BlackRock has unveiled direct Financial Information eXchange (FIX) connectivity for authorised participants (APs), boosting the efficiency of the creation-redemption process, ETF Stream can reveal.
FIX will allow APs to automate and scale their primary market order processes, allowing creation and redemption to take place “faster, more frequently and across more ETFs” while reducing operational costs and risks across the market.
BlackRock’s FIX connectivity will be available across all asset classes, excluding commodities in the US, and will initially include UCITS and US 40Act ETFs.
Initially, the asset manager will facilitate standard orders with a view to include share class switches in Q1 2024, followed by fixed income custom basket orders later next year.
The world’s largest asset manager becomes the second ETF issuer on the continent to launch FIX connectivity after DWS unveiled its own FIX capabilities in September.
The increased adoption of FIX by ETF issuers means APs will not be required to log into every issuer portal to manually key in orders. Instead, they will be able to engage through a single FIX specification.
While FIX has been available in the US for several years, the move has been described as a “key advancement” for the European ETF ecosystem as primary market ETF order volume continues to grow on the continent.
According to BlackRock, primary market order volume for iShares UCITS ETFs has increased by approximately 300% in Europe over the past five years, resulting in growing demand for more efficient trading solutions.
Jason Warr, global co-head of ETF markets at BlackRock, told ETF Stream: “As the market grows, APs will be looking to automate workflows which will lead to more demands for FIX connectivity.
“This is a key advancement for the European ETF ecosystem. AP efficiency is important for our ability to meet the growth and demands of the ETF business in Europe.
“The easier it is to trade ETFs, the tighter the spreads and the more liquidity we will see on exchange, which ultimately leads to better outcomes for investors”
The asset manager expects FIX messaging to become the “global standard” for APs placing primary market ETF orders with more issuers likely to adopt the technology in the coming years.
“Part of our goal here is to create new functionality so that we can offer an additional option for APs if they wish to create in this fashion,” Warr added.
“Clearly it is more efficient. We have seen this in equity markets where FIX ordering has become very relevant.”
APs will still be able to place order via iSOL and BlackRock’s Aladdin ETF servicing platform and negotiate custom baskets via Custom Basket Uploader (CBU).
BlackRock said it will be onboarding APs “over the coming weeks” and it will be available in all primary markets it operates. The group expects to offer FIX messaging to APs in the US from 2024.