Exchange operator Intercontinental Exchange has announced that its ICE ETF Hub open architecture ETF primary market platform has introduced new automated functionality for primary market participants to assemble custom basket proposals.
Peter Borstelmann, Head of ICE ETF Hub.
The new functionality allows market participants to screen, communicate and assemble custom baskets with issuers electronically, via Financial Information eXchange (or FIX)-enabled APIs and ICE ETF Hub’s front-end user interfaces.
The innovation has been developed following the passage of the SEC’s Rule 6c-11 – known as the ‘ETF Rule’ – last September which expanded the use of custom baskets to all ETFs in-scope of the rule.
The result of this change offers the potential for offering greater tax efficiency, better liquidity and tighter bid-ask spreads for investors.
ICE ETF Hub, which supports both US-listed domestic equity and fixed income ETFs, enables a more standardized and simplified process for ETF creation and redemption.
The platform gives users a straight-through process, allowing them to seamlessly send approved baskets to authorized participants for order placement.
This functionality is designed to help fixed income market participants transition away from the many manual, bespoke processes in use today, thereby increasing scale and reducing operational risk through standardization and automation.
“Assembling and placing custom creation and redemption baskets – all in a systematic way – has been our vision for the platform since we started exploring ways to automate the ETF primary market,” said Peter Borstelmann, Head of ICE ETF Hub.
“With this new functionality, we are introducing an innovative solution that enables market participants to deploy custom basket workflow in a more efficient and expeditious way.”
To allow customers to validate the new technology and experience its value first-hand, ICE ETF Hub is launching a pilot program allowing market makers to experience the custom basket negotiation functionality in a live production environment.
Several market makers, including Jane Street, Old Mission and CTC, among others, have already enrolled in the program. Additional firms are expected to participate in the pilot program in the coming months.