First ETF with an international security settlement structure in continental Europe
Today iShares, the exchange-traded funds offering of BlackRock, listed its iShares Euro Stoxx 50 ex-Financials UCITS ETF (EXFN) on the Amsterdam market of Euronext. This fund is the first ETF to come to market in continental Europe using an international security structure, where settlement of transactions is exclusively at Euroclear Bank – the Brussels-based international central securities depository (ICSD).
Previously, cross-border transactions in ETFs settled in multiple national central securities depositories (CSDs) with related re-alignment costs and risks. With this new international security structure, the iShares ETF will be issued and settled for the first time in an International CSD (ICSDs) – in this instance Euroclear Bank, facilitating better cross-border liquidity provision and in parallel reducing operational and trading costs for ETF investment, potentially resulting in growth of the European ETF market.
The newly listed iShares EURO STOXX 50 ex-Financials UCITS ETF is a physically replicating fund which invests in blue chip stocks from 12 eurozone countries, while excluding companies from the financial sector, potentially providing investors with a less volatile exposure to Eurozone equities. The fund has a total expense ratio of 20 basis points.
Pedro Fernandes, Head of European Exchange Traded Products at Euronext, said: “We are very proud to be chosen by iShares as the first exchange in continental Europe to list this innovative international ETF structure exclusively on the newly created ETF Euroclear Bank settlement segment. It reaffirms our position as the leading venue for ETF listing and trading in continental Europe. Adapting the market infrastructure to reflect the pan-European profile of ETFs should provide further operational efficiencies to issuers and liquidity providers, but more importantly improve on-exchange spreads and market depth available to end-investors.”
Gert-Jan Verhagen, Head of iShares Netherlands, commented: “iShares is excited to be the first ETF provider to have an international security settlement structure in continental Europe to list on Euronext. We anticipate that this new structure will enable investors to gain easier access to one of the most dynamic markets while benefitting from reduced costs. This will help us in our ambitions to not only grow the market but also to increase market efficiency for our clients.”
Mo M’Rabti, Deputy Global Head International Markets at Euroclear said: “Euroclear is delighted to be an integral part of re-shaping the ETF industry in Europe with BlackRock. The aim of the new international structure is to remove historical post-trade fragmentation and re-alignment complexities inherent to trading ETFs on multiple exchanges. This additional listing on Euronext Amsterdam is proof of multi-listed ETFs trading with seamless and efficient post-trade provision. We expect to lower total ownership costs for ETF investors while, equally importantly, raising settlement efficiency rates which have been sub-optimal, particularly for cross-border flows.”
The newly listed ETF follows a successful year of new listings on Euronext’s ETF market in 2013. Euronext reported growth in new ETF listings of 76% versus 2012, with a total of 51 listings on its European market totalling 564 ETFs. In Amsterdam, the growth in new ETFs was up by 223% compared to 2012, totalling 127 ETFs.