GFF Podcast

GFF Podcast episode 9: ETF Securities Lending and Product Innovation

• Clearstream • Season 3 • Episode 9

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In this show, we discuss the arrival of ETFs in securities lending and the new product and service offerings to meet the demand for ETF lending at Clearstream. As ETFs with fixed income underlying assets are now available for securities lending and eligible for use in both fails and strategic securities lending products, we go in-depth with ETF expert Allan Stewart (Exec. Director of ETF Sales and Relationship Management) and Catherine Pring (Senior Product Manager for Securities Lending Products) on the mechanics, opportunities and roadmap for Clearstream’s new ETF lending programme. We also look at the broader ramifications of ETFs being held in central bank reserves and get out our GFF crystal ball to predict where this innovative new market will be this time next year.

Speaker 1:

and welcome back to the gff podcast. Yes, we are back, our penultimate episode of season three, and it feels right that, as we come to the end of this season, we have got a red hot new topic for you and that is, of course, etfs being eligible for certain kinds of securities lending activities. This is big news and very exciting for us. But before we get into that and introduce our very special guests this week, of course, the show wouldn't be complete without my co-host, the man who I thought if we were a central bank reserve, he would be the high quality and I'd be the liquid asset. It is, of course, mr Christian Rossler. Christian, welcome back.

Speaker 2:

Hello, andrew, happy to be back.

Speaker 1:

That's good. Now I was going to say that you were the US Treasury to my Bitcoin, but you know I said we'd go at least one week, one show, without talking about US Treasuries, because we have talked about it a lot.

Speaker 2:

Also talking about AI and crypto. I mean, just let's do one show without that.

Speaker 1:

Okay, yeah, okay, no, no, no AI, no crypto.

Speaker 2:

I think we are in April, so it's dividend season, and so we're going to be spot on with this show because it's about ETFs.

Speaker 1:

So it is dividend season, christian. That is right, and we have got a great show dividend today, because joining us in a few minutes we have got Alan Stewart, of course, who is the Executive Director for ETF Sales and Relationship Management at Clearstream and an old friend of the show, someone who's been a main guest, someone who's also helped me out with live recordings as I've roamed around the summit. Catherine Pring, who is the Senior Product Manager for Securities Lending Products. But before we get to that, christian, let's take a moment to consider the evolution of securities lending and how new asset classes and instruments have entered the domain of securities lending and repo over the last decade since the financial crisis. So set us up, it doesn't seem that new asset classes come in very often from my sort of journalist point of view. What about it from someone who's working in the industry?

Speaker 2:

If I go back to the global financial crisis, I mean 2007, 2008, and the start of the extraordinary measures by the central banks, which we also know as the quantitative easing. We saw that central bank in the Eurozone purchased assets from the central banks and then subsequently lent those assets in the market again. These were exclusively fixed income and these were exclusively high quality liquid assets, but also some were covered bonds and corporate bond programs which were accepted by the central bank. This was all driven by monetary policy, by the central bank. This was all driven by monetary policy, and so we come out of the quantitative easing some two years ago and so quantitative tightening. We see that also the European Central Bank is going to change its monetary policy transmission mechanisms this month actually, so asset purchase programs will probably be over for the future. And also, when it comes to monetary policy, there is certain of the tool that are in the toolbox of the central bank, which will also disappear and others will appear. So I'm talking about refinancing operations, targeted and longer term refinancing operations, etc. Etc. Now, when it comes to asset classes and SEC lending, I believe that, from our perspective as an ICSD and we still run three securities lending programs, which you know, we have two Fates lending programs and we have one strategic lending program. The bulk of our strategic lending program has always been fixed income, and so we were the ones that borrowed, actually from some of the central banks, these assets that were actually lent back into the market. And next to that, obviously, you made reference to US Treasuries. I mean, we also borrow foreign reserves from central banks around the world, and these are obviously the US Treasuries. I mean and that leads to the topic of today because reserves managers have actually shifted some of their reserves into ETFs and so we are following that trend, and I think this is why we have taken the decision to also now include ETF as an asset class in our lending programs.

Speaker 2:

Now Catherine is on the show to tell us more about what it means in terms of the products that we have and how we price the ETF in different products, because we have different ways to price the loans when it comes to a phased lending program than when it comes to a strategic lending program.

