Settlement
Vestima delivers centralised settlement services for investment fund units. Clients can settle all orders from one single account, rather than holding fund shares in separate accounts at each fund/transfer agent. This allows netting out of cash flows so that clients can send one instruction per currency, instead of sending many instructions.
DVP settlement
Operational efficiency is significantly increased when the settlement is DVP, due to the simultaneous exchange of cash and investment fund shares in SWIFT message formats between fund distributors, custodians and transfer agents. Customers benefit from simplified and improved settlement of orders placed via the Vestima Order Routing service.
Fund market accounts
We introduced two securities accounts to be used as fund market accounts, rather than many hundreds of counterparty accounts.
The international fund market account, FMA01, performs as the clients’ counterparty in every settlement instruction, for the vast majority of investment funds.
The domestic fund market account, 19222, is used to harmonise the settlement of some domestic investment fund orders that are entered through the Vestima Order Routing service.
Instruction harmonisation
Orders in investment funds are settled on a DVP basis using plain DVP instructions. Orders, which in the past required separate cash and ‘free of payment’ (FOP) settlement legs, are now combined through a fund market account.
The client only needs to send us DVP instructions against one of the two fund market accounts described above. Clearstream’s automation and standing instructions manage the complex rules of the various local markets, and we settle the order with the fund company on our customers’ behalf.
Clearstream is working with market practice groups and transfer agents to implement standards for communicating the cash due date for prepaid subscriptions. In future, subscriptions in prepaid funds will be debited automatically on the cash due date.
Key benefits
The main attributes of Vestima’s settlement services are standardisation, efficiency and simplicity. Thanks to its global reach, Clearstream’s fund processing platform is able to connect multiple markets, many hundreds of fund companies, transfer agents, fund administrators and other parties on a single platform.
Fund distributors benefit from the same settlement process across markets and for all asset classes held with Clearstream, using the same platform and connectivity media.