Industry Updates

DWS to shift Luxembourg-domiciled ETFs to ICSD model

Move aligns ETFs with the rest of the firm’s Xtrackers range

Theo Andrew

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DWS is set to transition its Luxembourg-domiciled ETF range to the international central securities depository (ICSD) model, aligning it with the rest of the Xtrackers range.

The German asset manager said the current settlement model, which involves settling trades across multiple local central securities depositaries (CSDs), will no longer be operational as of the close of business on 7 October.

The new ICSD settlement model will come into effect on 10 October.

It follows a move by DWS to transition its Irish-domiciled ETF range in July 2020, ahead of the UK’s exit from the European Union.

A DWS spokesperson said: “This one moves our Luxembourg ETF platform in line with it all Xtrackers UCITS ETFs. The change is part of the operational development of the business overall.

“Accordingly, the directors are of the view that the ICSD settlement model provides a more streamlined centralised settlement structure, which they expect will result in improved liquidity and spreads for investors and reduce risk in the settlement process relating to the company and its sub-funds.”

Most ETF issuers in Europe have switched to an ICSD model which was introduced in 2013 to enable cross-listed ETFs to be settled in on pan-European location.

The majority of switches to the ICSD model came after Brexit when the Euroclear UK & Ireland (EUI) became no longer able to provide local CSD services for Irish-domiciled ETFs.

Trading and settling under the fragmented CSD model can be complex, costly and inefficient.

The move is expected to enhance liquidity, improve settlement performance and minimise the need to manually move the relevant shares between multiple local CSDs, DWS said. 

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