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ClearstreamInnovative Solutionsfor the ETF MarketA research paper analysing post-tradingfragmentation issues, and flexible solutionsto improve process efficiencies in light ofT2S and the internationalisation of markets.
Executive Summary 3Executive SummaryThe Exchange Traded Fund (ETF) market has rapidlytaken off in the last few years, fuelled by growing interestfrom issuers and investors. This paper focuses on thepopularity of ETFs in the marketplace, the lifecycle of theinstrument itself and the actors involved in the lifecycle.It looks at the market initiatives that instigated to improveinfrastructure and settlement flows especially in the lightof the internationalisation of markets, both inside andoutside of Europe, as well as discussing the remainingmarket barriers and impacts.In addition, this paper describes the innovative and flexiblesolutions that Clearstream has brought to the market andhow those solutions satisfy the needs of all ETF issuers.Such solutions reduce inefficiencies in the processbenefiting the issuers, investors and market in general.ContentsBackground . 4Market flows and constraints . 6Clearstream issuance models . 13Conclusion . 21
4 BackgroundBackgroundDid you know?Overview of the European ETF marketAn Exchange Traded Fund (ETF) is typically apassive (although becoming increasingly active)investment vehicle that tracks the value of a portfolioof assets such as shares, bonds or commodities.ETFs differ from most mutual funds in that theyare traded like common shares on an exchange,or over-the-counter, and thus offer more priceflexibility and liquidity. Typically, an ETF price willfollow the weighted average value of the underlyingshares comprised in the portfolio during the day.The ETF market has evolved into a huge success storysince the widely accepted launch of the first ETF at thebeginning of 1993. The value of ETFs issued has risenglobally, approaching 5 trillion EUR at the end of 2018.Although the US still accounts for the vast majority of theissued asset value, around 15% of the global asset value isnow attributable to European ETFs. Indeed, the growth invalue of European ETF assets under management (AuM)has increased more than six fold over the last ten years(Figure 1). The number of ETF launches has grown from500 in 2008 to 1700 in 2018, representing a CompoundedAnnual Growth Rate (CAGR) of approximately 13% over thepast 10 years.The anticipation is that the global ETF market will continueto expand significantly in terms of number of ETF issues,number of transactions and underlying asset value.Figure 1: Evolution of AuM for ETFs in Europe700600AuM EUR Billion500RC AG400* mbourgIreland2012It is worth pointing out that the accurate number of ETFtransactions taking place every day has historically beendifficult to calculate as it is estimated that only between30-50% are transacted on exchange. A significantproportion of institutional ETF trades are conductedover-the-counter (OTC).201320142015201620172018FranceSource: Clearstream analysisHowever, since the implementation of the MiFID IIregulation market participants are now required tomake such ETF OTC trading transparent. Reporting hascommenced but currently it is difficult to aggregate thedata. This will become feasible and provide an accurateinsight into the true total volumes on exchange andover-the-counter.
Background 5Reasons behind the popularity of ETFsETFs have gained popularity amongst institutional andretail investors for a number of reasons, but predominantlyfor the following factors:– Features: ETFs, as a product in general, fulfil investorobjectives in terms of liquidity, portfolio diversificationas well as hedging.– Liquidity: ETFs, being available for trading throughoutthe trading day, are liquid and allow institutionalinvestors in particular to fulfil short-terminvestment strategies.Additionally, from a tax perspective for the issuer ETFscan, in certain instances, provide a more tax efficientreturn on underlying securities than is achieved by somemutual funds.– Fees: ETFs typically have lower associated fees thantheir mutual fund counterparts. Mutual funds specificallyhave to bear the costs of shareholder servicing andrecord keeping.– Transparency: As an ETF is stock exchange-listedinvestors can see the market derived price throughoutthe trading day and can make investment decisionsaccordingly. The traditional equivalent mutual fundis typically only valued once per day. Moreover,ETFs’ constituents and their relative weightingare fully disclosed.
