Cboe Lists First ‘Semi-Transparent’ U.S. ETFs
Cboe Global Markets Lists for Trading the First Semi-Transparent ETFs in the U.S.
· The new actively managed, semi-transparent ETFs from American Century Investments utilize Precidian Investments’ ActiveShares® structure
· ETFs now primarily listed on Cboe BZX Exchange
Today, Cboe lists for trading the first Semi-Transparent ETFs in the U.S., brought to market by @AmericanCentury. See the press release at https://t.co/mZIeYXrYsK. #CboeListed pic.twitter.com/hmYlfMyHfK— Cboe (@CBOE) April 2, 2020
CHICAGO – April 2, 2020 – Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced it has listed for trading the first actively managed, semi-transparent exchange-traded funds (ETFs) in the U.S. – the American Century Focused Dynamic Growth ETF (ticker: FDG) and American Century Focused Large Cap Value ETF (ticker: FLV) – on the Cboe BZX Exchange.
The Focused Dynamic Growth ETF is designed to invest in early stage, rapid growth companies with large market opportunities, while the Focused Large Cap Value ETF is designed to invest in large-cap, high-quality companies temporarily selling at a discount. These ETFs utilize Precidian Investments’ ActiveShares® structure, which allows American Century to deliver its time-tested actively-managed investment strategies in an ETF vehicle without the daily holdings disclosure requirement of fully transparent ETFs. Semi-transparent ETFs also enable asset managers to take advantage of the liquidity and tax-advantage benefits of the ETF structure, while keeping their strategy hidden to protect shareholders.
In addition to Cboe as the primary listing venue, IHS Markit is the verified intraday indicative value (VIIV) calculation agent, Citadel Securities is the lead market maker (LMM), State Street Corporation is the custodian and State Street Global Markets, LLC and Cantor Fitzgerald & Co. are Authorized Participant Representatives (APRs).
Laura Morrison, Senior Vice President and Global Head of Listings at Cboe Global Markets, said: “We are proud to serve as the listing exchange for American Century’s ground-breaking ETFs. Cboe has led the effort with our regulators and industry partners to bring the Precidian ActiveShares ETF structure to U.S. investors, and pave the way for more semi-transparent ETFs in the future. The successful launch today marks a significant industry milestone and builds on Cboe’s proven track record in delivering products and services that bring unique value to the marketplace.”
Ed Rosenberg, Senior Vice President and Head of Exchange Traded Funds at American Century Investments, said: “We are excited to collaborate with Cboe Global Markets and draw upon their deep industry expertise to launch the first semi-transparent ETFs in the U.S. American Century has built a strong reputation for delivering true alpha-generating solutions, and with this latest innovation in ETFs, we hope to provide our strategies to a broader array of investors.”
Dan McCabe, Chief Executive Officer at Precidian Investments, said: “Combining the benefits of active and passive investing in one innovative solution, ActiveShares’ unique, periodically-disclosed structure could set a new industry standard for both mutual funds and ETFs alike. We are pleased to see American Century and Cboe being first-to-market with this product type, and look forward to expanding industry adoption of the ActiveShares structure.”
Sam Barber, North Americas Head of Business Development for DeltaOne at IHS Markit, said: “Our collaboration with Cboe, American Century and Precidian advances innovation in the ETF industry, while creating new opportunities for retail and institutional investors to generate alpha. Given the strong desire among our partners to enter the semi-transparent ETF space in the U.S., we are excited to provide the independent market pricing platform powering these groundbreaking products.”
The Cboe BZX Exchange is currently the only U.S. equities exchange that has received approval from the SEC to list semi-transparent ETFs utilizing the ActiveShares® model. At the end of 2019, Cboe was the listing venue for more than 380 exchange-traded products (ETPs) from close to 50 unique issuers globally. Since it was established in 2014, Cboe’s listings business has grown to capture nearly 15% of all U.S.-listed ETPs.
Precidian Issues Statement on Launch of American Century ActiveShares® ETF
Precidian Investments commented on the launch of American Century Investment’s (ACI) two new Actively Managed ETFs utilizing their proprietary ActiveShares® structure. Legg Mason, Inc. (NYSE: LM) currently owns a 19.9% stake in Precidian.
