Exchange-traded funds or ETFs have become increasingly popular with investors attracted by diversification, liquidity and cost-effectiveness. At an operational level, this has increased the pressure on fund sponsors to address issues relating to settlement in a challenging regulatory environment. In a session dedicated to discussing potential solutions to these issues, David McGuinness, product director at Calastone will explore the implications of market growth outpacing infrastructure updates and the growing need for visibility of how orders are progressing in real-time.
“A survey we published last year found that only 4% of issuers and authorised participants felt their services technology was very good, so there is clearly room for improvement in the technology primary market orders are serviced on,” he says.
He believes firms should review their operating models to understand where improvements can be made to their technology stack and determine whether this should be achieved through in-house development or working with technology partners.
McGuinness suggests that any review of operating models needs to start by identifying where the problems lie.
20 different portals
“Authorised participants have to log into a variety of portals to submit orders depending on which issuer they are looking to create or redeem with,” he says. “Some of the large trading firms might have 20 different portals sitting on their desktop. So how can we improve that experience and help authorised participants submit orders in a more generic fashion?”
There is also a need to use technology to improve the process by which orders get into and out of the servicing platform. On some platforms this is done quite late on T+1 because of batch processing and the Excel macros they need to run.
APIs
McGuinness recommends implementing external APIs on servicing platforms that authorised participants can connect to directly in real-time without manual intervention.
“Beyond that, as an industry we need to look at whether we can have open APIs like those used in the banking world,” he adds. “I know some mutual funds providers have been looking at open APIs – is this something we can standardise and have an industry standard format for firms to consume?”
Have you signed up yet to be in Stockholm for PostTrade 360° 2025 on 3–4 September? It’s free for securities operations pros, both trading and investor sides! (Vendor firm representatives need a sponsorship agreement.) The powerful event website lets you register, see all other delegates, schedule sessions and meetings, and message. Find all related articles, including loads of teaser interviews, here.
