With Calastone successfully launching its distributed market infrastructure (DMI) for global funds transactions execution, financial services moves into the blockchain-enabled future, raising the question of what next.
Calastone, the global funds transaction network, migrated the technology underpinning to DMI as of late May, and now more than 1,800 customers across 41 markets, including Australia, are now transacting via blockchain.
DMI is designed to increase speed and automation by creating permissible access for participants that are connected through the infrastructure. It also brings a new service, the sub-register, which creates a shared, real-time view and history of the registers between trading partners at any point in the distribution chain. This sub-registrar is privately permissioned for security purposes, Calastone said.
Because the migration to DMI happened behind the scenes for clients, the transition itself is only the beginning of how Calastone is communicating with clients.
“With regard to future functionality, the potential of the technology is so vast, and we’ve been speaking with organisations about that,” said Ross Fox, acting head of Australia and New Zealand at Calastone. “We’re getting questions such as, can I get a real-time look through to the transactions that the party is executing on my behalf? Fund managers are asking, could we plug our portfolio manager to have a view of the inflows and outflows that we have at real time, and at what time is that functionality available?”
At a live demonstration in Melbourne in March, pre-launch, Natalie Scuderi, business solutions consultant at Calastone, outlined a potential application to DMI using the sub-registrar that would permit visibility throughout the entire trade chain.
“What happens when we lift over the other fund processing services,” Scuderi said. “This could be your transfers, your dividends, any other kind of fund process that you engage in today. By having all of this on the DMI you’re now able to create electronic share class. And with everything else fully digitised, the processing cost of these could be minimal.”
With the launch of DMI, distributed ledger technology application moves from the theoretical into the practical. In Australia, the mooted next move will come when ASX replaces the CHESS cash equity settlement system with a form of DLT by 2021. The new system is expected to result in a shared, secure, single source of truth for settlements, say ASX and Digital Asset, the company that is developing the system.
Calastone predicts that DMI could bring more than £3.4 billion in savings per year for the mutual funds market worldwide, achieved through the technological mutualisation of the distribution model. With that savings brings ability to innovate.
“The evolution of this technology is really going to be dictated by wherever our clients want to go within the shortest period of time,” Fox said. “Look at securitsation and the ways that a distributed ledger can be harnessed. We are going to work on building out the functionality of our BMI in the way we did with the Calastone network, but understanding the inefficiency, and understanding where our tech can support the industry.”