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Central Facility for Funds 4 th Fund Summit Paris, 6 June 2007 What - - PowerPoint PPT Presentation
Central Facility for Funds 4 th Fund Summit Paris, 6 June 2007 What - - PowerPoint PPT Presentation
Central Facility for Funds 4 th Fund Summit Paris, 6 June 2007 What is CFF? Central Facility for Funds is a new post-trade Central Facility for Funds is a new post-trade infrastructure for European domiciled Funds infrastructure for
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What Does the Market Want ?
Market consensus for a post-trade funds infrastructure that provides:
n
A single point of access to replace many-to-many relations
n
Risk reduction by standardised DVP settlement
n
Centralised and standardised corporate action and income event processing
n
A high level of STP processing and support of industry standards
!
…key stakeholders across the board are in general agreement
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Existing Market Models
Custodian (CSD Member) CSD Local Settlement Agent (CSD Member) Distributor Fund Promoter Fund Supermarket TA Funds Promoter Distributor Custodian / Broker Investors Funds Promoter Funds Promoter Funds Promoter TA TA TA Bank
Transfer Agent Model CSD Model
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CFF Operating Model Best of both models
Fund Supermarket TA Funds Promoter Distributor Custodian / Broker Investors Funds Promoter Funds Promoter Funds Promoter TA TA TA Bank
CFF
CFF targets those distributors who hold a direct account on the register. The use of CFF as a settlement mechanism is independent of the mechanism used to route the related orders
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Order Routing Settlement & Custody
Investors
Banks Distributors
Communication Channels
Vestima+
DVP DVP
Transfer Agents Fund Promoters
100% STP
Central Facility for Funds Vestima+ and CFF positioning
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Clearstream Banking Luxembourg
CFF within Clearstream Banking
Core Settlement and Custody Services
Customer Account
Distributor
Euroclear Bank Bridge Account
CFF-Customer
Clearstream Banking Luxembourg
CFF-Service
Customer Account Pictet
Funds Register
Schröders
Funds Register Fund Issuance Account Fund Issuance Account
Settlement
Customer
Account
TA TA
Customer
Account
Customer
Account
TA
Fund Issuance Account Fund Issuance Account Fund Issuance Account
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n
TAs operate the Fund Issuance Account
n TAs sends the settlement instruction to CFF as soon as possible after updating the
register
n The settlement instruction officially confirms that the register had been updated n Manage cash accordingly n
DvP is always based on a matched instruction. It is the simultaneous exchange of cash and securities in an integrated step - performed all or nothing
n
Successful settlement within the Fund Issuance Account automatically creates and delivers the securities to CFF in the case of a subscription or withdraws the securities from CFF in an integrated step
Settlement Process: subscriptions and redemptions
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Settlement Process: Transfers
n
By default, funds admitted in CFF will be freely transferrable
n
CFF informs TAs of all intra CFF transfers ex-post
n
Transfers are always based on standard matching instructions (MT54x based)
n
Transfers in / out of CFF are processed via the Fund Issuance Account operated by the TA which leave him in full control as to when the transfer takes place
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For transfers between participants: Trade date = Settlement date
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For transfers-in and –out: Trade date is the TD confirmed by the TA in his settlement instruction
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Corporate Actions Processing
Corporate Actions processing in CFF is performed in a similar way as today in the ICSD.
n The TA sends the Corporate Action notification for the CBL Omnibus Account to CFF. n CBL reconciles with the TA effective register date (entitlement date) and sends the
notification of the Corporate Action to their individual CFF account holders.
n CFF receives a bulk payment or the securities from the TA and distributes them to the
CBL account holders accordingly. One major difference: entitlements will be calculated based on trade date positions instead of settled positions.
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Benefits to Market participants
Distributors:
q
Risk mitigation through DVP and operational processes simplification
q
Streamlining of settlement procedures as everything settles through the same hub
q
Consistency of settlement processes across asset classes (same instructions, centralised cash management)
q
Consistency of services re: Asset Servicing
q
Consistency of transactional reporting (not TA dependant)
q
Transfers facilitation
q
Improved reconciliation processes through systematic use of matching instructions
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Reduced operational and transactional costs
q
Transactions driven pricing vs. AUM driven pricing
Transfer Agents:
q
Risk mitigation through DVP and operational processes
q
Streamlining of settlement procedures as everything settles through the same hub (including proceeds distributions)
q
Simplified procedures compared to current ICSD model
q
Transparency: direct view on the distributors is kept (e.g. transfers reporting)
q
One CFF account allows settlement against CFF as well as ICSD accounts
q
Improved reconciliation processes through systematic use of matching instructions
q
Reduced operational and transactional costs
q
Simple and very reasonable pricing
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Phase x
n Further market-led
enhancements
n Possible geographic
extension
Specification
Q3 2005
n Working groups
consisting of major market players
n Dedicated project
team
n Executive
management commitment to finding a solution
Strategy of TAs migration onto CFF
Clearstream’s Commitment
§ Automated Cash Pay-out § Automated re-investment § Pre-advice & NOSTRO § Position Blocking § Connectivity Integration for Vestima & COL § CVS file upload for transactions
Q1 2007
n CFF to be
launched for Early Adopters
n Limited service
scope
Pilot Phase 2
n Entend service
scope
Q3 2007
Full Launch
n Launch CFF
to all customers
n Migrate TAs
to CFF
§
Schröders
§
Pictet
§
BP2S
§
UBS FS
§
Fortis
§
Fastnet
Pilots 26 March 2007
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Thank you !
patrick.wallerand@ clearstream.com