BlackRock has transitioned $2.9 billion (€2.7 billion) worth of exchange-traded funds (ETFs) to a centralised settlement platform to cut down on the complexity of settling ETFs listed on multiple exchanges.
The firm’s iShares ETF business is migrating 20 ETFs to a centralised model with the support of the international central securities depositaries (CSDs), Clearstream and Euroclear.
BlackRock issued the first ETF with an international security structure in 2013 and has launched all new funds since March 2015 on this platform. But these 20 ETFs are the first in the pre-existing range to transition to the new model.
The international CSDs will carry out issuance and settlement of the ETFs in a single pan-European location. BlackRock and the two international CSDs say this model simplifies the post-trade process of ETFs, “enabling market makers to offer more competitive trading spreads to investors, and also boosts overall liquidity”.
Many ETFs are currently listed across multiple exchanges in Europe and must settle in the national CSD of the trading venue where the trade is executed.
Stephan Pouyat, global head of capital markets at Euroclear, says: “What we are doing is effectively simplifying the European issuance and settlement process for this much sought-after investment product.”
Bernard Tancré, head of business solutions, investment fund services at Clearstream, says: “A significant advantage of this ICSD issuance model is that it utilises the well proven, and efficient settlement infrastructure for eurobonds that market participants from around the world have been accustomed for more than 40 years.”
Leland Clemons, global head of iShares capital markets at BlackRock, says he hopes an industry consensus will build around this settlement model.
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