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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.