Clearstream, the international central securities depository within theDeutsche Borse Group, has come up with a post trading solution for funds domiciled in Luxembourg, which it will pilot in the latter half of the year.
The Central Facility for Funds (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 wellas 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 andin Luxembourg, Europes biggest market for international investment fundswith more than Euros 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.
CFF is the result of an extensive consultation with Luxembourgs market participants looking for a reduction in risks and costs,” said Jeffrey Tessler, CEO of Clearstream. “We are particularly pleased to have beenasked to put Clearstreams expertise in other asset classes such asbonds or equities, at the service of the investment funds industry.”