IHS Markit Enhances ETF Collateral Lists to Accelerate Counterparty Borrowing

02 February 2021

IHS Markit has launched ETF Collateral Lists 2.0, the first automated solution to enable collateral receivers to proactively identify ETFs based on their risk criteria. With a broadened inventory of accepted securities and triparty agent connectivity to manage distribution, the lists can increase ETF collateral transparency and control by calculating daily risk scores.

Prior to the availability of ETF Collateral Lists 2.0, the traditional process for selecting ETFs as collateral was often inefficient, cumbersome and reactive - lenders would have to manually screen the vast universe of ETFs available to identify those which suit the diverse requirements of beneficial owners.

ETF Collateral Lists 2.0 solves for this by allowing custom search criteria to be set, which informs an objective methodology to screen the universe. The lists are produced daily and contain qualifying ETFs which physically hold the same underlying assets as those in the collateral receiver's current eligibility program. Once defined, the solution continues to manage acceptable ETF inventory, by automatically identifying newly qualified ETFs and removing those which fall out of criteria.

As of 2021, global ETFs have attracted more than $7 trillion in investments: their stability and liquidity through recent crises has increased institutional investor confidence in the asset class further. Accordingly, early institutional adopters who have subscribed to - and helped shape - ETF Collateral Lists 2.0 include Barclays, BlackRock, BNY Mellon, Citi, Credit Suisse, HSBC, J.P. Morgan and State Street.

Comments from industry leaders on the launch of ETF Collateral Lists 2.0 include:

James Templeman, Global Head of Securities Lending Trading, BlackRock - "We believe IHS Markit's launch of ETF Collateral Lists 2.0 is a significant milestone in increasing the use of ETFs as collateral. The enhanced functionality enables BlackRock to identify the ETFs that meet our specific collateral parameters, with the added benefit of a dynamic risk management process, which has been a challenge for the industry until now. We have already seen a significant increase in ETF collateral balances and look forward to further developments from IHS Markit, in particular within Fixed Income ETF functionality."

Brian Ruane, Chief Executive Officer of BNY Mellon Government Securities Services Corp., Clearance & Collateral Management and Credit Services - "ETF utilization has the potential to create greater efficiencies within the collateral management space and overall industry. We believe IHS Markit's ability to incorporate an ETF's underlying collateral pool as a list will lead to more transparency thus, broadening the acceptance of ETFs as collateral."

Andrew Jamieson, Global Head of ETF Product, Citi - "As a leading sell-side ETF participant, the adoption of ETFs within the collateral world is an important advance and something we fully support, particularly as our clients are using ETFs as financial instruments in ever increasing numbers."

Lewis Concadoro, Director, Prime Resource Management, Credit Suisse - "Dynamically profiling ETFs against lender eligibility and creating a consistent approach to application in the triparty world is exactly what's been missing. The use of Overlap Scores in conjunction with haircuts will further expand ETF usability and could lead to significant momentum on the buy side."

Loic Lebrun, Global Head of Prime Finance, HSBC - "ETF Collateral Lists 2.0 will help us expand the depth and breadth of our ETF collateral distribution, further strengthening our product proposition for ETF clients."

Ben Challice, Global Head of Trading Services, J.P. Morgan - "Given growing client demand for greater flexibility and granularity for ETF collateral acceptance, we are pleased to extend our eligibility service offering and integrate with custom ETF lists. Adding IHS Markit customised list data into our collateral systems provides clients additional optionality to manage their own risk parameters, complementary to their triparty collateral profiles which can be applied to clients' eligibility schedules using J.P. Morgan's online eligibility service. Having also expanded our acceptance of ETFs as collateral using the IHS Markit list data for Agency Lending clients, it helps expand liquidity for more efficient financing of ETF inventory."

Matthew Neville, Managing Director, EMEA Head of Trading, Agency Lending, State Street - "State Street is looking forward to partnering with IHS Markit to leverage solutions that can dynamically manage nuanced collateral criteria, enhancing our ability to distribute client inventory, as well as providing straight through connectivity to the triparty agents."

Pierre Khemdoudi, Senior Vice President, Equities and Regulatory Reporting at IHS Markit - "IHS Markit is proud to announce the launch of ETF Collateral Lists 2.0, which significantly broadens our ETF coverage to enhance risk management efficiency and automate acceptance processes. This is another great example of how our data and expertise are helping financial institutions solve difficult industry challenges. We look forward to working with our partners as we continue to deliver innovative solutions that identify new forms of ETF collateral, improve liquidity and enable standardisation."

IHS Markit has serviced the global ETF marketplace for more than 20 years, providing a comprehensive suite of products and services covering more than 8,000 ETFs. As a recognised and trusted independent vendor at the center of the ETF and Securities Finance ecosystems, IHS Markit partners with industry stakeholders to solve inefficiency by identifying new forms of diversified collateral. The introduction of ETF Collateral Lists 2.0 advances IHS Markit's global position as a leading provider of index and ETF data solutions.

For more information on ETF Collateral Lists 2.0, please view our product factsheet.

IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.