Today, Euroclear is at the forefront of innovation in the Exchange Traded Funds (ETF) market: around 80% of Europe’s ETFs by value are issued in the ICSD model and all the primary and secondary market activity takes place in the books of the ICSDs.
Euroclear’s iETF solution is the reference recognised by the industry. It brings tangible benefits in terms of liquidity, efficiency, global and multi-currency access and materially reduces costs for the market.
Tomorrow, Euronext’s announced ETF settlement model runs the risk of creating significant market disruption. There are definite benefits to consolidating listings, but the plan to push the settlement of Euro-denominated ETF trades into Euronext Securities Milan could fragment post-trade processes, creating operational silos and new challenges for market-makers.
With the support of market, Euroclear is committed to ensuring continuity in the current post-trade flows in order to avoid a serious step backward.
In this whitepaper we have gathered the thoughts of half a dozen industry experts who share their insights into the past, present and possible future state of the ETF market in Europe.
Some of the points they highlight
- The changes proposed run a real risk of creating more, as opposed to less fragmentation.
- The steps proposed are in many ways an unwinding of the efficiency gains made over the last decade.
- Compared to the multi-currency environment in which they operate today, complexity for non-euro denominated ETFs will go up as transactions will need to settle in two distinct CSDs – adding another unnecessary element of risk.
These points and more are covered in this article that also shares a word of caution about tampering with a model that yields real benefits for the market and its participants and has been running efficiently for over a decade.