Speaker 2:

I mean, you know the team in London, you know Alex who's on the strategic lending program, but Catherine is the one that really prices our FH lending programs, and we have two. So I think we are now in a time where spreads are very tight on fixed income and so it's a very difficult environment currently to create alpha in securities lending on fixed income. And this is, I think, one of the reasons why we also move into the space of ETFs, where I believe Alan will give us a bit more insight, definitely on what it is an ETF, but also where this market trend, where it comes from and where it goes market trend where it comes from and where it goes. And so I think, from that perspective, I would stop here and I would hand it back to you, andrew.

Speaker 1:

Indeed. Well, this is a good time for us to bring in our ETF expert, and it's good to actually have a bona fide ETF expert to take us through this topic, alan Stewart, who is, as I mentioned, the executive director for ETF sales and relationship management at Clearstream. Prior to that, of course, he worked as a product manager in investment fund services for some time. He also worked at State Street you probably know Alan from one of those. If not, you might know him from years at Bank of New York, where, of course, he worked extensively in collateral management. So he's got a gold-plated CV. He, he's the man to take us through this. So, alan, welcome to the show, and I want to start. No pressure, just give us a quick history of ETFs. So you know, there are reasons, aren't there, why market participants might want ETFs in their lending programs, and let's have a look at where they come from and how they've wound up in the world of global funding and financing.

Speaker 3:

Yeah, indeed. So I mean there's a lot that could be said about the history. I'll try and focus on what is immediately relevant to us, to me, as it were. I'm sure we'll mention more about the history later on, but looking at where the three of us actually work so Deutsche Börse Group so we've actually been part of that history since 2000. And of course we all know our listeners all know that we are a major listing venue in Frankfurt where they have new ETFs, as I said, almost 25 years listed Now.

Speaker 3:

This means that as a group and, let's say, in the clear stream, part of the group, we've been involved in the post-trade aspect of ETFs for as long as that in fact.

Speaker 3:

So it does stretch back quite a few years and we've seen the changes that ETFs have gone through over those years firsthand and really throughout their sort of life cycle as they are initially set up, inception, as it were, brought to market or issued, as we would say.

Speaker 3:

Every step of the way we've been involved. So I would say it's been a rich history, a very successful one and I would say a very rewarding one, because over the years we have found that, certainly in Europe, the way that the ETF market has morphed or evolved has been to our favor, in that they have increasingly centered and focused on infrastructures such as ours, meaning the international CSD. So we've become a very close partner for the industry and in so being, we talk to essentially every stakeholder asset managers, promoters, the capital market teams, the administrators and we'll say more about each one of those but the authorized participants, market makers so all these sort of crucial roles that make ETF market happen are interlocutors of ours. So, yeah, I mean I think our listeners will be aware that ETFs are going through a very strong growth period and have been for a few years. I will mention a few numbers, I'm sure, later on in our chat. So yeah, that's really the history and I want to make sure that we've been at the center of that history.

Speaker 1:

ETFs have grabbed a lot of headlines because of crypto-based ETFs the BlackRock and the Grayscales and the Bitcoin ETF that got approval in the US. But beyond that sort of hype, the ETF itself is a really interesting instrument, isn't it? Because they are very efficient and there are still good spreads on lending ETFs. I mean, there are a number of features that make them attractive to investors, market participants, and this is finally landing. Would you think it's landing maybe a little bit late in the world of securities lending?

Speaker 3:

Well, you know, I would say better late than never. No, you're right. The thing is, etfs have gone through a staggering growth, so you know it takes time for various other things to happen, such as the ETF asset class entering the lending market. I think the industry has been talking about this, discussing this, for some time now. We have been working on it. It all just takes preparation.

Speaker 3:

However, it is something that was needed, definitely as the market has grown. So have the needs and requirements for maintaining high levels of liquidity throughout the market and, as we all know, structurally, functionally speaking, a key component of this and maintaining liquidity is just providing the lubricant, as it were, and this is where securities lending programs come in. So I would say it was certainly an inevitability, whether it's sort of late or early I think it's a complex market, let's put it that way but it's definitely happening. As it happens, though, it will bring additional post-trade efficiency, so that is definitely the key objective and therefore improve the liquidity, and this is the lifeline as we're at the markets. So that's really our angle on this.

