Euroclear’s international ETF structure is selected by State Street Global Advisors
Brussels and London 1 October 2014 - Euroclear Bank, the Brussels-based international central securities depository (ICSD), and State Street Global Advisors (SSgA), a global leader in asset management, plan to merge a proposed thirteen SPDR® ETFs to an international ETF structure under Irish Law. This is an industry first; the first conversion from a domestic structure to an international structure that would remove the inefficiencies and reduce the costs associated with the current market practice.
The SPDR ETFs will be issued and settle for the first time in an ICSD. It is intended that these funds will migrate to the Euroclear-designed international structure towards the end of the year.
In addition to the primary market issuance process taking place in the ICSD, settlement of transactions occurs within the ICSD structure. Local CSDs can also provide post-trade services for internationally-structured ETFs via their links with the ICSD, achieving the best of both worlds. Currently, the thirteen ETFs are listed on Euronext Paris, Euronext Amsterdam, Euronext Brussels, Borsa Italiana, SIX Swiss Exchange and will also list on the London Stock Exchange for the first time.
Stephan Pouyat, Global Head of Capital Markets at Euroclear, commented: “We applaud SSGA’s recent announcement to rationalise their offering. By simplifying the issuance and post-trade processing in the European ETF market, liquidity providers will be able to significantly improve service levels towards end investor clients and ultimately lower the cost of owning ETFs.”
Paul Young, Head of Capital Markets Group, SPDR ETFs EMEA stated: “We anticipate that the new international structure will alleviate many of the operational complexities, costs and risks when settling ETF units and realigning them in the incumbent CSD structure. This is an exciting development and further demonstrates our commitment to enhancing the service we offer clients.”
The list of proposed SPDR ETFs that will migrate to an international structure include:
|French Domiciled Fund||ISIN||New Irish Domiciled Fund||New ISIN|
|SPDR AEX Index UCITS ETF||FR0000001893||SPDR AEX UCITS ETF||IE00BKWQ0B60|
|SPDR MSCI Europe Consumer Discretionary UCITS ETF||FR0000001752||SPDR MSCI Europe Consumer Discretionary UCITS ETF||IE00BKWQ0C77|
|SPDR MSCI Europe Consumer Staples UCITS ETF||FR0000001745||SPDR MSCI Europe Consumer Staples UCITS ETF||IE00BKWQ0D84|
|SPDR MSCI Europe Energy UCITS ETF||FR0000001810||SPDR MSCI Europe Energy UCITS ETF||IE00BKWQ0F09|
|SPDR MSCI Europe UCITS ETF||FR0000001885||SPDR MSCI Europe UCITS ETF||IE00BKWQ0Q14|
|SPDR MSCI Europe Financials UCITS ETF||FR0000001703||SPDR MSCI Europe Financials UCITS ETF||IE00BKWQ0G16|
|SPDR MSCI Europe Health Care UCITS ETF||FR0000001737||SPDR MSCI Europe Health Care UCITS ETF||IE00BKWQ0H23|
|SPDR MSCI Europe Industrials UCITS ETF||FR0000001778||SPDR MSCI Europe Industrials UCITS ETF||IE00BKWQ0J47|
|SPDR MSCI Europe Information Technology UCITS ETF||FR0000001695||SPDR MSCI Europe Technology UCITS ETF||IE00BKWQ0K51|
|SPDR MSCI Europe Materials UCITS ETF||FR0000001794||SPDR MSCI Europe Materials UCITS ETF||IE00BKWQ0L68|
|SPDR MSCI Europe Small Cap UCITS ETF||FR0010149880||SPDR MSCI Europe Small Cap UCITS ETF||IE00BKWQ0M75|
|SPDR MSCI Europe Telecommunication Services UCITS ETF||FR0000001687||SPDR MSCI Europe Telecommunications UCITS ETF||IE00BKWQ0N82|
|SPDR MSCI Europe Utilities UCITS ETF||FR0000001646||SPDR MSCI Europe Utilities UCITS ETF||IE00BKWQ0P07|
Note to editors
ETF processing background
At present, cross-exchange listed ETFs in Europe are issued and traded on one or more national stock exchanges and ultimately settle in the national central securities depository (CSD) of the exchange where the trade is executed.
However, when ETFs are traded across borders, i.e. a firm buys an ETF listed on one national exchange and then sells the same ETF on a different country’s exchange, the firm’s trading desk is confronted with complex post-trade processes and risks.
The firm has to ensure that it moves the ETF from the national CSD where it has been bought to the national CSD where it is being sold. Moving ETFs from one CSD to another in order to deliver the ETFs to the buyer in another country often requires the firm to have accounts with multiple CSDs, to align the firm’s ETF positions among different CSDs and to follow different post-trade market practices in different markets. Realigning ETFs across multiple European markets throughout the trading day is expensive, time-consuming and operationally complex. In addition, it increases the potential for settlement fails, fines, counterparty compensation claims and ETF buy-ins to avoid settlement fails. These are also reasons why ETFs in Europe trade with such wide spreads, i.e. to compensate brokers for the risk and costs of moving ETFs across borders.
Euroclear is one of the world's largest providers of domestic and cross-border settlement and related services for bond, equity, ETF and other mutual fund transactions with offices in 15 countries across the globe and links to 46 international markets. Euroclear is a proven, resilient capital market infrastructure committed to delivering risk-mitigation, automation and efficiency at scale for its global client franchise which includes over 100 central banks and supranationals.
The Euroclear group includes Euroclear Bank, which is consistently rated AA+ by Fitch Ratings and AA by Standard & Poor's, as well as Euroclear Belgium, Euroclear Finland, Euroclear France, Euroclear Nederland, Euroclear Sweden and Euroclear UK & Ireland. The group settles the equivalent of $782 trillion (€572 trillion) in securities transactions annually representing 170 million domestic and cross-border transactions. The group holds $1.1 trillion (€833 billion) in average daily collateral outstandings, and over $34.5 trillion (€25.2 trillion) in assets for clients.