Deutsche Börse and Clearstream said they began their joint effort at introducing exchange trading in mutual funds.
As of Thursday, Jan. 13, more than 80,000 investment funds that are currently on Clearstream's order routing platform, Vestima+, can be introduced for trading on Deutsche Bank’s cash market, Xetra, by funds specialists.
After execution, the funds will be settled through Clearstream's post-trade facility for mutual funds, the Central Facility for Funds (CFF).
Before this, the value of an individual fund’s share could only be identified the next day. As in the United States, this meant calculation once a day of the net asset value.
Stock exchange execution will allow individual funds units to be priced and monetized immediately, the two firms said.
Also, customers trading investment funds on the Xetra exchange and pooling them within Clearstream can use their funds units as collateral to in financial transactions.
"We are modernizing the archaic funds distribution model. Trading mutual funds on exchange significantly reduces end-to-end cost for investors and brings all advantages of stock exchange trading to the funds world, i.e. immediacy of execution, price transparency and reduction of operational risks," said Rainer Riess, Managing Director of Deutsche Börse and Head of Market Development Xetra.
"In an environment where almost no financial commitment occurs without being secured, the new offering will also create a new large source of collateral of around 700 billion euros that is currently immobilized," said Philippe Seyll, Member of the Executive Board and Head of Investment Funds Services at Clearstream.
Exchange Traded Funds (ETFs) have been traded on Xetra since 2000, mutual funds since 2006. Currently, more than 3,500 funds are admitted to trading on Xetra.
Under the new joint Deutsche Börse and Clearstream offering, fund specialists can introduce funds - according to market demand and pending certain regulatory preconditions - from the universe of additional 80,000 mutual funds, including almost all European cross-border funds.
With this move, Deutsche Börse Group is creating what it calls “an additional extensive secondary market for mutual fund shares.’’