Speaker 1:

Catherine, you first mentioned the ETFs were being implemented in products. When we caught up at the GFF Summit in Luxembourg a few months back and you know when we spoke originally, of course, way, way back in episode two of the very first season of the GFF Summit we were talking about ASL principle and fails lending and we sort of bring these things together. It feels like a pretty significant development for product managers in the lending brokering and fail space.

Speaker 4:

How has it affected your products.

Speaker 1:

Let's have a look at how you take something like a new asset class ETFs come along eligible for securities lending and then actually bake those into the sort of next generation of products that you can offer.

Speaker 4:

Hi, andrew, and thank you, and it's good to be back again. Exactly as you say, these developments are relatively significant for our products ETFs as a new source of liquidity and as a new asset class. They fit perfectly into all three of our lending programs and since we last spoke, the securities lending landscape has dramatically evolved along with the capital markets and Clearstream as a company finds itself striving to improve the entire service offering it gives to its clients. So I think I'll start with typically identifying the types of securities lending that we have for ETFs. So, first of all, you've got the traditional lending programs established by the issuers, and that's known as inside lending, which is where the issuer lends the underlying securities that make up the ETF, so that's like underneath the wrapper. And then you have the second one, which is referred to as outside lending, and that's where the ETF investor lends the ETF share or unit or the actual wrapper itself.

Speaker 4:

And I want to make it clear that it's this outside lending that we're focused on here at Clearstream.

Speaker 4:

So we see demand and the detail of which I think we'll touch upon a bit later.

Speaker 4:

We're perfectly placed to supply this demand, considering our market position, so it really is a win-win for all the actors involved in this value chain, especially our clients who choose to use our financing products to source ETFs and their fails or strategic advantage all those customers who supply the ETFs as liquidity.

Speaker 4:

So if you want to bring this all together and have a look at what we've got on our delivery roadmap, this year In June we'll see Clearstream Banking Frankfurt Flow unlocked and released into our T2S Fails Lending solution. That's our principal and I spoke about that in the last podcast that we did, and the timing couldn't be better, as we'll also be able to unlock the ETF potential from this location as well, and also going live in June this year. As a company, we've enhanced our data universe to a new level of granularity, so it will allow for complex feature selection to give us a more intelligent lender pool creation, and that will be in the context of the ETF world. So Clearstream's ETF securities lending offering, which is live now. It provides perfect opportunities for income generation, liquidity enhancement and risk management for all of our clients.

Speaker 3:

In terms of the actual lenders. I think this is also coming at the right time, as Kathleen said, because along with the growth in the ETF market, what has happened is that many entities out there are holding ETFs. Now ETFs as a wrapper are a very efficient, convenient proxy, as it were, to getting exposures that one would normally have got through investment in other products. So what we have essentially happening right now is that those participants in our lending program that are holding a variety of assets have been holding more and more ETFs, and so they are naturally looking at including ETFs in their lending pool more and more ETFs, and so they are naturally looking at including ETFs in their lending pool more and more. So, you see, it's on both let's say, the demand and supply side. Things are happening together, as it were, and on the right time.

Speaker 1:

Okay, now, at this point I'm going to raise another E, which is the elephant in the room, because I've got an expert on fails lending, I have an expert on ETFs and there is an issue, isn't there? The elephant in the ETF room is that there appears to be a disproportionately high rate of settlement fails for ETF trades and, in fact, Esmer is actually consulting on issues around ETF timings, and I want to ask you both what are those sort of challenges to do with creating and redeeming ETFs that leads to this sort of friction point when it comes to settlement delivery and fails?

Speaker 3:

Indeed. So, going back to the history a little bit, so what happened a couple of years ago February 2022 to be more exact is that a very important piece of European regulation came into force, the CSDR, so the Regulation of CSDs, and, along with that, Settlement Discipline Rules. So that's all about making settlement more efficient and, you know, happen on time, essentially. So, from that point on, we and other CSDs have been measuring settlement very accurately. Of all asset classes that can settle, that we handle in post-trade, as you hint, Andrew, ETFs sort of have stood out as an asset class that are subject to perhaps more regular settlement delays for a variety of reasons we'll comment on right now. Two years on, though, and essentially very recently, ESMA came out with a consultation, essentially to take stock of the progress that had been made over the last two years around ETS, but also the other asset classes subject to settlement discipline, and I would recommend our listeners, you know, go to the ESM page. I know that sounds very exciting. I've done it.

