The settlement model requires that each fund manufacturer use three primary CDS participants to facilitate settlement of a transaction.
Transfer Agent
The transfer agent is responsible for facilitating the settlement obligations for transactions. The transfer agent will receive treasury directions from the fund manufacturers and then confirm, deliver or withdraw fund units for settlement. The transfer agent will also produce funding letters for cash distributions and fund the distribution through CDS on behalf of the custodian.
Clearing Broker
A clearing broker facilitates clearing and settlement of mutual fund trades. If a fund manufacturer becomes a CDS-approved participant, they can perform this function.
Custodian
A custodian facilitates the creation and redemption of mutual fund units and works with the transfer agent to ensure delivery of cash or units for settlement obligations.