BNY Mellon has enhanced exchange-traded funds (ETF) markets by introducing an automated system to calculate collateral requirements in a bid to reduce errors in ETF transactions.
In addition, the service is also expected to enhance the management and allocation of by Authorized Participants (APs), according to The Asset.
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Following the calculation of collateral requirements, BNY Mellon will report them to the APs on a daily basis, removing the earlier process of notifying them through a manual process
Rex Wong, managing director at BNY Mellon’s Asia Asset Servicing business said that ETF providers in Asia-Pacific typically manage cash collateral in-house, and the process tends to be manual.
"Through our new automated capability we are now able to provide an efficient and risk-controlled process which is important to ensure a timely settlement of the ETF creation and redemption transactions with the Aps," added Wong.
APs are also provided with an option of delivering a basket of securities or cash collateral to an ETF servicer while creating new ETF fund shares.
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