Speaker 3:

There's been a lot of feedback, a lot of submissions from a variety of associations, participants and so on and so on. So I think that shows that people are very involved, and the aspects of the consultation on ETS were very closely or I almost want to say passionately commented on. Our own submission is in there. My point is that the elephant in the room that you refer to is something that the industry as a whole cares about, is working on and is definitely being improved Now. A key solution to that improvement is precisely what we're discussing now, which is bringing ETFs into the lending market. So you know, this is all I would say. Happening as planned. We are part of the improvements that are being brought to that general picture and I think the elephant is shrinking as we speak.

Speaker 1:

So, Catherine, I mean coming to you it seems like from a sort of product design point of view, a lot of what you've done in your role there since we first started producing this show is focus on friction points for market participants and then work out sort of product-based solutions and service solutions that can address those. So in many respects you're sorting out the ETF issue here, not wishing to obviously put too much pressure on you, but hey, Catherine, you sorted out ETFs, Thanks. But hey, Catherine, you sorted out ETFs, Thanks.

Speaker 4:

You're welcome. So if we look at the European ETF market, there's around 1.8 trillion US dollars worth, and here at Clearstream we do have a market share of that in terms of custody holdings and, as we've already discussed, we see clear demand in the various settlement locations, not just of the ICSD, but also the CSD, which is CBF and the T2S platform or street borrowers have a need for, and if we can match that demand to our holdings, we can enhance our clients' portfolio yield. In addition to supporting the European ETF settlement market, where we've seen friction, as we've already mentioned, in terms of settlement discipline, there's a disproportionate number of ETFs that are settling late and, as Alan mentioned, it's been highlighted by ESMA. So in part response to all of this Clearstream being an infrastructure provider to the capital markets and we have to encourage and foster a more efficient settlement market we have launched our own ETF lending service across all of our lending solutions and this service enables clients to add ETFs to all the lending pools, making this liquidity available for both strategic and Fails lending purposes. So this covers our flagship ASL Fails lending service, which aids the ICSD settlement, also our newly launched ASL principal T2S Fails lending solution, and it also enriches our strategic lending service offering, where we have a dedicated team of securities lending traders that distribute the ETFs out to our community of borrowers.

Speaker 4:

And I'll touch upon a point that Christian mentioned earlier about pricing, and it's important to say that, when we look at fails lending versus strategic, the loans for fails are open for a very short period it could be from a number of hours to maybe two days maximum Whilst the strategic loans can be open for weeks to months and even termed up, and this affects the pricing of the loans. So, looking at fails, it's a lender of last resort and the rate reflects this, based upon the overnight money market rate, and the rate reflects this based upon the overnight money market rate. So, compared to strategic lending, the loan is going to be more expensive. However, like any financial practice, I would say, etf lending is not without its risks.

Speaker 4:

It does require careful management and a deep understanding of market dynamics, and here at Clearstream I've management and continuous monitoring of the lent securities, and this is partly why the project of ETF lending has taken us several years to develop. Like any project, you need the buy-in and the support of all stakeholders, internal and external. You also need a supportive team around you and the ability to harness their skill set, and here at Clearstream, I'm certainly very lucky to have such a team with a wealth of securities lending, collateral management and ETF experience spanning the whole value chain. This enables us to produce these global winning products that we have here at Clearstream.

Speaker 3:

Focusing on the actual mechanics, lifting the bonnet, as it were, and looking down at what's happening inside ETF. This whole notion of friction is due to a very sort of unique aspect of ETFs, which is that ETFs are open-ended instruments, so shares are created and redeemed, in fact, very frequently, but they also trade very frequently as well on the markets, on the secondary market, as we would say. So, in effect, what you have very uniquely with ETS is that you've got two things happening at the same time. You've got one level. At one level, the ETFs are actually being created, shares are being created and, as Catherine explained, these are the units which are actually part of the lending program, so the units of ETFs.

