In an attempt to boost market efficiency and liquidity in the European markets, BlackRock is working out “cross-border,” U.S.-styled unified exchange traded funds that would allow international trades to be settled in one location.
Currently, Europe-listed ETFs are issued and traded on more than one national stock exchanges, which are then settled in the national securities depository of the country where the trade was placed, reports Clare Hutchison for Reuters.
The Europe-listed ETF market has 1,962 available products, but there are currently 6,222 listings spread across 23 European exchanges, reports Philip Stafford and Chris Flood for the Financial Times.
An investor in one country would have to hold a depository account in his or her home country and the foreign country, updating both with any changes in positions and following post-trading regulations in both countries, which BlackRock argues as complex, costly and time consuming.
BlackRock is now working on an international security structure that would allow trades to be settled in one location. The money manager believes that the new cross-border fund structure would help boost liquidity and cut transaction costs in the growing $220 billion European ETF market.
“Liquidity is the number one concern that we hear from clients about ETF trading in Europe,” Mark Wiedman, global head of iSharesa said in the Financil Times article.
BlackRock calculates that the cross-border structure would help save €200 million, or $261.7 million, a year if 15 to 20 of its iShares ETFs were “euroclearable,” similar to how U.S.-listed ETFs operate.
“In order for the European ETF market to reach $1 trillion in the next three to five years, the entire market ecosystem must become more efficient for investors,” Wiedman added in the Bloomberg article.
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.