Intercontinental Exchange (ICE), owner of the NYSE Arca, is planning to launch a new open-architecture platform to standardize primary market ETF trading.
The new platform is due to launch in 2019, subject to regulatory approval.
BlackRock has committed to be a development partner and has signed a memorandum of understanding with ICE to support the new platform.
Due to begin operations in 2019, subject to regulatory approval, the platform will seek to simplify the primary market trading process which is expected to bring more efficiency and transparency to the creation and redemption process.
Market participants will be able to place orders for creation and redemption baskets in a central venue, designed in an open platform to support participants from ETF sponsors to market makers, and other authorized participants.
The process is expected to be particularly beneficial for fixed income ETFs, one of the fastest growing segments within the US ETF industry with compound annual growth of over 30% over the last ten years.
Ben Jackson, President of Intercontinental Exchange, commented, “In order to fulfil its next phase of growth, the ETF industry needs to standardize the process for creating and redeeming shares, particularly in fixed income. ICE has a well-established track record of bringing innovative technology to drive efficiencies and solve the market’s most complex challenges. With a diverse range of investors embracing ETFs, participants in the ecosystem will benefit from the transparency and scalability these standards will foster.”
“As ETFs have grown, it has become increasingly clear that there is a need for transparent and consistent creation and redemption protocols. As clients continue to adopt ETFs as both core holdings and ways to take tactical positions, they’ll benefit from the efficiencies these standards create,” added Samara Cohen, head of iShares global markets for BlackRock. “There is a growing industry consensus on this issue and ICE is taking an important step by creating a new open-architecture platform that establishes standards to simplify the trading process. We are pleased to be a development partner with ICE and other ETF ecosystem participants to build out primary trading standards.”
As part of the initiative, the platform will be hooked up to BondPoint, TMC Bonds and ICE Credit Trade, which provide fixed income execution protocols for asset classes including municipals, corporates, Treasuries, agencies and certificates of deposit.