DWS, Germany’s leading investment fund manager, was confirmed on the system in late February 2006, while Erste Bank has been enlisted to start in April. A bank in Italy is also in the pipeline, said a Clearstream spokesman.
Transaction volumes on Vestima+, touted as “the only available system” offering free choice of settlement and custody routes, witnessed a 103 per cent growth in the number of fund related transactions processed for the investment funds industry in the calendar year 2005 - with the depot business for funds spiking 80 per cent.
Philippe Seyll, head of Clearstream International Investment Funds Services who joined the Luxembourg-based organisation last October after a 10-year stint at the Bank of New York, said: “The success of Vestima+ is the success of a collaborative process of working with market participants to create a solution that meets their needs.
“As a result, the service is open, unique and innovative and delivers cost-efficiency where our customers need it most,” said Mr Seyll who “parallels” the investment fund processing business today with the work of Cedel during the 1970s for the eurobond market.
Clearstream is seeking to expand Vestima+ market coverage in 2006 as well as providing new and “innovative solutions” for the investment funds industry, said Mr Seyll, who this month was involved in the launch of a so-called Central Facility for Funds (CFF), a post-trade product for investment funds in Luxembourg. The CCF service seeks to offer a more efficient post trade solution for investment funds domiciled in Luxembourg.
Mr Seyll views his mission as akin to taking a start-up operation with his team towards a more “industrial size” scale operation. Over 16,000 investment funds traded on a regular basis are already available on Clearstream’s Vestima+ and a steady stream of organisations signed up for the service throughout 2005.
This compares with almost 31,000 eligible funds on Euroclear’s FundSettle platform, a one-stop-shop for the order-routing, settlement and asset servicing of fund transactions, which in 2005 saw a 209 per cent surge in traffic and a 46 per cent increase in FundSettle accounts.
Euroclear’s FundSettle offers a service whereby a single instruction is sufficient to see a transaction routed, settled and serviced. The number of funds on the platform rose by around 7000 last year, (an increase of over 30 per cent on 2004), including domestic and offshore funds.
Conor Leeson, communications manager at Euroclear in Brussels, said: “Client demand suggests that market players want a ‘one-stop-shop’ for all their investment-fund processing requirements. They want to press a button once and have their transaction routed, serviced and settled in one go.”
Mr Leeson added that fragmentation or breaking up the process is “not the answer”, which is why Euroclear’s FundSettle pursues the fully integrated model.
Mr Seyll said: “At Clearstream my role is to steer the development of the provision of investment fund-related services. We believe that what we have to put in place has to mimic what the market is doing.”
“Given that the market is open by nature, we do not see why a company or a set of services should be rendered in a closed manner. You have to give the players the freedom to settle wherever they want.”
Mr Seyll acknowledged that “in the long run” the current situation of a myriad of transfer agents and distributors interacting [with respect to Vestima+] in addition to multiple settlement venues would not always exist. But for the time being “whatever you put in front of the market in terms of streamlining must be open.” This means orders routed through Vestima+ can and are settled, for instance, in Euroclear (France).
With Vestima+, orders can be routed (subscriptions and redemptions) from the distributor network to a particular fund or funds, which can be deposited within Clearstream’s book. Settlement instructions reach Clearstream in an automated way with high straight-through processing rates claimed .
Another touted benefit includes ‘registered’ settlement, allowing settlement to be made on the register of the transfer agent. Using Vestima+ orders can be routed, with the system triggering a settlement instruction - that in the end - can see settlement outside of Clearstream’s book and/or on the register of the transfer agent’s book.
