Strategic Management

A Strategic Review of Calastone Transaction Network BHM 530

Strategic Management II



A Strategic Review of Calastone Transaction Network

Executive Summary

Calastone Transaction network was setup as a transaction hub to help introduce technology to the funds industry in order to allow for what the industry today calls “Straight Through Processing” this was a form of technology to allow for funds and derivatives to be traded across board from different clientele and different industries.

The history of Calastone came from the idea of a core group of individuals who focused on an idea that developed after the review of practises in the mutual funds industry. The main focus was on how the trading partners conducted their business, here the trade volumes were high and in some days totalled over £1 billion however the use of technology was nil or non-existent. For the founding partners of Calastone this was an opportunity to introduce the industry to technology that would both help them keep costs of transaction down, lower the risks associated with trading days and adopt 21 century compliance.

The offer Calastone made was simple, basic and straight to the point. For an introductory fee Calastone would take trades from counter parties and pass them along the process of presentation, aggregation and pricing the whole trading lifecycle of funds.

The Calastone business thrived from the inception based on the value of the offer to prospective clients. Calastone were fortunate based on the need for value at the point they came into the market and the technological options they offered the clients at different phases of the transaction cycle.

In a market that was unfortunate enough to take a substantial amount of loss during the financial recession, the funds market needed a stimulus of some sort and the lower cost of transaction and infrastructure to firms. For the first time, the whole of the mutual fund market can become fully electronic. With a single connection, Fund Providers, Fund Distributors, and Transfer Agents/Third Party Administrators could communicate electronically regardless of size, location, technical capability or message protocol preference

To join the Calastone transaction network there were no joining fees, no annual membership fees and minimal (often no) technical investment Calastone unlike most firms that offered a form of electronic transaction. Calastone members were made to benefit from the company's low tariff model which matched the company commitment to drive down costs for clients and connected parties.

This chart shows how market participants that use STP , including the buy side, sell side, custodians, exchanges and depositories are reacting, and assesses their overall state of readiness. This report will discuss the various Calastone approaches to achieving STP and the challenges therein.

Fig 1: The Calastone Cycle



Table of Contents

Understanding and Expressing Context6

Eliciting and Evaluating Strategy7

The Calastone Business Strategy7

The Calastone Market8

Challenges Opportunities and Actions8

Business Model10

Calastone Customer Segments:10

Value Propositions10

Channels11

Customer Relationships11

Revenue Streams11

Key Resources12

Key Activities12

Key Partners12

Cost Structure13

Rich Picture14

Integrating strategy15

Venture Management16

New Business Model16

Market Focus17

Management Focus17

Strategic Focus18

External Review Vs Internal Management Strategy18

Management of the environment18

Strategic Engine19

Analysis, Research and Development20

Business and Venture Management21

SWOT Analysis of Calastone24

Calastone PESTLE Analysis25

References26

Understanding and Expressing Context

Calastone ...