Hargreaves Lansdown upgrades to automated settlement solution

The investment fund platform Hargreaves Lansdown, ranking at the top in the UK for private investors by holding £58.8 billion under management for over 783,000 clients, has upgraded its settlement solution with Calastone Settlements.

The technology provider is a commercial settlement system designed specifically for the funds industry, with automating processes in reconciliation and settlement. The automated matching calculates net settlement positions between trading counterparties, allowing automated settlement net payments. Calastone Settlements claims the reduction of settlement payments can amount to 52%.

According to the settlement solutions firm, an £158bn of settlement payments took place needlessly in 2015.

“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 that Hargreaves Lansdown processes this is of huge benefit.”, said Danny Cox, Head of Communications at Hargreaves Lansdown.
Jon Willis, Chief Commercial Officer at Calastone Settlements added: “Calastone Settlements addresses several issues which challenge the funds industry today and significantly improves efficiency for our clients. As a commercial settlement system, as defined by the FCA, we are delighted to be able to offer significant liquidity improvements to firms such as Hargreaves Lansdown through the automated matching and netting of trades.”

Currently, one of the issues affecting mutual funds distribution today is transactions completed on an individual trade level regardless of the amount of funds bought buy a distributor from a fund manager. Then, a lot of manual post-settlement activity happens to confirm exchanges.

Another issue regards the Clearing House Automated Payment System (CHAPS), with payments being sent but not yet received for quite a while, because of the central clearing. The system prioritizes sending payments, but takes time to be properly allocated. When it comes to fund managers, if they are selling then the distributor has to recover the money first before sending out to clients, or fund on a gross basis until the end of the trading day.