Morgan Stanley has launched a lending book for European ETFs across multiple issuers, to create greater liquidity and supply of ETFs for investors increasingly seeking to borrow these funds.
The lending book allows for a create-to-lend process, which involves borrowing the constituent stocks in the underlying basket of the fund and then using the creation process with the issuer to make new ETF shares. These new shares can then be lent out to investors seeking short positions. In order to do this, the broker passes through to the ETF the liquidity available in the borrow market for the underlying constituent stocks. This process is in line with the way market makers buy and sell the underlying stock basket, to allow for trading in ETF shares. The firm says it is this p...
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