Clearstream, a provider of post-trade services for financial services participants, today issued its latest monthly report indicating that the demand for Exchange Traded Funds (ETF) has been steadily growing.
The market now has a value of more than €450 billion with over 2,200 products in over 20 countries.
Increase in demand for ETFs
Jeffrey Tessler, Chairman of Clearstream, noted that the boom was curtailed by settlement and realignment challenges within the fragmented European market. He said: “In Europe, ETFs are listed on multiple exchanges in different regions. As a result, trading desks have to hold multiple accounts with all Central Securities Depositories (CSDs) with differing post-trade practices”.
The necessary realignments of positions between CSDs on the post-trade side when ETFs are traded across borders can create extra cost and complexity. Difficulties arise when multiple CSDs are separately connected with the registrar of the fund. To avoid realignments at the register, it is most efficient to issue the fund through one single CSD or through an International Central Securities Depository (ICSD), such as Clearstream.
ICSDs facilitate the issuance and settlement of multi-listed ETFs. Both the settlement and the distribution take place in the ICSD, resulting in simplified inventory management and cost-effective trading between different venues.
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Clearstream provides ETF issuers with global access to investors in over 50 markets as well as settlement in over 40 currencies. ETFs can also be used for collateral management and securities lending within Clearstream’s Global Liquidity Hub.
Deutsche Börse Group’s ETF offering covers the full lifecycle. Once the ETF has been designed and issued, it can be distributed on the German stock exchange, Europe’s largest ETF platform by order book turnover and number of listed products. The trades will then be cleared by Eurex Clearing and settled and distributed by Clearstream.
June Financial Metrics
In conjunction with its monthly report, Clearstream has also published its June financial metrics. Clearstream’s Securities deposits ICDS saw a total of $7.5 trillion (€6.81 trillion), representing a 1 percent MoM increase from $7.5 trillion (€6.80 trillion) compared with May 2016 and a 2 percent YoY increase.
Securities deposits CDS saw a value of $4.79 trillion (€4.33 trillion) in June 2016 which was reflective of a drop of -10 percent from $4.85 trillion (€4.39 trillion) in May 2016. This arm of Clearstream’s business was also lagging behind YTD, seeing a decline of -9.0 percent YoY so far into 2016.
Clearstream’s Securities deposits IFS was $2.10 trillion (€1.86 trillion) in June 2016 from $2 trillion (€1.84 trillion) in May 2016, or 2 percent MoM and 4 percent YoY.
Clearstream’s volume outstanding GSF was $575.27 trillion (€520.77 trillion) in June 2016 from $577.48 trillion (€522.77 trillion) in May 2016, representing a decrease of -15.0% MoM and -16% YoY.