Fund transaction network Calastone says it has successfully completed the first phase of a proof of concept blockchain for the settlement and trading of mutual funds.
The test targeted reducing frictional cost of trading mutual funds from fund manufacturer to end investor by placing the marketplace on a blockchain.
According to Calastone, the results of the test replicated transactions equivalent to a full day’s trading across its network.
“Our vision is to enable friction-free trading for funds industry participants”, said Julien Hammerson, CEO at Calastone.
“Since launching in 2008, Calastone has pioneered ways to introduce operational and functional efficiencies for the industry from order routing, through to settlement, reconciliations, market data distribution and analytics.”
The next phase of the proof of concept is aimed at engaging market participant “design partners.”
Ken Tregidgo, Calastone’s deputy CEO, told Global Custodian that wider industry changes are driving applications of blockchain.
“If you look at industry challenges as a whole, there is the changing market environment and changing regulatory challenges.
“We are also seeing increasing channel competition as everyone is competing with everyone in an environment where everyone needs to focus on the total cost of ownership.
“So overall, reducing costs of trading, enabling clients to innovate, addressing the scale and particularly the gradual move to a client centric approach are driving the need for these applications,” said Tregidgo.
Settlement has been touted as one of many potential uses of blockchain technology within securities services.
SIX Securities Services recently revealed it had developed a blockchain powered service covering the full bond trading life cycle from issuance to settlement.
Panellists at the SWIFT Business Forum earlier this year stated blockchain technology must be adapted if it is to be used in settlement transactions as ‘archetypal’ deployments do not lend themselves to settlements.