NEW YORK, April 15, 2020 — BNY Mellon today announced the launch of an end-to-end technology solution to support ActiveShares™ non-transparent actively managed exchange-traded funds (ETFs). This solution delivers a digital workflow from order placement through execution of underlying securities associated with creation and redemption activity.
Within BNY Mellon's digital platform, the new solution incorporates the Authorized Participant Representative (APR) and Verified Intraday Indicative Value Agent (VIIV Agent) in daily ETF workflows to enable efficient investor access without daily holding disclosure. The platform includes security restriction and approval processing features within the order ticket, eliminating the need for off-line phone and email communications. This results in a fully digital audit trail for all ETF orders and brings the APR role into deal handling.
"As periodically-disclosed and non-transparent active products become more prevalent in this space, BNY Mellon is excited to support ActiveShares ETFs and other new proxy-based active ETFs with our technology solutions," said Jeff McCarthy, Global Head of Exchange Traded Products, BNY Mellon Asset Servicing. "Our industry experience allows us to offer solutions to wrap any passive or active investment strategy in the ETF structure. Leveraging both our asset servicing and capital markets franchises, BNY Mellon is able to deliver a full-service solution by acting as the ETF Servicer and the Authorized Participant Representative."
ActiveShares products are designed to merge key advantages inherent in a traditional ETF wrapper with the strategy-protecting disclosure requirements of an actively managed mutual fund. This new structure was created by Precidian Investments and gained SEC Trading & Markets approval in 2019. Within this new process flow, an executing broker (referred to as an APR) is inserted in the middle of the creation/redemption mechanism to keep the investment strategy of the product confidential. An APR is essentially an agent working on behalf of a traditional AP to exchange a basket of securities and cash to create or redeem a large block of ETF shares in-kind.
Mark Criscitello, Founding Principal at Precidian Investments, recognized BNY Mellon's partnership with the ETF ecosystem saying, "Precidian is proud to have BNY Mellon as one of our primary service providers as we bring ActiveShares to market. We are grateful for their steadfast support of the structure and the industry. They solved for authorized participant cash-in-lieu restrictions right in the order ticket."
Legg Mason plans to be one of the first-movers to launch under the innovative model with BNY Mellon as their ETF service provider.
"The importance of a basket that fully reflects everything happening in the portfolio, like daily portfolio manager trading or corporate actions, is critical to the integrity of both the VIIV and arbitrage process for market makers," said Brandon Clark of ETF Product Management at Legg Mason.
BNY Mellon's ETF platform connects across the ETF ecosystem with active users at 40+ ETF issuer clients, 50+ authorized participants, 5 external order placement platforms, and 11 distributors. In 2019, BNY Mellon distributed over 350,000 baskets and supported over 45,000 creation and redemption orders through both web and direct electronic messaging across issuers, distributors and liquidity providers.
About BNY Mellon
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of Dec. 31, 2019, BNY Mellon had $37.1 trillion in assets under custody and/or administration, and $1.9 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.