“We are truly appreciative of ACI’s perseverance in making ActiveShares® a reality,” stated Dan McCabe, Chief Executive Officer of Precidian Investments. “I’d like to thank ACI CEO Jonathan Thomas, as well as Ed Rosenberg, Matt Lewis, Cleo Chang, and Rene Casis for their tireless efforts and unwavering support in bringing the launch of these funds to fruition.”
“I’d also like to thank our ETF community, but notably, the Cboe, BNY Mellon, State Street Bank, JP Morgan, Mizuho, Cantor Fitzgerald, Rosenblatt Securities, Citadel, GTS Mischler and Foreside, for their commitment to the ActiveShares® model.”
“We are incredibly proud of this structure, which we believe combines the best attributes of active management with the additional flexibilities of an ETF wrapper. ActiveShares should provide a much better experience for both investors and asset managers.” he continued.
Designed to fit seamlessly into the existing ETF ecosystem, ActiveShares® offers investors and managers a far more flexible structure than currently exists with today’s mutual funds.
Potential benefits include:
Investors: Lower operating costs, improved tax efficiency, lower potential cash drag, benefits of exchange trading, lower liquidity charges and eliminates multiple share classes.
Active managers: No changes in day-to-day responsibilities, but greatly improved flexibility. Significant improvement in tax efficiency enables more effective implementation without fear of front-running or loss of intellectual property.
Markets: Diversifies the markets away from concentration in index-based ETFs and associated price discovery challenges, supporting goals of regulators. The availability of additional investment capabilities within the ETF structure can lead to more robust asset allocation models.
“We believe these features, added to the ETF landscape, will provide investors significant benefits, including reduced fees and tax advantages,” McCabe said.
State Street to Provide ETF Servicing to American Century Investments for First Semi-Transparent ETF Suite
Firm also announces it will be first Authorized Participant Representative in the ActiveShares ecosystem
State Street Corporation announced that it has been appointed ETF servicing agent and also has been appointed to serve as first Authorized Participant Representative (APR) for American Century Investments’ new range of semi-transparent, actively managed ETFs. American Century Investments is the first asset manager to receive regulatory approval for two investment strategies, Focused Large Cap Value and Focused Dynamic Growth, both of which will be available through ActiveShares®, its semi-transparent active ETF vehicle.
American Century Investments will utilize Precidian Investments’ ActiveShares® methodology. The structure will allow American Century Investments to deliver its actively-managed investment strategies in these ETF vehicles without the daily holdings disclosure requirement of fully transparent ETFs.
“The approval of semi-transparent ETFs opens a whole new category of opportunity for active managers and investors. We are delighted to be working with American Century Investments on this unique offering and look forward to using our extensive experience, expertise, and innovative ETF servicing technology to support the firm with this exciting new product,” said Frank Koudelka, Global ETF Product Specialist at State Street.
As part of the agreement, State Street will provide services including basket creation, dissemination, settlement, custody, fund accounting, order-taking, financial reporting and transfer agency services to American Century Investments’ new suite of funds. In addition, State Street, through its affiliated broker dealer within its Global Markets division, will also serve as the first Authorized Participant Representative (APR) in the ActiveShares ecosystem. The APR is a new and pivotal role, serving as agent for the execution of the underlying confidential portfolio holdings, and standing in between the Authorized Participant and the Investment Manager to protect the confidentiality of the portfolio holdings.
“We believe that semi-transparent ETFs expand the opportunity set to managers and strategies that had previously not been available, providing additional choices for investors,” said Ed Rosenberg, senior vice president and head of Exchange Traded Funds for American Century Investments. “We are pleased to be the first to provide investment strategies in these new vehicles and to work with State Street, whose established track record in the exchange traded ecosystem and global footprint with local expertise, made it an ideal service partner.”
State Street has serviced ETFs since their inception more than twenty years ago. Today, the firm is the largest global ETF servicer, servicing close to 70% of US ETF assetsi, and is the only provider serving all major ETF regions.
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