Speaker 3:

Now, that share creation process can be complex. Remember, some ETFs will actually give exposure to a multitude of underlying products. This is the ETFs that follow indices. Some of these indices are very large. Now, next to that, what you've got happening is that these units, once created, are being actively traded on the exchange, off the exchange, across various jurisdictions. Now, this is where the friction comes from, the sort of side-by-side processes of actual share creation and then feeding the market out there, as it were. And so this is why you know, it's both a very sophisticated instrument but also a fairly complex one that can run into a certain number of frictions.

Speaker 1:

Christian. I mean when it comes to central bank and monetary policy. We've got to have a look at this because ETFs, they aren't eligible as HQLAA yet, are they? They don't qualify as collateral to be posted with CCPs. But central banks are looking at ETFs. There was some interesting lobbying and activity around ETFs that have underlying HQLA collateral to be recognized as such in the States, but the Fed hasn't gone ahead with that. So there is some complexity, isn't there, around the asset and the class. Give us that big picture central bank view what's happening with ETFs from a central bank monetary policy viewpoint.

Speaker 2:

Two trends I think are important here. I think one is what is being and what is going on in the space of green finance and also I mean climate change related, sustainable investments, which are obviously done by central banks I mean, you know the Network for Greening the Financial System or the central banks that is also trying to influence the investments into sustainable investments. So ETFs are a way to invest into ESG assets. So there is the main vehicle to convey, obviously, climate bonds, which is the green bond, and it's obviously one of the assets which is where ETFs are available. So that's one trend. The other trend is to move into equity.

Speaker 2:

As I said earlier, I think if you want to move into equity, you can obviously invest directly to equity or you can go via mutual funds Alan will speak about that or you can obviously invest into ETFs, and ETFs also allow central banks, reserves managers, to increase their exposure to, lastly, also the corporate bonds. So I think it's a trend in the reserves management that we've seen over the last years, specifically the last three to four years since the pandemic that we see that some reserve managers have shifted their assets up to 25% of the reserves into ETFs. So, yes, etfs are increasingly attractive for central banks for reserves management purposes, not yet for monetary policy purposes, because, as you already pointed out, I think there is not yet any asset purchase program which purchases actively back also green bonds.

Speaker 3:

Because ETF, as I said and I repeat myself here, is a way also to invest into green bonds and, as you pointed out, andy, we've seen interest definitely being expressed by central banks, sovereign entities etc. In that asset class, possibly also following you know sort of communication or lobbying, as you might want to put it. However, I think there are good and serious reasons why central banks have started taking close interest. Some central banks have been holding ETS for years already. They're well known the Fed, japan, places like that. However, the recent interest I think has stemmed from the fact that ETS behaved and performed very well in periods of high stress.

Speaker 3:

Kristen referred to the market that at those times, you know, ets were actually more reliable in certain respects than, let's say, their mutual fund counterparts were. But, in summary, what happened was that, due to the fact that ETS had been traded continuously throughout the day, they were reflecting much more quickly and accurately the value of their underlyings than, let's say, the mutual funds were, where there was a bit of a lag for that to be sort of the underlyings, I mean, and the quickly changing market-derived prices of the underlyings. There was a lag in that being reflected in the actual market price of the mutual fund itself or the net asset value. The pricing in ETF was much more reactive at times when you want reaction, when you want to know what you're holding and what the value is of what you're holding, as I said, in times when prices are up and down very quickly. So that I think was noticed by central banks and I think that is a key factor into why central banks have taken notice and in their approach, diversifying reserves, et cetera, as Kristen said.

Speaker 1:

Because there is a sort of shift in the ETF mindset isn't there and so far as traditionally you've got the mutual fund and the celebrity stock picker and the very sort of active management with the ETF it's more of an index driven thing, but it's actually proven to be a less risky asset from the point of view of predictable performance and predictable costs and cost efficiency, those sorts of issues.

Speaker 3:

ETFs certainly in Europe, come under strict regulation in the same way that mutual funds do. So in that respect, I don't think anyone should have any concerns about the riskiness, as it were, of the product. I think what has to be considered and I think all three of us have alluded to that is just the care with which one has to make one's investments. So all these vehicles or wrappers give exposure to underlying assets. Some of them can be very, very straightforward, as you say, andy, sort of following very well-known indices. Others can be a little bit more exotic, the underlines can be a little less liquid, and ultimately that will be reflected in things like the spread of the product. So there's a little bit of everything out there. To your point, though, andy, I think essentially what we're considering now is performance over the longer term, and some might argue that, you know, comparing a passive instrument like ETF and an actively managed like these traditional mutual funds, you know there are as I said, some have argued differences over the long term in terms of performance. I'll leave that to the market to decide. Obviously, we have a very neutral position in that respect, but I think it's also wrong to characterize ETFs as just being sort of passive zombies, as it were.

