BNY Mellon has launched the industry's first one-stop process for authorised participants (APs) to automate the creation and redemption of exchange traded funds (ETF).
The enhancements allow an AP to utilise the BNY Mellon ETF Center to propose and negotiate ETF baskets of underlying assets with a fund sponsor during the creation and redemption process. This is a significant improvement over the common industry practice, which required APs to utilise more than one venue to propose, negotiate and settle ETF baskets, BNY Mellon says.
APs are large financial institutions or market specialists that play a critical role in the ETF marketplace as they are chosen by an ETF sponsor to obtain the underlying assets needed to create or redeem an ETF. Once an AP has negotiated an ETF basket with a sponsor, the AP transfers the shares to a custodian bank.
"Helping APs become more efficient ultimately benefits the other participants in the ETF marketplace, ranging from issuers to those in the secondary trading market," says Steve Cook, Global Head of ETF Services at BNY Mellon. "We pay particular attention to technology enhancements that support the AP community, because this community ultimately drives new assets into our clients' ETF products."
Cook notes the systematic ability to propose and negotiate ETF baskets is particularly important with fixed income ETFs and brings greater flexibility and efficiency to APs when processing fixed income ETFs.