6 Market flows and constraintsMarket flows and constraintsMarket flows overviewThe popularity of European ETFs is growing and thedemand comes from an expanding number of markets(inside and outside of the European Union). This increasingtrend is highlighted in Figure 2 below.Conversely, the statistics for listing of European ETFshighlight that strategies are changing. Figure 3 shows thatEuropean ETFs essentially concentrate their listing on oneto five trading venues.Figure 2: Evolution of worldwide marketdistribution of European ETFsFigure 3: Evolution of European ETF numberof listing25002500CAGRCAGR2014-82014-82000 49% 23%1500-9%1000 5%Number of ETFsNumber of ETFs2000-27% 5%1500 25%1000 21% 4%50005002014201520163 to 4 markets8 to 10 marketsMore than 14 markets201720185 to 7 markets11 to 13 marketsCAGR Compounded Annual Growth RateSource: Clearstream analysisIt is interesting to note that the number of European ETFsdistributed in eleven markets or more has doubled inthe space of four years. As of 2018, just short of 50% ofEuropean ETFs distribute to eleven or more markets.0201420151 listing4-5 listings2016201720182-3 listings6 and more listingsCAGR Compounded Annual Growth RateSource: Clearstream analysis
Market flows and constraints 7The number of ETFs listed on more than 5 stock exchangeshas decreased since 2014. Moreover, Figure 4 shows thatEuropean ETF issuers are positioning their assets onthe European hot spots that are attracting internationalinvestors. The top 5 European Union trading venues arelocated in Frankfurt, Zurich, London, Milan and Paris.CAGRFigure 4: Top European trading venues byunique number of ETFs listed and by AuM6001600AuM EUR Billion12004001000300800600200Number of ETFs140050040010020000Deutsche BörseSix SwissExchangeLondon StockExchangeBorsa ItaliaEuronextNumber of EU-domiciled unique ETFs listed (2018)Estimated AuM (in billion EUR) of ETFs listed (2018)Source: Clearstream analysisIn conclusion, these charts highlight the growing globalpopularity of ETFs with rapidly expanding marketdistribution, yet an evident pragmatism amongst ETFissuers to rationalise their cross listing to a smaller numberof concentrated trading venues. This rationalisation isclearly born out of experience and the desire for efficiencyin the ETF issuance, trading and settlement lifecycle.In order to comprehend the implication of these trendsin terms of post-trade settlement, it is important tounderstand the overall ETF lifecycle and the issuanceand settlement models.
8 Market flows and constraintsFigure 5: ETF lifecycleFigure 5 illustrates the lifecycle of an ETF starting fromthe ETF issuer creating the security to the end investorholding it. The roles of each actor within the lifecycle arethe following:(I)CSDs: place of settlement(I)CSD: place of all transactions occurring in the ETFlifecycle. Each actor has an account within an (I)CSDin order to enable the transaction.Issuer: entity instructing the issuance of an ETF. Thereare different issuance models that are described hereafter.Primary marketETF lifecycle and main actorsCreationSellSecondary marketInvestors (institutional or retail): buy and sell ETFs on thedifferent trading venues or over-the-counter. They are theultimate holders of the ETFs and do not directly have anaccount with an (I)CSD, but rather their custodian bank sed Participants (APs): support creation andredemption of ETFs by providing the underlying securitiesor cash in exchange for units of the ETF.Trading venues: official markets where securities areexchanged between investors.The ETFs are issuedand held within a(I)CSD.BuyTrading venuesSellThe issuer sellsthe ETFs tothe AuthorisedParticipants.The AuthorisedParticipants sell theETFs to the investorson the tradingvenues.BuyInvestors*The investors buyand sell the ETFsthrough the tradingvenues.* The investors's assets are held at a custodian bank which has anaccount at (I)CSDs.Overview of the issuance modelsIn the ETF market there are generally two issuance modelsgoverning the lifecycle of trading, clearing and settlement.These are often described as the Central SecuritiesDepository (CSD) and International Central SecuritiesDepository (ICSD) models or alternatively domestic andinternational models. The diagram below (Figure 6)provides a simplified overview of the two models:Figure 6: Overview of CSD and ICSD modelsIssuance model:Trading venuesClearing CounterpartiesSettlementThe key difference between the two modelsoccurs at the end of the process duringsettlement which potentially involvesrealignments for the CSD model, but notfor the ICSD model.CSD modelICSD model
Market flows and constraints 9CSD generic modelDid you know?To list an ETF in multiple trading venues using the CSDmodel, an issuer must issue the ETFs in a given CSD(Issuer CSD) and there must be a link with CSDs (InvestorCSDs) in the country of the trading venues. The settlementprocess occurs in the CSD of the trading venue’s country.This means that when an investor buys an ETF on onetrading venue and sells it on another, there must bea realignment between the two CSDs involved in thetransaction. This is illustrated in Figure 7.A Central Securities Depository (CSD) is an entitythat provides a central point for depositing financialinstruments. The EU regulation of 2014 describesthe following core functions performed by a CSD:1. Operates a securities settlement system2. Records newly issued securitiesin a book entry system3. Provides and maintains securitiesaccounts at the top tier level.Figure 7: Cross-border settlement andsubsequent realignment12Buy ETF AInvestorSell ETF ATrading venue 1Trading venue 2CSD 1CSD 2Realignment12An investor buys ETF A on trading venue 1.The place of settlement is in the CSD wherethe exchange was performed, thus CSD 1.Realignment is a well documented challenge within theCSD model in terms of time and cost, which is explainedlater in this paper. In some cases realignment can alsorequire realising a transfer at the Transfer Agent level.The same investor sells ETF A on tradingvenue 2. The place of settlement is in the CSD2 (place of trade). To enable this trade theremust be an individual link between the 2 CSDs.