Speaker 3:

There's a lot of variety out there in ETF world. There's a lot of creativity. I think what ETFs have done very well is that they've tapped into this sort of inspirational need that the investors have, or certainly newer generations of investors that the investors have, or certainly newer generations of investors, and we're seeing things like thematic ETS. There's a lot of new ETS coming to the market. It's a space where there is, as I said, sort of inspiration, and those of us who want to put our money in ideals, as it were, ets is a very good platform for that. There is that creativity coming out of the industry and you've noticed, I've not even mentioned Bitcoin yet, and I will, but you know that's sort of one end of the spectrum, as it were. Is that level of creativity is there? Definitely?

Speaker 2:

Just to add on what Alan said. I mean, I would like to stress the ESG aspect because I mean they can invest through ETFs in those companies which are top-rated companies based on ESG scores, and so that's, I think, one of the angles which is a trend when it comes to central banks related to ETF investments.

Speaker 3:

Absolutely. Central banks operate on very specific mandates. They're not just your sort of ordinary I would say performance or revenue-seeking entities. Their mission's a little bit more subtle and, as you say, christian, they have these imperatives. Now ETFs have embraced that definitely. There are certain asset managers out there who've really made that a prominent aspect of their strategy. So definitely, in that respect, it's an asset class that central banks can look at and pick and select from to fulfill these kind of requirements, absolutely.

Speaker 1:

And so, catherine, coming back to you now, just before the show started, by the way, I was lucky enough to be given some numbers by Catherine and the team, so I'm going to look at this and say, ok, so the largest ETF market is in the US, that's 8.4 trillion US dollars. Europe comes second with about 1.8 trillion US dollars worth of ETFs. Many ETFs, of course, domiciled within the EU for various reasons, which is interesting, especially Luxembourg and Ireland. Clearstream holds a large proportion of the European ETF market in custody for its participants, but you're focusing on a very specific pool to begin with. I know you've touched on this, but let's go into a little bit more details. We're talking about the sort of fixed income underlying assets ETFs, usits. There's good tax implications, good admin costs. Give us the call to action. If I'm a market participant, why do I want to leverage these products? What are all those benefits?

Speaker 4:

So we are rolling out the ETF lending in phases. Phase one is live now and this focuses on the two largest European markets in ETFs, which are Ireland and Luxembourg I think it's roughly 90% and in phase one we also just focus on the fixed income underlying ETFs. But in future phases we will look to increase the scope of both the markets and the underlying asset type. And practically all European issued ETFs are USITs regulated. And this piece of European regulatory framework has, I think, two core objectives. I think, firstly, it offers robust product regulation as well as a high level of investor protection, and that's across the European Union. And secondly, once a USITS fund is authorized in one EU member state, it can be marketed and sold in other member states as well, and this makes ETFs very attractive to the end investor. I think this demonstrates that the whole ETF concept has quickly gained popularity due to the benefits offered, as you mentioned, andrew, such as the lower costs, the liquidity and the tax efficiency that we see through capital gains advantages.

Speaker 1:

So we've got. I mean, this is great, really. We're coming now, sadly, we have to start drawing these threads together. But you know, we can't let you go without getting out the famous gff crystal ball and getting everyone to make a prediction as we come to the end of the series. We've introduced a whole new asset class. Uh, before we get to the end of season three, let's look forward to season four and think, okay, um, let's, where do you think we're going to be a couple of years from now when it comes to ETFs? We're going to see an expansion of ETF lending. Will some become eligible for collateral and margin posting? Are we going to see securities lending, the world of securities lending and repo suddenly rejuvenated with this interesting new asset class? And, alan, I'm going to come to you first. What do you see in the mists of our GFF crystal ball?

Speaker 3:

Right. So, as I scrutinize my own crystal ball ball, it's a very optimistic one. The growth is there. It is still there this year, so that's very encouraging. So the overall market, certainly in Europe, we have to say, will continue to grow.

