Frank Koudelka

State Street Corporation (NYSE: STT) has announced the expansion of its Fund Connect ETF portal via upgrades to its Application Programming Interface (API), now offering coverage to all clients globally including Europe and the APAC region. Fund Connect ETF APIs have been available in the U.S. and Canada for years and account for nearly half of North American order volumes.

Fund Connect ETF is a global online portal that facilitates the creation and redemption of ETFs, designed as a single point of access to many issuers. The portal’s automated order routing solution provides access to ETFs in multiple currencies, supplying a direct link between Authorised Participants (APs), order takers, sub-advisors and sponsors. This API expansion allows global market participants to scale their businesses and capitalizse on efficiency gains and risk reduction through the portal’s automated API technology.

“This expansion is in response to the growing demand from our valued APs, particularly those in Europe and APAC, who have expressed a strong interest in leveraging State Street’s best-in-class connectivity,” said Lori Coakley, global business head of Fund Connect ETF at State Street. “Not only does this cater to that increasing demand for streamlined and automated ETF creation and redemption processes, but it also further solidifies our position as a leader in in the ETF industry.”

The ETF market has witnessed unparalleled growth over the course of the past few years, driving a surge in demand for increased automation within the creation and redemption framework. Recognising this trend, State Street is meeting the evolving needs of APs by upgrading one of the most integral parts of State Street’s GlobalLink product suite. With this enhanced API integration, clients globally will now be able to seamlessly place orders directly with funds via their own Order Management Systems (OMS).

“The global API connectivity is the next logical step in the continued digitisation of our ETF servicing business,” said Frank Koudelka, global head of ETF Product at State Street. “Close to 100 authorised participants are communicating their create / redeem orders globally on behalf of our ETF clients to State Street via Fund Connect. The continued theme we have heard from them is a desire to communicate system-to-system as opposed to web portals, and Fund Connect is now the first create / redeem portal with fully enabled via APIs across Asia-Pacific, Canada, Europe and the United States. This further demonstrates the innovations that State Street has brought to the marketplace as the largest global ETF service provider.”

Fund Connect ETF is an integral part of State Street Global Markets’ suite of award-winning electronic trading platforms.

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Frank Koudelka

State Street Corporation (NYSE:STT) has announced the Australian launch of its Fund Connect ETF Portal – a global online portal for the creation and redemption of exchange traded funds (ETFs), designed as a single point of access to many issuers.

“Australia is one of the fastest growing ETF markets in the Asia Pacific region and this portal will be an important solution to meet the needs of clients in the country,” said Tim Helyar, country head for State Street in Australia. “Since 2018, ETF assets in Australia have risen from AU$41 billion to AU$147 billion^[1] , a compound annual growth rate of 29 percent.”

Frank Koudelka, head of global ETF product solutions, State Street, said the Australian portal is going live following the successful launch of the portal last year in Singapore as the first market in Asia Pacific.

“Our newly launched Fund Connect ETF portal will complete State Street’s ETF servicing solutions in Australia, bringing clients a dynamic suite of offerings to meet the growing ETF markets,” said Koudelka.

“For more than 15 years, Fund Connect ETF has been serving as a conduit between authorised participants (APs) and issuers globally. It provides a single point of access to approximately 1,100 ETFs in multiple currencies from more than 50 leading issuers. Currently, the portal has around 95 APs.

“In the Australian ETF market, the creation and redemption process still relies heavily on manual tasks including faxes,” said Lori Coakley, global head of Fund Connect ETF at State Street. “We believe an electronic trading solution like the Fund Connect ETF Portal will bring significant value to ETF issuers and APs in Australia.”

“Importantly, it will allow them to scale their businesses, drive efficiency and reduce operational risks,” she added.

Fund Connect ETF’s automated order placement solution, and comprehensive integration into order management systems, supply a direct link between market makers, APs, distributors, transfer agents, sub-advisors and sponsors, along with direct access to ETFs.

“State Street has 30 years of experience servicing 47% percent of ETF assets globally,” said Koudelka. “Our long and deep experience has guided ETF issuers in Australia with industry best practices, and offers them the most sophisticated tools to benefit from economies of scale.”

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Notes:
[1] ETFGI Asia-Pac ETF, 06/30/2023

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The new State Street Alpha for ETF Issuers offering integrates Charles River Development’s front office products with State Street’s industry leading ETF servicing capabilities to deliver end-to-end technology and processes for ETF issuers.