10 Market flows and constraintsICSD generic modelDid you know?Conversely, in the ICSD model, the ETF is issued in onecommon place of issuance and the settlement will occurin the books of one or both of the two ICSDs (dependent onwhere the counterparties hold their accounts) ClearstreamBanking Luxembourg or Euroclear Bank Belgium.International Central Securities Depositories (ICSDs)were introduced in Europe in the 1970s predominantlyto settle Eurobonds. They have now widened their scopeto cover all types of internationally traded financialinstruments and settle in multiple currencies. Thereare two ICSD’s in the European Union, ClearstreamBanking Luxembourg and Euroclear Bank Belgium.These two organisations have a unique settlementlink between them referred to as the ‘Bridge’.The ICSD model has some similarities with the US modelwhere all ETF transactions are cleared and settledthrough the Depository Trust & Clearing Corporation.Effectively all US ETF trades are centralised through thisone organisation ensuring a liquid and efficient clearingand settlement process. For the generic ICSD modelto deliver on its objective of settlement efficiency, ETFissuers are encouraged to engage with listing and clearinginfrastructures to request that settlement be madepossible directly into either of the two ICSDs.The following section highlights the issues and impactscaused by fragmentation and market infrastructurechanges that help reduce the impacts.Constraints and impactsAs highlighted in the market flows section of this paper,ETFs have become increasingly popular with investorsand demand has become ever more global. Tradingvia sophisticated electronic platforms is seamless intoday’s world, however the challenge of alignment in thepost-trading environment and particularly in settlementremains. For ETFs, it is well documented that the multilisting and accordingly settlement locations has ledto a fragmentation in the settlement process. This issue ismanifested in the CSD model where there are a number ofCSDs within the European Union that may be involved in thesettlement process.The European Union has contributed to harmonisingthe European landscape through the implementation ofTarget2-Securities (T2S) and the CSD Regulation (CSDR).Market InitiativesDid you know?T2STarget2-Securities (T2S)Settlement at CSD level within Europe has beenharmonised in recent times with the implementationof T2S, a single market securities infrastructure.It effectively has removed the differencesbetween domestic and cross-border securitiessettlement bringing centralised delivery-versuspayment (DvP) settlement in central bank moneyacross all European securities markets.T2S is a centralised settlement infrastructure thatconnects all the participating CSDs. As a result of beingcentralised on one platform, settlement between the CSDsis harmonised with standard settlement procedures andprocesses. This harmonisation is also being extendedto other ancillary services such as corporate actionsprocessing. This centralised infrastructure is somehowmoving closer to the model in the US with the DepositoryTrust & Clearing Corporation.
