Calastone, on Monday (May 20, 2019) unveiled its iconic Distributed Market Infrastructure (DMI) that is powered by Blockchain. The firm which is a major player in the UK and global mutual funds industry is set to onboard its 1,800 clients into its new Blockchain platform as it radically overhauls managed transactions.
At the industry level, Calastone’s decision to develop and deploy the DMI platform was informed by the finding that Blockchain has the potential to save up to $4.3 billion (£3.4 billion). Hence, the company aims to spearhead Blockchain adoption in the managed mutual funds as a pioneering innovator.
Calastone processes $218 billion (£170 billion) worth of funds in monthly transactions and its new DMI Blockchain is poised to streamline operations as well as make transactions faster and error-free.
Eliminating Manual Transactions
Manual reconciliation of accounts has been a standard operation in the mutual funds’ industry as trades are either faxed or emailed. Further, the transactions revolve around the major clients of the industry such as asset managers and their administrators, brokers or intermediary agents, and even retail investors. The fragmented customers-base means that each class of clients is diverse and this makes it tricky for software developers to develop a network that can integrate all these users in a central ecosystem.
How The Calastone Internal System Works
Calastone was established nearly 12 years ago to primarily automate trades and integrate ten systems that were being used to sell mutual funds products. The traditional system receives raw data as formatted by clients and then normalizes it by translating it to another format for the counterparty to use. Data was collected in silos through messaging standards such as SWIFT and FIX leading to increased operational costs that the new Blockchain-based messaging has been deployed to counter.
The DMI Solution
The Calastone Distributed Market Infrastructure (DMI) that is modeled on Blockchain technology is offering an easier alternative for the UK based firm to execute its operations.
Blockchain is enabling clients to connect to the Blockchain ecosystem through the Calastone API to transact DMI routing operations for all parties to view orders in real time at the same instance. Hence, messaging that necessitated the need to reconcile data in order to execute a sharing among different parties is being eliminated and replaced with a faster and more versatile system. The parties that will be able to get data instantly include trustees, accountants, custodians, etc.
The Chief Innovation Officer, Campbell Brierley, further reveals that the DMI system will enable all participants in a trade to collaborate seamlessly and exploit new investment opportunities. The long-term implication is that investors will be more competitive and increase their portfolio wealth.
Ethereum Blockchain Technology Powers DMI
The Calastone DMI system is powered by permissioned Enterprise Ethereum that uses the Proof of Authority protocol to validate and complete transactions. Ethereum has been selected because it is relatively “mature” as at the time that the project development was rolled out. However, as other platforms undergo upgrades as more are deployed, the technology can be switched according to CMO Andrew Tomlinson.