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About ETF

NSCC's ETF process automates the creation and redemption of ETFs when the underlying securities are eligible to be cleared through NSCC. NSCC reports, clears and settles ETFs and their underlying securities through its creation/redemption process. NSCC’s ETF processing service includes a web based tool displaying the ETF’s portfolio constituents and relevant cash amounts. The browser based application data can be down loaded by Members as an excel spreadsheet. Members may also elect to receive a data file of the same portfolio information.

In the event the securities underlying an ETF are not NSCC-eligible, NSCC’s ETF processing service allows Members to customize standard portfolios by excluding those securities and substituting those securities with cash or with another NSCC eligible security. The customized portfolios can then be used to create and redeem the ETF within NSCC’s ETF processing.

NSCC also clears and settles U.S. listed ETFs that are traded in the domestic secondary market. In addition, ETF Agents and Authorized Participants have access to a self-service web based tool that enables them to monitor and maintain relationships in connection with these creation and redemption transactions.

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The Depository Trust Clearing Corporation has worked diligently over the past 20+ years to innovate and modernize its range of ETF products and services.

On January 22, 1993, DTCC cleared and settled the first trades placed on ETFs. Fast-forward nearly 25 years later, the ETF industry has matured both in terms of product availability and assets under management with the latter continuing to demonstrate rapid growth year over year. Even as the universe of exchange-traded products expands and becomes ever more complex, central counterparty (CCP) clearing of ETFs continues to offer the same essential benefits it provided in 1993; most critically, centralization, standardization, risk reduction, and operational efficiency.

To view the complete white paper, see the The Evolution of ETF Clearing: Opportunities Ahead.

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Are ETFs Regulated?

ETFs are regulated by the Securities and Exchange Commission (SEC) and are granted exemptive relief under the following acts:

  • Securities and Exchange Act of 1934 - Enables broker/dealers and others to bid and offer shares in the secondary market.
  • Investment Company Act of 1940 - Enables shares to trade on an exchange at prices other than the net asset value (NAV). You can redeem ETF shares at the NAV only in creation units.

How Many ETFs Exist?

At the time of this writing approximately 2,000 U.S. listed ETFs and their components are distributed daily to more than 70 customers. Approximately 58% of these ETFs are eligible for creation and redemption through NSCC. A complete list of ETFs are available at:

http://www.dtcc.com/en/charts/exchange-traded-funds.aspx.

Does NSCC Process ETFs?

NSCC's ETF process automates the creation and redemption of ETF securities. NSCC reports, clears, and settles ETFs and their underlying securities through its creation/redemption process. ETF processing also includes a nightly distribution of domestic, foreign, and fixed income portfolio information. For all relevant ETF formats, see NSCC File Formats for ETF.

Additional Notes:

  • NSCC allows participants to customize portfolios by excluding specific securities and replacing them with cash.
  • NSCC can support ETF processing when the underlying security is ineligible at NSCC (for ETFs that have been created and redeemed against cash, in lieu of securities).
  • NSCC also clears and settles ETFs traded in the domestic secondary market.
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Use the following NSCC contacts for information about Exchange Traded Fund (ETF) and the Web application. You can also contact your DTCC Relationship Manager or obtain general assistance by visiting the DTCC Client Center.

For...

Contact...

Permission to the Exchange Traded Fund (ETF) Web application and to set up your account

Your super access coordinator (SAC) at the firm. For SAC that need access to the Clearing Dashboard, contact Registration Support Group at This email address is being protected from spambots. You need JavaScript enabled to view it..

Setup and testing

NSCC Integration by email at This email address is being protected from spambots. You need JavaScript enabled to view it..

ETF related issues

Your relationship manager.

Issues with logging on to the system

DTCC Client Support. Call the following number, and then follow the prompt for product support.

For US and Canada, call 1 888–382–2721.

For the UK, Europe, and Asia, call +1 212–855–8099.

Production support issues

NSCC Support by email at This email address is being protected from spambots. You need JavaScript enabled to view it.

Access to historical data and the Historical Portfolio MRO File Layout: AutoRoute 02262222 file

DTCC Data Sales by completing the form available at http://www.dtcc.com/dtcc-data-sales

 

Note:
Login to the DTCC Learning Center to learn more about ETF by accessing ETF Documents, customer business requirements, NSCC file formats, ETF industry working group meeting notes, and other content.

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NSCC’s ETF process provides the following efficiencies and risk controls around the creation and redemption of ETFs:

  • Provides Members with the ability to select only the portfolios they need for next day’s trading through a web based on-line view. Through this mechanism, Members can download the portfolio details in an Excel spreadsheet format.
  • Enables Members to elect to receive a nightly Portfolio Composition File (PCF) data file containing information that pertains to the ETF for the following trading day. This information is also available through the ETF web-based tool.
  • Supplies an instruction detail file containing the details for each create and redeem
  • Provides Members with the ability to submit a supplemental portfolio on trade date for standard and custom portfolios.
  • Reduces manual deliveries.
  • Provides clearance and settlement of the ETF, as well as the underlying components, through NSCC's CNS and non-CNS settlement processes. When eligible, settlement of the underlying components of ETFs and certain eligible ETFs through CNS (minus the transaction fee) are guaranteed by NSCC.
  • Allows Members to create or redeem ETFs on T+2 or T+1 (next day) basis.
  • Allows Members to create or redeem a customized portfolio with cash in lieu of securities.
  • Allows Members to create or redeem a portfolio either against cash or through the exchange of securities.
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  • On the day before trade date (T-1), participants receive a Portfolio Composition File (PCF), either through a web-based application or in a data file, listing the securities in each ETF.  The data file also identifies the cash amount in each portfolio and other relevant information. Trades eligible for cash creates and redeems show a cash creation amount on the portfolio composition file.
  • On trade date (T), participants can place a create/redeem order through the distributor. The distributor delivers the order to the ETF agent. After receiving, the ETF agent transmits an Instruction file for the creates or redeems to NSCC.
  • On the night of T, NSCC transmits an Instruction Detail file showing the details of the creates and redeems to participants with activity. The information in the file can also be viewed by Members who subscribe to Universal Trade Capture (UTC) through that service’s data output. This report serves as the contract for the create/redeem activity.
  • Both the components underlying the ETF and the ETF itself are processed through DTCC’s normal equity clearance and settlement systems.
  • Create and redeem transaction fees are reflected separately in the participants End of Day settlement. Cash amounts for the transaction fees are sent directly to money settlement and are settled under a unique NSCC settlement codes. For standard portfolios, it is a code 54; for custom portfolio’s it is a code 55.