Market flows and constraints 11T2S has been implemented via CSD migration wavessince June 2015 and the countries of the CSDs currentlyparticipating or planning to participate are highlighted inthe map shown.Source: www.ecb.europa.euT2S has made a significant difference to the settlementharmonisation. However, CSDs that are not in T2S must beindividually linked, directly or indirectly, to other CSDs toenable cross-border settlement.CSDRDid you know?CSD Regulation (CSDR), which is applicable to all EUmembers, has contributed to harmonising the operationsand rules of the EU CSDs. It aims to make CSDs moreefficient and therefore more robust and safe. CSDR putspressure on the securities industry in general to ensurethat going forward trades are settled on the actualcontracted settlement date (normally T 2). CSDR enforcesCSDs to apply mandatory buy-ins and cash penalties oneach settlement instruction when settlement fails. Withinthe ETF industry, this adds additional incentive to reducefragmentation and to minimise the number of realignmentsbeing performed.The European Central Securities DepositoriesRegulation (CSDR), implemented in the wake of the2008 financial crisis, has the objective to increasethe operational efficiency of CSDs and to ensurethe security of the assets they hold. Amongst anumber of measures, CSDs require to obtain anew license to operate, must apply a more rigidsettlement discipline imposing cash penalties forlate settlement, apply account segregation rules,daily reconciliation, book entry form of securitiesand conform to use of the Legal Entity Identifier.Remaining barriers for ETFsThe initiatives described in the previous section havebrought significant improvement to the harmonisation ofthe European settlement environment but there still remainsome challenges to overcome to eliminate all the barriersin the European ETF industry. T2S has greatly contributedto defragmenting the market, however only 21 countriesare currently, or planning to be linked, to the platform(the European Central Securities Association has over30 members). Settlement in T2S is currently restrictedto Euros (EUR) and Danish Krone (DKK). T2S continuesto strive to harmonise services within the T2S CSDsfor instance with corporate actions processing.T2S clearly enhances the market flows betweenparticipating CSDs, but on a more global scale, T2S naturallydoes not improve market flows between countries in T2Sand those out of T2S. Looking back on the market figures,the trend shows an increase in cross-listing in 2 to 5markets. In these markets, London Stock Exchange is inthe top five markets in terms of Assets under Managementand number of ETFs listed and is not within T2S. Thiscontributes to fragmenting the currentETF European market.
12 ETF issuer needsImpactsDid you know?The lack of harmonisation remaining between CSDs inT2S and CSDs out of T2S adversely affects the post-tradeenvironment, impeding the European industry in reachingits full potential. The key impacts are the following:Collective Safe Custody (CSC) is governed by theGerman Securities Deposit Act (Depotgesetz, DepotG).In summary, it refers to the rights of holders underthe custodial arrangement whereby securities areissued under German law and are safe kept in thevaults of any German central securities depository(currently only Clearstream Banking AG).– Realignment challenge: On the European ETF market,in the case where a de-synchronisation betweentraded settlement location and place of issue and/or safekeeping occurs, a cross-border realignment isrequired between the place of safekeeping and tradedlocation to ensure that the accounting records are inline. This effectively relates to performing a positiontransfer between one securities depot and another. Insome circumstances where cross-border settlementrequires a realignment of holdings between CSDs,this can take between two and three days. This bringsinherent challenges in a European trading environmentwhich largely operates on a trading date plus 2 days(T 2) settlement basis. Delays in settlement can becostly due to stringent clearing discipline and the newCentral Securities Depositories Regulation (CSDR). Theinefficiencies are often reflected in the pricing of theETFs with the bid/ask spreads. Ultimately, the investoris paying for these inefficiencies.– Regulatory challenge: There are different regulatoryframeworks within the EU and different settlementregimes. These are generally surmountable, but there isfor instance the specificity in Germany with the nationalCollective Safe Custody (CSC) regulation. Securitiesmaintained within the German CSD, namely ClearstreamBanking Frankfurt (CBF), domestic system, as well asforeign securities held by CBF through a foreign CSDmust comply with this regulation. For example, ETFsissued in Ireland via Euroclear UK and Ireland (EUI),with an Irish (IE) ISIN, do not meet the CSC criteria, andcannot be accepted into the CBF domestic settlementsystem. To overcome this issue, and to meet the Germanmarket demand to adhere to the CSC regime, EUI issuedETFs have been re-certified into a German (DE) ISIN ETFthat satisfies CSC requirements. This uniquely meansthat the same ETF can have two ISINs, one Irish (IE)and one German (DE).– Lower liquidity and thus higher funding costs.ETF issuer needsBased on information collected from ETF issuers andbased on market trends, we understand that there area number of key issuer needs in terms of ETF issuanceand settlement. The key drivers of these needs can besummarised as follows:– Ease of set-up of issuance – the ability to access anissuance facility quickly.– Ease of migration – the ability to switch issuance modelwith minimal operational risk or impact for both issuersand investors.– Settlement efficiency – no barriers to settlement on thecontracted settlement date.– Minimising operational risk – efficient settlementprocess.– Infrastructure connectivity – efficient settlementlinks and market liquidity.– Costs – minimal settlement costs and overheads.Control of costs with intermediaries.– Transparency – disclosure on where the ETFs are beingdistributed and who are the holders of the ETFs.Clearstream has developed solutions with these driversin mind and its key issuance model solutions describedhereafter satisfy each of these needs for varying issuer andinvestor types.
