Hargreaves Lansdown Live with Calastone Settlement Service

Funds transaction network Calastone has announced that fund distributor Hargreaves Lansdown has gone live with its settlement solution, Calastone Settlements.

Calastone Settlements automates the reconciliation and settlement process of investment funds, says the company, which adds that according to its own calculations, automation can save a fund manager up to 52%.

In 2015, an estimated £158 billion of settlement payments took place needlessly in the UK, says Calastone chief commercial officer Jon Willis. He explains how Calastone got to this figure: "Calastone carries about 50% of find orders in the UK today. We analyzed our own trading data between fund managers and distributors and got to a netting ratio of a 52% saving. Then we extrapolated what we see to the wider marketplace.

"So in 2015, there was £303 billion of settlements managed in the fund industry, and a 52% saving of that is £158 billion."

The automated matching of trades calculates the net settlement position between trading counterparties, reducing settlement payments, Willis explains. "Today, everyone is effectively geared up to settle on a gross basis," he says.

Calastone Settlements matches trades and automatically reconciles that process, effectively netting the settlements, two days before settlement day.

The solution also deals with the receipts of money being moved at any time of the day, which happens every day by about 7.30am, says Willis. "Often distributors will sell out of one fund manager and buy into another. So rather than firms having to monitor their accounts through the day and try to find a way to pay one fund manager before receiving the money from another, the money is moved by all parties first thing in the morning.

"Hargreaves Lansdown has a huge volume of transactions and runs a number of different services, some of which are execution; it has a lot of retail clients buying funds; and it also runs some model portfolios. So it may well be selling out of one fund manager and buying into another. The fact that all this is netted and agreed two days before settlement day means Hargreaves can predict in advance what its cash requirements are going to be."

Danny Cox, head of communications at Hargreaves Lansdown, says in a statement: "Automatic matching of trades and the netting of settlement positions early in the day will improve the efficiency of our operational and treasury teams. Given the number of transactions Hargreaves Lansdown processes, this is of huge benefit."