Euroclear has partnered with the Hong Kong Exchange and Clearing (HKEX) to enhance the distribution of European-domiciled exchange traded funds (ETF) in Asia.
With the collaboration, HKEX has become the first Asian stock exchange to adopt the international central securities depository (ICSD) settlement model in Euroclear Bank.
European ETF issuers, linked to Euroclear, will now be able to expand their distribution network to Asia and growth their ETF liquidity.
“We are excited to introduce the ICSD settlement model for the ETF industry in Hong Kong. The ICSD link, which is proven effective in narrowing spreads and driving liquidity, will reinforce Hong Kong’s position as Asia’s ETF marketplace,” said Brian Roberts, head of exchange traded products, HKEX.
“This aligns with our vision to bring best execution and timely settlement to ETF investors, all in a convenient time zone.”
The ICSD model with Euroclear will allow trades to be settled in one central location rather than in multiple depositories in different markets, something which has held back some firms issuing their ETFs in Hong Kong.
“We welcome this collaboration with Hong Kong Exchanges and Clearing and are extremely pleased to be the first ICSD to extend an efficient global distribution of international ETFs. This partnership further underpins Euroclear’s wider Asia strategy which spans nearly 30 years in the region,” added Mohamed M’Rabti, deputy head of FundsPlace, Euroclear.
Euroclear stated ETFs with a value of around $271 billion are currently issued in its ICSD structure.
HKEX earlier this year announced its intentions to become an ETF hub in Asia as part of a broader three-year strategic plan to make it more relevant for global investors.
It has also been involved with establishing an ETF Connect with Mainland China, though a number of operational impediments have caused the project to be put on hold.