ETF Edge

The Intercontinental Exchange is overhauling the ETF issuing process. Here's what you can expect from its new 'Hub'

ICE president on how NYSE parent's new ETF Hub will improve industry efficiency
ICE president on how NYSE parent's new ETF Hub will improve industry efficiency


That is the central goal behind the Intercontinental Exchange's recently rolled-out "Hub" for exchange-traded funds, a joint effort by the New York Stock Exchange parent and ETF issuers like BlackRock meant to streamline the often complex, decentralized process of bringing ETFs to market, ICE President Ben Jackson tells CNBC's "ETF Edge."

"It came about by ICE pulling together a lot of the major asset managers, issuers, market makers and banks ... to design a more modernized solution and infrastructure that underpins such a critical investment tool for investors like you and I that want to get access to a very efficient and effective investing vehicle such as ETFs," Jackson told CNBC's Bob Pisani on Tuesday.

The ICE ETF Hub, which launched in October, is an attempt to simplify the ETF issuing process for these industry players by offering what it calls key "efficiencies" such as messaging, order management and analytics.

Once more issuers sign on, the platform will serve as a central location for ETF industry participants to go through the series of negotiations and transactions required to bring ETF shares to market known as the creation/redemption process, Jackson said.

"There's a whole negotiation process between the issuers and the banks around, 'What is going to be an acceptable sample for that bank to trade of securities in lieu for a share of the ETF?' So, what we're doing is really lubricating that process," Jackson said.

"It's the communication, it's the negotiation vehicle over instant messaging, it's the transaction platform and the settlement platform that's going to enable the [authorized participants] and market makers that are facing off these issuers really make that communication, negotiation and transaction much more simple and effective," he said.

As 2020 draws near, the ICE will be "looking to build out" its ETF Hub community, Jackson said, adding that the platform has already seen impressive volume since its launch.

"We've seen volume continuing to grow on the platform. We're seeing transactions that are continuing to grow. The number of ETFs and equities are continuing to grow," he said. "[On] Thanksgiving week, we launched fixed income, and last week alone, we saw trades happen across 17 different fixed-income ETFs."

Given that performance during a holiday week, Jackson anticipated even more engagement in the new year as ICE builds out the hub's capabilities.

"We're very pleased with the pickup in volume that we've seen in fixed income, and as we go into 2020, we're going to be introducing some of the complex basket negotiation facility to further enable issuers to create more complex, more structured types of ETFs," he said.