iShares to settle through EuroClear instead of Crest leaving UK shareholders with CDIs

EdGasketTheSecond

I had notification from iShares that as a result of Brexit, their ETFs will no longer be settled by Crest but by EuroClear and Clearstream.

If I understand this correctly then that means that anyone holding iShares ETFs will end up with CDI's instead of shares which are traded 'off-market'. I take that to mean no live price and possibly higher charges and possibly FX charges. I have been given a deadline of 11th June to basically sell up or get CDI's in my iShares ETFs.

Has anyone else received notification and are my conclusions as to no live price and more difficulty trading correct for CDI's?

Alexland

This has transition been expected for a while and Crest is owned by EuroClear anyway.

I believe it only affects settlement rather than dealing/execution which would still be live.

https://www.etfstream.com/feature/9209_could-etf-issuers-miss-the-etf-migration-deadline/

"Prior to the Brexit referendum, 23 ETF issuers domiciling their products in Ireland would settle their shares through CREST in the UK, however, now the UK is leaving the European Union, the European Commission has set 29 March 2021 as the final date for issuers to use the CREST model."

According to AJ Bell if you do end up holding a CDI then the dividends would be in the local currency of the investment so platform FX charges may apply.

https://www.youinvest.co.uk/faq/what-cdi

It doesn't really affect us as the only iShares we hold is SWDA which is accumulation anyway and on our other Irish ETFs the dividends were already not in GBP so incurring FX charges.

EdGasketTheSecond

Thanks.
One big disadvantage of cdis that I see is that they will probably be thinly traded and the price I get may not be good compared to the underlying shares.

Alexland

EdGasketTheSecond said:

One big disadvantage of cdis that I see is that they will probably be thinly traded and the price I get may not be good compared to the underlying shares.

Possibly I guess we will have to wait and see. Although I have a preference for OEICs most of our money is in ETFs for the capped platform fees on AJ Bell, Fidelity, etc. However our workplace pension got a lot cheaper when it changed to a master trust and they have just announced further reductions (eg L&G FTSE World tracker for 0.18% all-in) so it's marginal if it will be worth continuing with SIPPs with all the asset manager, currency conversion, reinvestment, capped platform custody fees and limitations or lack of FSCS protection on the wrapper and investment type.

bargainhunter888

Alexland said:

This has transition been expected for a while and Crest is owned by EuroClear anyway.

I believe it only affects settlement rather than dealing/execution which would still be live.

https://www.etfstream.com/feature/9209_could-etf-issuers-miss-the-etf-migration-deadline/

"Prior to the Brexit referendum, 23 ETF issuers domiciling their products in Ireland would settle their shares through CREST in the UK, however, now the UK is leaving the European Union, the European Commission has set 29 March 2021 as the final date for issuers to use the CREST model."

According to AJ Bell if you do end up holding a CDI then the dividends would be in the local currency of the investment so platform FX charges may apply.

https://www.youinvest.co.uk/faq/what-cdi

It doesn't really affect us as the only iShares we hold is SWDA which is accumulation anyway and on our other Irish ETFs the dividends were already not in GBP so incurring FX charges.

I have invested in SWDA too, surely this should affect a lot of ETF's rather than Ishares specifically?
is there any reason to invest in another MSCI world tracker ETF instead?

Thanks 

EdGasketTheSecond

As per post above, there aree 23 ETF issuers in RoI so it would affect all of them, yes.

I will be selling my iShares ETFs as a live price is important to me and I'm not sure how widely traded the CDIs are going to be when there are alternatives like WisdomTree.

EthicsGradient

EdGasketTheSecond said:

As per post above, there aree 23 ETF issuers in RoI so it would affect all of them, yes.

I will be selling my iShares ETFs as a live price is important to me and I'm not sure how widely traded the CDIs are going to be when there are alternatives like WisdomTree.

How are WisdomTree different? They appear to be going through the same process: https://www.wisdomtree.eu/en-gb/-/media/eu-media-files/other-documents/faq/faq-icav-icsd.pdf
They say:

For UK Investors 

For the Issuer, all of the existing Irish ISINS (IE ISINS) will remain the same, although will be known as ‘International Irish ISINS’ from the effective dates (above). These International Irish ISINS will still be available through CREST but via a Crest Depository Interest or CDI. Neither the change to an International Irish ISIN or use of a CDI will have any impact on how the products trade, settle or transfer. Investors may only see changes to references in documentation.

EdGasketTheSecond

Thanks I had only briefly looked at WisdomTree and they seemed to be NY based. They have a later date of August compared to iShares for the switchover.

I notice from the document you linked it says:

"Neither the change to an International Irish ISIN or use of a CDI will have any impact on how the products trade, settle or transfer. Investors may only see changes to references in documentation."

however that is not what my broker said which is basically:

1) CDI's do not trade on the LSE, they are off-market

2) I would have to leave an order and the broker would try and fill it

3) The market in CDIs might be limited

which does not sound very encouraging.

After the virus, Brexit is the next disaster waiting in the wings.

Looking at that document some more, only some of their ETFs are listed and not the physical metal ones that I am interested in. I have emailed them to ask about the changes and whether the metal ones are being converted to CDI's at a later date. If anyone else knows I would be interested, thanks.

2unlimited91

EdGasketTheSecond said:

I notice from the document you linked it says:

"Neither the change to an International Irish ISIN or use of a CDI will have any impact on how the products trade, settle or transfer. Investors may only see changes to references in documentation."

however that is not what my broker said which is basically:

1) CDI's do not trade on the LSE, they are off-market

2) I would have to leave an order and the broker would try and fill it

3) The market in CDIs might be limited

I would be very surprised if this change led to less liquidity in the the trading of ETFs on LSE. It appears to affect all the ETFs that are based in Ireland and traded on LSE. There is currently a lot of trading of these ETFs in London, and I don't see why there wouldn't be afterwards. Surely the point of the change is to allow all this trading to stay on LSE, despite regulatory changes.

AIUI, Vanguard's Irish ETFs made this change last year — see www.investegate.co.uk/vanguard-funds-plc/rns/circular/201907241214085933G/ (including the linked PDF) for when they were proposing it. I've had no problems trading their ETFs since then. Indeed, they cite potentially increased liquidity as a reason for the change, because their ETFs are also traded on other stock exchanges, and it would facilitate moving ETFs between trading on different stock exchanges when all the exchanges are using the same international central securities depositories.

Perhaps your broker's answer could be a generic answer about trading CDIs on LSE, rather than specific to Irish ETFs after they've moved to an ICSD model? CDIs are the mechanism by which it is possible to buy, on LSE, shares in many companies which are primarily listed on other stock exchanges, and in that case the trading on LSE may well be thinner than on their primary exchange.

EdGasketTheSecond

I think you might be right that it was a generic answer about CDI's. I don't think the person replying to me was the brightest spark on the planet.

However CDI's are only traded off-market so unless I am missing something or totally got it wrong there will be impact and additional costs. I have also asked another broker and emailed WisdomTree about their change; I will update with what they say when I hear back. I'll have a look at the vanguard link too.

Edit: The Vanguard document does not mention CDIs at all so perhaps they are doing something slightly different or not based in Ireland.

Edit: Broker 2 states:

"Under the terms of the event, your existing ETFs will be replaced by new CREST Depository Interests (CDIs) on or around 11 June 2020."

EdGasketTheSecond

From what I can make out, the WisdomTree metal funds are Jersey based and so far seem unaffected by the changes to the Irish-based funds.