Two live Blockchain use cases in Mutual Funds administration and four pilots

In Blockchain world everybody wants to be `the World`s first`. The term started being a must in white papers, now it is all over social media, with announcements about

The World`s first tokenized equity

The World`s first STO

The World`s first regulated Crypto bank

The World`s first Initial Wallet Offering

The World`s first Regulated ATS for STOs

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Today I am sharing with you how established players in the fund industry are actually using DLT in their business. I really don’t know who moved first and I hope you don’t care that much.

Vanguard, the only client-owned fund business, is deploying DLT technology in partnership with Symbiont to manage index data. The objective is to synchronize data from CRSP-based indices in a digital way and most importantly WITHOUT A TRUSTED INTERMEDIARY.

CRSP  is the Center for Research in security prices and has been the source of data (inclusion-exclusion in an index and weighting) for Vanguard forever. The updating was done manually. When Vanguard decided to go digital for the updates, it went all the way. Using existing, established technology for automated updating without reconciliations would require trusting a third-party intermediary to host and manage the updating of the database. Instead, Vanguard chose to NOT entrust this sensitive data process to ANY one company. Symbiont`s DLT architecture is a shared ledger. For now, there are three participants, Vanguard, Symbiont, and CRSP but more than half a dozen other  asset managers are thinking of joining as validators.

Calastone, is the largest global funds transaction network. They launched a few months ago their long-awaited Distributed Market Infrastructure (DMI) which is a new blockchain-based marketplace for fund administration. The vision is to get rid of the web of reconciliations and the ripple effects of batch processing of data.

The shared ledger (to be accessible to participants in the wholesale processing of funds) hosts the data and all needed will be handled by smart contracts.

At the launch the DMI is offering transparency in Order Routing, which means access to real-time trading activity. It is also offering an improvement for the settlement services of funds with a reduced number of reconciliations and improved global payment projections.

Vanguard 44yrs old

Symbiont 6yrs old

Calastone 12yrs old

Lots of testing has also happened and will continue. Several are out of Luxembourg naturally. Fundsquare which is a consortium and subsidiary of the Luxembourg Stock Exchange, in collaboration with FundsDLT, the Luxembourg blockchain-powered fund distribution platform for fund managers, has completed tests with BNP Paribas Asset Management and with Credit Suisse Asset Management and Natixis Asset Management ((separately).

Recently, Franklin Templeton announced their intention to use the Stellar Network to register share ownership of one their large money market funds (following SEC approval.)

FundsDLT is 2yrs old and the result of a collaboration between FundsquareInTech, and KPMG Luxembourg. Intech is subsidiary of the Post Group in Luxembourg.

Sources:

Vanguard Is Now Using Blockchain Technology To Help Manage $1.3 Trillion In Index Funds

Making our businesses better for today and for the future: the true value of DLT in funds

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

 I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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One comment

  1. back in December 2015 when the concept of real time settlement in fund admin surfaced at an industry panel in Luxembourg, insiders were talking about 10 years for it to become mainstream. Less than 4 years later here we are – on track.

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