BNY Mellon Asset Servicing will allow authorized participants in exchange-traded fund transactions to place orders one day ahead of the actual trade date.
The investment services firm said it has enhanced its Authorized Participant Interface (API) to allow authorized participants more flexibility in placing orders.
The API is BNY Mellon's name for its exchange-traded funds order processing platform.
Authorized participants can create and redeem shares of exchange-traded funds by delivering or receiving baskets of securities or cash to create or redeem shares in their portfolios.
This, BNY Mellon said, will give the participants, usually large institutions, the ability to pre-notify trade orders on the day prior to trade date, after market close. This will “ facilitate processing for international portfolios,’’ it said.
This will provide “more precise trading options, reducing processing errors and post-trade reconciliation issues," said Joseph Keenan, managing director and global head of exchange-traded fund services at BNY Mellon Asset Servicing.
The enhanced API also provides investment managers and fund distributors with an automated, real-time mechanism for approving and tracking orders.
Authorized participants will, for instance, have the option to shorten the settlement period for an order and, when eligible, settle the order through National Securities Clearing Corporation.
They can also place cash orders online and receive an automated trade confirmation with relevant order details.
Only so-called authorized participants (typically, large institutional investors) actually buy or sell shares of an ETF directly from or to the fund manager. This is done only in so-called creation units which are large blocks of tens of thousands of ETF shares. These units usually exchanged for baskets of the underlying securities.
In September, 37.3 billion shares of exchange-traded funds changed hands, according to the National Stock Exchange. That was down from 50.3 billion in August, a volatile month after Standard & Poor’s downgraded U.S. debt, for the first time.
-- This article first appeared on Securities Technology Monitor.