Smartshares is set for long-term efficiency gains after signing on as the first Asia-Pacific client for the Bloomberg exchange-traded fund (ETF) basket-making machine, according to NZX head of funds management, Hugh Stevens.
As reported here, Smartshares adopted the Bloomberg service earlier this year in a bid to streamline the order flow and stock ‘basket’ creation and redemption processes across its ETF product range.
Stevens said the Bloomberg technology – composed of the AIM order management system and the ETF creation-redemption service, dubbed BSKT – was “flowing beautifully” through the Smartshares suite of 30-plus ETFs.
“It has established a straight-through processing infrastructure for the NZ industry,” he said. “While there was a reasonable fixed cost in setting it up, [the Bloomberg system] is an investment for growth.”
Smartshares reported a touch under $5 billion in its ETFs as at the end of May but Stevens said the Bloomberg service would support the business at much greater scale.
In a release last week, Bloomberg confirmed Smartshares had implemented both AIM, which streamlines the trading process, and BSKT.
While ETFs appear as simple, easy-to-trade products, the illusion is maintained by complicated behind-the-scenes activities involving multiple players including the all-important ‘market-makers’ that keep the underlying ‘basket’ of securities close to net asset value with institutional trading techniques. In March, Smartshares appointed Jarden as its second ETF market-maker, joining fellow broker, Craigs Investment Partners, on the panel.
Stevens said BSKT allows the Smartshares market-makers to create or redeem ETF baskets as needed each day with automated processes flowing from the custodian through to brokers and back.
Phillipa Thompson, Bloomberg APAC head of buy-side enterprise sales, said in the release: “ETF management workflows can be incredibly complex, involving interactions with many third parties that support trade matching, reconciliation, and execution.
“Bloomberg’s AIM and BSKT will allow Smartshares to have a more simplified process in connecting all parts of the workflow related to ETF creation and redemption.”
BSKT is a component of the broader Bloomberg ETF product service offering accessed by “investors, issuers, and liquidity providers”, the statement says, while AIM boasts over 15,000 users in 900 plus firms spread across 90 countries with more than US$17 trillion under management.
In other back-office technology news last month, Guardian Trust selected the Moody’s Analytics ABS Suite to “administer its trust management and structured finance-related corporate trust services”, according to a release.
Harry Koprivcic, Guardian Trust chief, said in the statement that the still-fledgling but fast-growing NZ asset securitisation market required robust infrastructure to bolster “issuer and investor confidence” in the sector.
“Moody’s Analytics has expertise in supporting an array of securitisation types, and by using its platform we have the flexibility and control to adapt to the evolution of New Zealand’s capital markets,” Koprivcic said.
“Using an industry-leading platform such as the ABS Suite solution will help us mitigate operational risks and provide a framework for scalability, flexibility, and operational excellence.”
Guardian Trust, part of the Complectus group controlled by Andrew Barnes, is trustee of 30 structured finance deals in NZ, equating to about 90 per cent of the market here “where an independent trustee has been appointed”.
Overall, Guardian counts about $240 billion of assets under supervision or administration.