account with KBC Bank. However, we at KBC felt that, especially for cross - border investors, external settlement through an ICSD had to remain possible. In this respect we discovered the CFF service from Clearstream which perfectly matched with our business requirements: DVP settlement in multiple currencies, a settlement process through a Clearstream account (FIA account) and no separate mark-up/mark-down messages needed. So, as a clear win-win situation for KBC Bank NV and Clearstream was identified the implementation process went very smoothly”.