Speaker 3:

There is a dynamic out there where the net new money, as it were, really is going into ETFs and there's the offering and it's growing, it's diversifying, it's rich, it's inspiring. So I've said all that. We also have said that this is a well-regulated instrument, very liquid, it's easy to use and it's finding its way naturally into sort of every recess of the market. So all this essentially points to growth. So that's definitely something that I'm seeing in the crystal ball For our purposes here. I definitely see that asset becoming necessarily popular in lending programs as it will inevitably as eligible collateral in the various the fine baskets, to put it generically. So, yeah, I would say, overall, a very positive signal there and as well in terms of, I think, new developments that we've maybe not mentioned during this program but hopefully we will mention next time we meet and if ETS is on the agenda. So I would say, watch this space. I think there have been new topics coming along that we will be able to discuss.

Speaker 1:

And Catherine, what about you? What's in your product management crystal ball?

Speaker 4:

So, from a product management perspective, the future of Clearstream's ETF lending program certainly looks promising. We have a significant commercial campaign to help drive growth of our lending products and, listening to both Christian and certainly what Alan's saying about ETFs, I think it's clear to see more investors becoming familiar with ETF as an asset class, as a product, and this should drive, I think, the acceptance as collateral in securities lending that we're maybe not seeing now, but in the future I think we're likely to see an increase. And finally, the ETF industry is known for its innovation New types of ETFs, such as those that I think maybe track the less traditional indices and those that use more complex strategies. This could create new opportunities for ETF lending and Clearstream as we continue our journey through the ever-evolving financial landscape. I believe ETF lending will play an increasingly important role in shaping the future of investment, and this is exactly where Clifstream wants to position itself with respect to supporting its customers and the capital markets.

Speaker 1:

And Christian, you're the BFF of GFF for all the central banks in Europe. What do you think? What do you see in your macroeconomic crystal ball?

Speaker 2:

Yes, andrew, I think I repeat myself, but I think it's important and, as you know, I do a lot of groundwork with supranationals on climate change and green bonds and also with a lot of asset managers involved, so I get closer to this buy side, which is obviously here the big newcomer to also our security lending industry.

Speaker 2:

Now, I think, from the central bank perspective, what I would like to stress is that the ESG and the green and the climate bond initiatives and the green bonds there is different categories which are obviously sometimes difficult to you know in terms of metrics.

Speaker 2:

It's difficult for investors to you know, to know, for investors to know in what to invest, and I think ETF is the right tool here to allow investors, such as central banks, reserves managers, to incorporate those sustainability metrics alongside the risk and return objectives that Catherine and also Alan have alluded to. I think, of course, it's important that you yield alpha in your portfolio when you invest, but it's also important and this is really close to my heart is that we move into a world which is more sustainable, because I said it already in the very past, you know I mean Because I said it already in the very past, you know I mean we can get blockchain or DLT or even AI wrong to some extent, but if we don't get climate change right, we will be one day will be disappearing, and so I think, from that perspective, I'm very positive about this trend.

Speaker 1:

That's good, okay, fantastic. Well, listen, we have to draw the show to a close there, but it is nevertheless for many, many people uh in europe, the easter holidays coming up and I have to ask, knowing as I do that I am going skiing with the, the family, uh, for easter, and I'm going to ask you do you ski? Do you have Easter holiday plans? Alan, I know you have a new baby. Are you taking your new baby skiing for the very first time? Tell me what's the plan.

Speaker 3:

Not quite no. So the new baby is indeed very new, seven months old. I can't really stand up, so I wouldn't put the baby on the skis quite yet Snowboarding then, but no, we are taking a little Easter break to hopefully slightly sunnier. I was going to say shores, no, just over the border in France, you know. But yeah, no, no, looking forward, definitely, and the baby boy is a joy. There you go, fantastic, fantastic Congratulations there. And Catherine, what about?

Speaker 1:

joy. There you go, fantastic, fantastic, congratulations. And Catherine, what about yourself? Are you a skier? I am. Are you taking the family away for a little bit of she-laugh-and-gain, as they say? I wish.

Speaker 4:

I am a keen skier, but unfortunately I'm not skiing this year, though I have got time off. It's actually my niece's birthday today and my other niece is going to be 14 on Saturday, so I'm taking time off, spending it with my family and my sister and all my nieces celebrating birthdays.

