The move comes as providers look to fight fragmentation in Europe and drive costs down. It will mean that trading costs and cross-border costs associated with the European ETF market could be reduced.
SPDR will use the International CSD settlement model which is offered by the London Stock Exchange. This new Trading Service for ETFs – Euroclear Bank settlement is a new order book provided by the LSE to its members enabling trading in a wider range of ETFs during standard London trading hours.
The new service offers settlement in venues other than the UK domestic settlement system, Euroclear UK & Ireland (CREST) and in a wider range of trading and settlement currencies.
Currently ETFs in Europe can be cross-listed across all exchanges in the region meaning they can appear and be traded on one or more national stock exchange and therefore settling in the national CSD of the exchange where the trade is executed. This ETF settlement system can cause inefficiencies when ETFs are traded across borders.
The international system is expected to improve trading liquidity, ease cross-border ETF processing and significantly lower transaction costs for investors.
The aim of simplifying the issuance structure and post-trade environment in the European ETF market is to make it easier for liquidity providers to service clients and ultimately lower the cost of owning ETFs through reduced transaction costs.
In the US, a single settlement location for ETFs is currently used.
iShares was the first ETF provider to collaborate with Euroclear in June last year when it launched the first internationally settled ETF.
In September this year SSgA moved 13 of its French domiciled ETFs to Ireland.