Liquidity Sea Change

By connecting all money market fund participants digitally for the first time, Calastone is reshaping how treasurers see liquidity   

Calastone Money Market Services is all about helping companies, public sector organisations and financial institutions balance their liquidity, risk and yield objectives when investing surplus cash. The technological approach it has to its global network is transformational, and TMI salutes its success with the 2021 Technology & Innovation Award for Liquidity Investments Innovation. 

Technology & Innovation Awards

Liquidity Investments Innovation

Calastone is the largest global funds network and Calastone Money Market Services (MMS) enables MMF managers, for the first time, to directly connect and integrate with treasurers and money market portals in a completely digital network environment.

The automation of one of the largest areas of the financial sector is a welcome upgrade. What’s more, with Calastone working with some of the world’s largest investment banks, and continuing expansion of its global coverage, it is making transformational waves in the way liquidity fund investments are made.

Overcoming challenges

MMFs account for more than $6tr. in AUM globally. For treasurers, they are an essential short-term liquid investment tool. Yet despite the huge volumes of trade and the extreme importance of this market, treasurers and fund managers have for too long been subject to trading entirely manually.

Effectively managing and balancing liquidity, risk and yield objectives has been a challenge, with the ever-present risk of duplication and errors in placements and settlements, a lack of visibility over balances, fund positions and orders, and a tedious regime of bringing reporting data into the TMS.

With recent market pressures seeing many fund managers having to inject liquidity to support their own funds, the demand for efficiency, automation and cost reduction has been loud and clear.

Calastone’s MMS responds to all needs by automating and digitalising trade placement, settlements, and reporting processes. Clients can instantly obtain investor cash balance information from any bank and any geography to automate the calculation and execution of  trades. What’s more, the translation technology enables clients to connect to their counterparts regardless of the technology they use.

This is a great leap forward in that, through proven technology (currently used by nearly 3,000 organisations worldwide), treasurers can manage their risk and liquidity priorities faster, with certainty, and at a lower cost. It means fund managers can grow fund inflows by making their entire fund range available to investors through a single direct connection, and can activate new client trading links quickly to realise revenue and inflows faster.

Quick drivers

In an era of ultra-low returns, investing in MMFs needs to become much more automated to drive down costs, improve transparency, and remove risk from the process. As a complement to bank deposits, MMFs enable treasurers to achieve diversification across counterparties thanks to the spread of assets and issuers within each MMF portfolio. They can also achieve the necessary liquidity with same-day, or T-plus-zero, settlement.

The inflexibility of some legacy systems – especially where working from home is required – has seen demand grow for rapidly deployable cloud-based tools that can link the different parties and enterprise IT systems seamlessly. Calastone’s approach automates end-to-end processing of transactions, facilitates comprehensive reporting, and delivers a single, real-time view of positions visible to all counterparties.

One for all

The Calastone proposition automates the MMF investment process using unique order routing, settlement and reporting capabilities. Its Distributed Market Infrastructure (DMI) – based on DLT – means liquidity fund managers, portals and liquidity investors need connect only once to the Calastone network, using their preferred connectivity method, to benefit from connection to all their liquidity trading partners.

With its innovative take on technology, and live connections with a number of the world’s largest investment banks, including J.P. Morgan, Calastone MMS is transforming the economics of money markets. Ed Lopez, Chief Revenue Officer, Calastone, comments: “Calastone’s Money Market Service continues to connect treasurers to all their liquidity fund providers and portals. By allowing firms to integrate an automated trade, settlement and reporting process into their treasury system we can eliminate the risks posed by having multiple steps, systems and partners.”

In short, Calastone is supporting a sea change in the way in which treasurers invest and disinvest into MMFs, reducing cost and risk for all participants within the fund chain and, by eliminating manual activities while providing full visibility over every trade and payment, it is doing so with optimal security and efficiency. For TMI, this is what marks Calastone out as a leader, and worthy winner of the 2021 Technology & Innovation Award for Liquidity Investments Innovation.

Reflecting on the Award win, Lopez notes that: “We are now in the era of the strategic treasurer where there is a strong focus on getting rid of repetitive, high-volume and low-value tasks, reducing risks and costs – and making treasury more strategic. At Calastone we are here not only to remove friction, but also to enable treasurers – and their fund providers/portals – to find new ways to apply a more consumer-like experience to treasury technology with functionality driven by a single click. As such, it’s an honour to have our hard work recognised by TMI.”