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Jeff McCarthy ETF

BNY Mellon reaps success from investment in talent and systems


Jeff McCarthy (pictured), Segment Head, Exchange-Traded Funds, BNY Mellon explains that the firm is very pleased to be recognised in the industry as an ETF partner, providing systems and solutions across the whole ETF eco-system from front to back. They are also proud to be the 2021 winner of the Best ETF Middle Office tech provider.

BNY Mellon services USD1.2 trillion in ETF assets, giving them a far reach into the ETF world, not just the global asset managers that number among their clients, but also market makers, liquidity providers and distributors.

“What we have shared across the industry over the last few years is that we have increased our investment across the ETF segment; both technology and talent., Growing our talent with diverse view-points across the ETF life-cycle drives platform change and development of new solutions: front to back,” McCarthy says.

The firm has spent significantly on its core platforms. “We are seeing that positive recognition in the market of the investment we have made over the last few years,” he says.

McCarthy believes the ETFs are reaching a point of maturity in the lifecycle where the industry can ask itself where it can be more efficient so that investors get the best access to a product. “I think overall what we have seen is that ETF issuers recognise an opportunity to increase efficiency; recognising that the investment process of an ETF versus mutual fund can impact traditional operating models; including integration into OMS and EMS platforms”.

The middle office is crucial in achieving efficient ETF operating models and any third party open- architecture integration, he says. “We are delivering the tools to create and execute investment decisions for an ETF, which means integrating into back office functions, as well as front office order and execution management systems.”

McCarthy believes that a key component of the firm’s strategy is not just a focus on the portfolio manager’s experience, but a focus on the whole eco-system’s experience. This means that their systems are also used by the liquidity providers who get visibility into the ETF in which they are making a market. “We see that as an important shift in the market, partially driven by growth, as in the number of products and the number of investors and what that asks of the market makers who are making efficient markets.”

He also comments on the complexity of new products as innovation moves ETFs outside the traditional passive role into active and semi-transparent active ETFs, often with ESG considerations in the loop, or products invested in more complex instruments, i.e., options.

“As the products get more complex, you need to build out some more solutions – that also applies in the digital asset space which have opened up another aspect of product innovation both in futures and in the physical underlying asset.”

BNY Mellon has been named in many of the filings for anticipated US crypto ETFs and will become the administrator of the new Grayscale bitcoin product in October.

“Leveraging our enterprise, we are preparing our business to support digital assets custody and administration and be an advocate across this space,” McCarthy says. “Our goal is to invest in our infrastructure now, so we are ready when the market allows these products because we are the facilitators.”

Best ETF Middle Office Tech Provider

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