Speaker 1:

Fantastic, fantastic. That sounds good. Now, christian, you and I, we both know, don't we, that we are going. What's your plans, christian?

Speaker 2:

Yeah, yeah, I'm taking an older baby to the ski, my daughter, who is 17, so we're going skiing for a couple of days after Eastern let's see. I saw that there's still snow today tomorrow in the Alps, so I go to the Swiss Alps Looking forward not to break a leg this time, because I had this accident on the bike so I was off the ski slopes for at least two years. So coming back there, maybe I'm doing some, you know, more skiing, less alpine skiing, but more skiing, you know, cross country.

Speaker 1:

So that'll be good. I'm going to say now, christian has been banned from most European cycle shops. He's not allowed to own a carbon fiber bike anymore because of what he does to them. Have you got carbon fiber skis?

Speaker 2:

No, I don't.

Speaker 1:

Okay, good. Well, you know I've got carbon fiber poles, so I feel finally I've got one up. I wouldn't say I could use them nearly as well as you. I can barely keep up with my kids, but you know I'm nevertheless. I've been working out all week. My thighs are in great shape, and that's as much personal information as anyone on this podcast needs to hear.

Speaker 2:

You're going to a very remote area? Tell us.

Speaker 1:

I am. I am this year we are going to. We like to travel around to unusual places to ski. So we've done Norway and Finland, but this year we're going to Bulgaria. We're trying Bulgaria, in the mountains there in the Balkan Peninsula, bansko. So if you happen to be going and you see an obese middle-aged man getting carried off on a stretcher with a wonderful speaking voice, that is, of course, me. Come and say hi. Okay, now, sadly, we have to draw the show to a close. So it's a huge thank you from everyone here at the GFF podcast to our very special guest this week, alan Stewart, who is the Executive Director of ETF Sales and Relationship Management at Clearstream. Alan, thank you very much.

Speaker 3:

Thank you very much, andy. It's been a pleasure. I look forward to possibly being invited again. Yes, as I said, a very fast changing world here, so I'm sure we'll have opportunities to discuss many of those topics again.

Speaker 1:

Yes, absolutely. You're coming back, alan. You didn't think this was a one-time deal, as Catherine will tell you once you're in. You're in and on that front, a huge thank you to our very special guest from episode two of season one of the GFF, who has also been in all our live shows from the summit itself and has taken time to join us today. Huge thank you to Catherine Pring, who's the Senior Product Manager for Securities Lending Products at Clearstream. Catherine, thank you.

Speaker 1:

Thank you, Andrew, and I look forward to joining you in Season 4. Yes, indeed, you will be back. You will be back. I'm afraid that's what we like to refer to here as the GFF podcuffs. Once you've been on, you're coming back again. And, of course, a huge thank you to the man who is the T to my plus one, the GFF BFF, Christian Rossler. Thanks for joining us again.

Speaker 2:

Yeah, andrew, we're coming close to the end of season three and I think what's coming up next? Next month we're going to have a show on the Central Bank Money Tri-Party Repo Settlement, which is also a new product, a new feature to an existing product, and that will close season three. So it's crazy, we've been doing three seasons now, so it's almost three years.

Speaker 1:

It is and it feels great that you know, having had all the fun of the GFF and all the issues that we've addressed with that, we are now coming to the end of this season and we're still talking about new products, new launches and exciting developments that are happening in the world of securities lending. And make sure you do join us for that final episode of season three and be ready for season four, which will have a whole load of new surprises for you, not least with new clips and content. But I'll leave it there. I won't give too much away In the meantime. If you want to find out more about the topics we've been talking about today and network with Alan and Catherine and Christian and all the people that we've had on the show, do join us on our LinkedIn page that is linkedincom. Slash company, slash Clearstream.

Speaker 1:

And in the meantime, from everyone here, have a good break if you're getting one over the Easter period and from me, andrew, keith Walker and everyone at the GFF podcast, thanks very much, we'll see you next time. Podcast. Thanks very much, we'll see you next time. And don't forget, this show is brought to you by Clearstream Banking, one of the major sponsors of the GFF Summit each year in Luxembourg and features members of the Clearstream team and special guests expressing their personal opinions, not the opinions of Clearstream as an organization. And, of course, don't forget that none of the information in this podcast should be taken as legal, tax or other professional advice. See you next time.