iShares’ exchange traded funds (ETFs) will soon be issued and settled at international central securities depository (CSD) Euroclear Bank for the first time.
iShares, run by asset management and advisory services firm BlackRock, with more than 600 funds trading on 20 exchanges worldwide, are to be different than other cross-exchange listed ETFs in Europe, which are settled in national CSDs.
When trading ETFs across borders, firms have to move ETFs from national CSD, where they are bought, to the national CSD, where they are being sold, which may cause inefficiencies, according to BlackRock and Euroclear. Using a single European settlement location is expected to improve trading liquidity, ease cross-border ETF processing and lower transaction costs for investors.
“ETF trade processing across borders in Europe has long suffered from inefficient, complex and labour-intensive post-trade processes,” Tim Howell, CEO of Euroclear, said.
“The beauty of our service offering is that it centralises settlement for ETF trades conducted on multiple trading venues. This structural shift, that clearly recognises ETFs as internationally traded securities, will further broaden investor appeal and provide the optimal post-trade arrangements.”
iShares funds, which cover equities, fixed income and commodities, are bought and sold like common stock on securities exchanges.
A pilot programme for the issuing and settling of iShares ETFs in Eurobank will launch in coming months. Upon the completion of the programme, additional ETFs will be issued using the new international security structure.