Euroclear’s international ETF structure premiers on BATS Chi-X Europe

Jun 16th, 2014 | By | Category: ETF and Index News

BlackRock’s recent launch of the iShares MSCI USA Dividend IQ UCITS ETF  marks another step forward in the industry’s efforts to make Europe’s fragmented exchange-traded fund market more efficient and, ultimately, further reduce costs for investors.

Euroclear's international ETF structure premiers on BATS Chi-X Europe

Mark Hemsley, CEO of BATS Chi-X Europe.

Launched in cooperation with Euroclear Bank, the international central securities depository (CSD), and exchange operator BATS Chi-X Europe, the new ETF has a unique international securities structure that is designed to enhance trading liquidity, ease cross-border processing and significantly lower transaction costs for investors.

Its creators hope that this innovative international format will accelerate the growth of the European ETF market by simplifying the issuance structure and post-trade environment of European ETFs.

Typically, multi-listed ETFs in Europe are issued and traded on one or more national stock exchange, and subsequently settle in the corresponding national CSD. This causes inefficiencies in cross-border transactions. By using a single European settlement location, it is expected the international structure will improve liquidity, ease cross-border processing by removing the need for realignment of positions between CSDs for settlement and significantly lower overall costs and risks for investors.

Mark Hemsley, Chief Executive Officer, BATS Chi-X Europe, said: “BATS Chi-X Europe obtained its Registered Investment Exchange (RIE) status a year ago with the express purpose of bringing market efficiencies to European ETF listings. This latest listing can be counted as proof of concept that listing on BATS brings material benefits to pan-European investors looking to access deep and liquid markets, and we are very much looking forward to working with Euroclear Bank to extend use of their services in the near future.”

Stephan Pouyat, Global Head of International Markets, Euroclear, commented: “We are pleased to have a second international ETF available for settlement on our multi-currency transaction processing platform. I thank those involved at BATS and BlackRock for the smooth inaugural launch here at BATS of this ETF. We are ensuring that intermediaries purchasing this ETF will benefit from the safety of electronic delivery-versus-payment settlement, as well as delivering tangible benefits such as harmonised processing rules across trading venues and much improved asset servicing. And as the market knows, expedient reconciliation as well as the timely and accurate payment of dividends is vital to the attractiveness of ETFs – and the optimal functioning of the market.”

Leland Clemons, Head of iShares Capital Markets in EMEA, commented: “Market infrastructure improvements are imperative to support the rapid growth of the ETF industry and we hope to see this structure adopted by providers across Europe to continue to drive the ETF market evolution.”

The ETF is the second iShares fund to be issued and settle in an international central securities depository provided by Euroclear Bank. The iShares Euro Stoxx 50 ex-Financials UCITS ETF (EXFN), which has the same international securities structure, was launched in December 2013 on the London Stock Exchange.

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