“In the first 4 months of 2023, growth in ETFs showed no sign of slowing. According to our internal research, ETFs had over US$200 billion of inflows globally, the third highest total on record1, bringing the total ETF market to approximately US$10T,” said John Plansky, head of State Street Alpha. “By optimising ETF workflows with consistent data, key analytics and more efficient basketing capabilities, asset managers are better equipped to drive investment decision making with access to near real-time data modernise their operating models as the ETF marketplace continues to grow.”

State Street Alpha provides a centralised platform for ETF Issuers across the entire ETF lifecycle, including portfolio management, trading and compliance to enable growth across a variety of ETF strategies and increase speed to market.

“For the past 30 years, State Street has continuously innovated to support what has become a US$10T ETF marketplace. Today State Street is the largest ETF administrator in the world with more than 2,700 ETFs serviced in 13 countries2 and provides fully integrated global ETF servicing capabilities. This heritage of expertise has been leveraged throughout the development of the Alpha Platform and reaffirms our position as the forefront leader in ETF servicing,” said Frank Koudelka, global ETF Product Specialist for State Street.

State Street’s Alpha platform is designed as an open architecture structure to integrate with external ETF providers as well as State Street’s internal ETF systems. More broadly, State Street has also established a fully integrated middle office servicing model that has been tailored specifically for ETF issuers.

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Notes:
[1] https://www.ssga.com/us/en/institutional/etfs/insights/investors-put-2022-in-the-rearview-and-double-januarys-average-etf-inflow
[2] State Street Internal Research

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State Street continues to be an industry leader servicing over $5.5 trillion in ETF assets, which is close to 60% of global ETF AUM. Additionally, State Street remains committed to innovation, servicing close to 95% of assets for the U.S. semi-transparent active ETFs.1

Putnam Investments recently announced the debut of its first actively managed ETFs, which are based on four of the firm’s leading equity strategies. The new ETFs – Putnam Sustainable Leaders ETF (PLDR), Putnam Sustainable Future ETF (PFUT), Putnam Focused Large Cap Growth ETF (PGRO), and Putnam Focused Large Cap Value ETF (PVAL) – are listed on the New York Stock Exchange.

“State Street remains committed to providing industry-leading service for actively-managed ETFs as it continues to be a significant and rapidly-growing portion of the ETF market,” said Frank Koudelka, Global ETF Product Specialist at State Street. “We’re excited to collaborate with Putnam by supporting their first foray into the exchange traded fund marketplace.”

“In recently launching Putnam’s initial ETF offerings, our firm is addressing the changing needs of clients by delivering fundamentally-driven investment capabilities through this exciting new vehicle,” said Carlo N. Forcione, Putnam’s Head of Product and Strategy.

“Based on State Street’s distinguished position in the ETF ecosystem, we knew they were the right partner as we entered this important new market.” State Street currently provides back-office work, specifically accounting and custody services, to the Boston-based investment management firm, which has $200 billion in assets under management.

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Originally developed seven years ago, AllianceBernstein’s Managed Volatility Equities Fund (AMVE) was listed on the Chi-X exchange just last month leveraging the innovative dual access model.

The dual access structure enables active managers to run a single register for both unlisted and listed investments. As a result, managers can gain greater operational and investment efficiencies.

Active management strategies now make up more than 20% of the Australian ETF market^[1] .

“State Street continues to pave the way for active managers to participate in the ETF marketplace globally,” said Frank Koudelka, global ETF specialist for State Street. “This included being the first ETF service provider to support each of the semi-transparent active ETF models in the U.S. and now the ground-breaking dual access model in Australia.”

“We are very excited to expand our relationship with AllianceBernstein and to be servicing this innovative investment product.”

As part of the arrangement, State Street will provide a range of servicing solutions including ETF basket services (to provide indicative NAV or iNAV files), fund accounting, fund administration and custody.

“AB developed the Managed Volatility Equities strategy in collaboration with a major Australian superannuation fund which wanted to give its members a smoother, but still competitive, return profile in volatile markets”, said Jen Driscoll, AllianceBernstein Australia chief executive.

“We are very pleased to be working with State Street in the delivery of our active ETF.” State Street has been servicing ETFs for close to three decades and is the largest global ETF servicer. The firm is currently servicing close to 60% of ETF assets and is the only provider serving clients in all major ETF regions^[2] .

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[1] ETFGI Asia-Pacific ETF Insights 03/31/21
[2] ETFGI Global ETF Insights 03/31/21 and State Street research

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