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Central Facility for Funds (CFF)

The Central Facility for Funds (CFF) is the new post-trade infrastructure designed to provide greater efficiency and cost-effectiveness in the settlement and custody process.

CFF is the result of extensive consultation with key players in the Luxembourg funds industry, and aims to deliver significant reductions in risks and costs to the market.

It will initially cover Luxembourg domiciled UCITS, and will provide standard settlement services based on the synchronous exchange of cash and securities between:

  • Fund Distributors

  • Custodians

  • Transfer Agents

The processing risk in the currently prevailing process of separating the cash and securities settlement is therefore significantly reduced.

Furthermore, CFF will enable the management of corporate actions and the distribution of trailer fees.

All of which will be backed up by efficient reporting services on settled positions and the provision of a central source of static fund data.

 

Benefits

The benefits of becoming a central hub for the industry are cost reductions and simplified operational procedures through single connections to it and therefore also greater standardization and reconciliation benefits. Naturally, a structured market of this kind enables a reduction in the systemic and operational risk elements.

The CFF will provide the market with a secure infrastructure that enables further business volume growth.

 

 

Openness

A key element will be the openness of the structure. This enables the multiple order-routing mechanisms that exist today (SWIFT, Vestima+, etc) to seamlessly integrate with CFF.

It provides benefits for users at every point in the chain:

  • Distributors will get an infrastructure that re-uses the proven processes, in particular settlement and safekeeping, and integrates with trading activities such as transfers and OTC trading

  • Fund promoters will get a central hub that supports international distribution and provides the required granularity of related information

  • Transfer Agencies will get a structure that reduces risk and reconciliation efforts while increasing STP processing and holding information at the distributor level

For easier implementation, CFF will not force the commercial relationships between Order Issuers and Order Handling Agents for order execution to change.