Clearstream issuance models 13Clearstream issuance modelsGiven the expansion of the reach of different models,Clearstream believes that issuers can rely on a single ISINissuance via the ICSD model. This option facilitates efficientissuance, trading and post-trade activity, reducing costand post-trade fragmentation due to centralisation of thesecurities within one or both of the European ICSDs.Such a model allows for solutions for new issuance as wellas accommodating regulatory or market change e.g. Brexit.Ultimately, Clearstream offers a range of innovativesolutions for ETF issuance tailored to different needs.The key model offerings, their features and their respectivebenefits are described below.Model 1: ICSD issuance modelThe ICSD issuance model is based on the utilisation ofa common depository, which is a financial institution thathas been jointly appointed by Clearstream and Euroclearto hold and service international securities issued inClassical Global Note or book-entry form. Settlement ofthe securities occurs in Clearstream Banking Luxembourgand/or Euroclear Bank Belgium.The issuance and redemption of tranches of the overallETFs issued are simply reflected by markup/markdownof the issued quantity within the books of the commondepository i.e. no requirement to generate or withdrawthe underlying certification (e.g. Global Note).ICSD issuance model121Transfer Agent instructs markup/down and ETFs are issued in theCommon Depository.Transfer AgentCommon Depository2The ETFs are posted to the accountsof Clearstream or Euroclear in thecommon depository to reach the targetclient/CSD most clearBankBelgium2LegendIssuance*Transfer*The Transfer Agent can alsoredeem the ETFs (opposite flow).Clearstreamclients2Clearstreamlinked CSDsEuroclearclientsEuroclearlinked CSDs22Downstream clients/counterpartiesDownstream clients/counterparties
14 Clearstream issuance modelsIssuance and settlement processIssuanceThe security is issued in a common depository and the totalsecurity holding is split between the two ICSDs based onthe underlying securities holdings held in their respectivebooks. Subsequent transactions in the market may alterthe respective security balances between the two ICSDs,however the overall total is altered only in the case of amarkup/markdown. The ICSD holding may be for a numberof clients that may maintain accounts directly on the booksof the ICSD or alternatively via a downstream CSD.SettlementSettlement is executed in Clearstream BankingLuxembourg and Euroclear Bank Belgium. Realignmentis performed between these two entities via adjustmentof their relative holdings at the common depository(no impact on underlying customer accounts).Benefits– Easy set-up of accounts using the ICSD’s currentaccount structure and product offerings.– Structured migration from a CSD model based ongood coordination and market communication.– Settlement efficiency:– Single ISIN. There is no re-certificationrequirement.– Simple model providing efficient liquidity poolas the securities are maintained in one location.– Realignment only needs performed between thetwo ICSD accounts within the common depository,can be immediate and does not pose a delayto settlement.– Operational risk: reduced settlement failure.– Infrastructure connectivity:– Provides access to the vast community ofinternational participants on the Clearstreamplatform and its settlement links to other (I)CSDs.– Cost savings:– Fee model based on pooling of settlement,safekeeping and custody fees at client/family grouplevel, hence economies of scale are possible.– Increased liquidity potential from pooling of assetsand collateral.– Ability to use multi-currency settlement capabilityof ICSD in line with ETF characteristics.– Transparency of holdings for all Clearstreamaccounts.
Clearstream issuance models 15Model 2: ICSDplus issuance modelModel 2 is based on the unique Fund Issuance Account(FIA) capability delivered by Clearstream. Clearstreameffectively takes the role of the common depositoryin Model 1 reducing a step in the overall process. Thefollowing diagram provides a high-level overview of theservice and process:CSD X3Clearstream BankingLuxembourg1Fund IssuanceAccountThe Transfer Agentinstructs Clearstream torealise a share markup/markdown in the FundIssuance Account.4ClientAccount2Transfer Agent(TA)1Authorised ParticipantAccountCSD X32Clearstream BankingLuxembourgAuthorised ParticipantAccount3The shares are issuedor redeemed in theFund Issuance Accountheld by the TA atClearstream BankingLuxembourg.This service has been in place since 2007, attractinga growing customer base and as such is both provenand robust.The shares aretransferred from theFIA to an AuthorisedParticipant's accounteither in Clearstreamor in a CSD linked toClearstream.Clearstream BankingLuxembourg4ClientAccount4The shares are onwardtransferred from theAuthorised Participant'saccount to any accountsin a CSD linked toClearstream BankingLuxembourg.
