Unlike other cross-exchange listed ETFs in Europe—which currently settle in national central securities depositories (CSD)—the new iShares ETF will be issued and settle for the first time in an international CSD, Euroclear Bank.
Currently all cross-exchange listed ETFs in Europe including iShares ETFs, are issued and traded on one or more national stock exchanges and settle in the national CSD of the exchange where the trade is executed. This often causes inefficiencies when ETFs are traded across borders.
By using a single European settlement location, it is expected the new international ETF structure will improve trading liquidity, ease cross-border ETF processing and significantly lower transaction costs for investors.
Tim Howell, CEO of Euroclear, commented: “ETF trade processing across borders in Europe has long suffered from inefficient, complex and labour-intensive post-trade processes. BlackRock and Euroclear Bank have listened to the industry’s calls for an improved European solution and worked closely together to provide one.”
“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. This will enable ETFs to continue their rapid rate of growth in Europe.”
Mark Wiedman, global head of iShares, added: “This pioneering partnership seeks to facilitate growth in the European ETF market by simplifying the issuance structure and post-trade environment of European ETFs. In order for the European ETF market to reach $1trillion in the next three to five years, the entire market ecosystem must become more efficient for investors.”
“Access must be widened to encompass new investors and operating simplicity must be delivered in the form of lower transaction costs. We are proud to be a part of this development by making iShares ETFs ‘Euroclearable’ and hope that the result will be valuable for our clients.”