The new structure will use an international central securities depository (CSD), Euroclear Bank, unlike existing cross-exchange European ETFs which are settled in the national CSD of the country in which the exchange is executed.
According to BlackRock the current system can cause complex, labour-intensive post-trade processed when ETFs are traded across borders, particularly when they are bought in one country and sold in another.
The single settlement location model has been used in the US for a number of years and is deemed to be more efficient, offering a simplified issuance structure and post-trade environment and therefore making it easier for liquidity providers to service clients and lower the costs of owning ETFs through lower transaction costs.
Mark Wiedman, global head of iShares, said: “In order for the European ETF market to reach $1trn in the next three to five years the entire market ecosystem must become more efficient for investors. Access must be widened to encompass new investors and operating simplicity must be delivered in the form of lower transaction costs.”
The pilot programme is due to launch in the next couple of months and should it prove successful, additional ETFs will be issued using the new international security structure.