16 Clearstream issuance modelsThe ICSDplus issuance model has the advantage ofservicing ETFs issued directly within T2S as well asthose outside T2S as illustrated in Figure 9 below.Figure 9: ICSDplus issuance modelTransfer Agent1ClearstreamBankingLuxembourgLuxCSD1Fund Issuance AccountFund Issuance Account2Clearstreamclients2Clearstreamlinked CSDsEuroclearBankT2S 'in' CSDsT2S 'out' CSDs221Downstream clients / counterpartiesDownstream clients / counterpartiesETFs issued outside T2SETFs issued in T2STransfer Agentinstructs markup/down and ETFsare automaticallyissued in the FundIssuance Account inClearstream.LegendIssuance*Transfer*The Transfer Agent can alsoredeem the ETFs (opposite flow).2ETFs are transferredDvP to the APsClearstream account,CSD account or via thebridge to Euroclear inClearstream.1Transfer Agentinstructs markup/down and ETFs areautomatically issuedin T2S throughLuxCSD via the FundIssuance Account inClearstream.2ETFs aretransferred DvPto the APs orAPs custodianaccount withinthe 'in' T2S CSD.
Clearstream issuance models 17IssuanceDid you know?In the ICSDplus issuance model there is no requirement fora common depository, rather the participating institution(issuer’s agent, such as Transfer Agents or fund promoter)opens a Fund Issuance Account (FIA) within ClearstreamBanking Luxembourg. Holdings are automatically markedup or marked down in the FIA without the need for thecreation of a Global Certificate. Effectively the TransferAgent is synchronised with the FIA structure.The Funds Issuance Account (FIA) is at the heartof the Clearstream post-trade infrastructuredesigned to provide greater efficiency and costeffectiveness in the settlement and custodyprocess for the fund industry. It is used for theposting of standard settlement services based onthe synchronous exchange of cash and securitiesbetween fund distributors, custodians andTransfer Agents thus reducing processing risk.This service has been available since 2007 to catertraditionally for fund shares issued within ClearstreamBanking Luxembourg. However, the FIA service is nowavailable additionally to facilitate the direct issue ofETFs in T2S through LuxCSD via Clearstream BankingLuxembourg. This allows issuers to take full advantageof the settlement and cost efficiencies offered by theT2S infrastructure. Furthermore, the issuer’s agent canbenefit from this facility without being a direct customerof LuxCSD, and simply leverage their existing ClearstreamBanking Luxembourg setup and connectivity.This FIA service is fully integrated with ClearstreamBanking Luxembourg’s ICSD settlement and custodyservice. The settlement capability facilitates the reductionof processing risk through the synchronous exchange ofcash and securities (DvP) between participants.The FIA structure also benefits from the capability oftrade date accounting ensuring that income and corporateaction entitlement is calculated on an accurate basis. Thisremoves for instance the requirement for lengthy cashreconciliation once dividends are paid.Finally, the ICSDplus issuance model utilising theFund Issuance Account is perfectly positioned to caterfor the issue of dematerilaised securities under theLuxembourg Dematerialisation Law dated 6 April 2013.This Law established a new category of securities – thedematerialised security, which was introduced to coexistwith, and to be an option to, its material equivalentsnamely registered and bearer securities. The Luxembourglegislator defined dematerialised securities as securities,which are issued or converted through registration on asecurities issuance account maintained by a settlementorganisation or a central account keeper. Clearstreamand LuxCSD both meet the required criteria as settlementorganisations within Luxembourg.
18 Clearstream issuance modelsSettlementDid you know?For non T2S issued ETFs, settlement of the fundtransactions in the market can directly reach counterparts(or their nominated custodians) who have accounts at:CSDs settlement activity typically settles inCentral Bank Money (CeBM). In simple terms, thismeans that the funds are sourced from /paid to
The ETF market has evolved into a huge success story since the widely accepted launch of the first ETF at the beginning of 1993. The value of ETFs issued has risen globally, approaching 5 trillion EUR at the end of 2018. Although the US still accounts for the vast majority of the issued asset value, around 15% of the global asset value is now attributable to European ETFs. Indeed, the growth .
