CASH COLLATERAL ETF

摘要

An exchange-traded fund (ETF) exchanges cash for a low risk security to be used as collateral. Cash is provided for purposes of posting margin in connection with a futures transaction and exchanged for shares of an ETF. The ETF permits banks to hold, as margin, a securitized version of cash (in the form of an ETF) in lieu of the margin cash posted by a client. The ETF is created or redeemed by a bank in its capacity as authorized participant, acting on behalf of a client, as collateral requirements are imposed or removed on the client. The ETF can hold a set of underlying funds in a fund-of-funds structure. Such securities may include short-term investments with specified minimum credit ratings, short term U.S. treasuries or agency securities, repurchase agreements collateralized with U.S. treasuries or agency securities, and similar minimal risk assets, which are typically government backed.

主权项

1. A method comprising:
identifying an underlying transaction by a client, the underlying transaction exposing a bank to liability beyond a value of an asset received in the underlying transaction; identifying a required collateral cash amount for the underlying transaction; receiving, at the bank, the collateral cash amount from the client, the collateral cash amount serving as collateral for the underlying transaction and being subject to reserve requirements requiring the bank to hold additional capital; placing a creation order with an ETF provider to create ETF shares corresponding to the collateral cash amount, the ETF comprising underlying assets with a similar minimal level of risk to the collateral cash amount; and receiving the ETF shares from the ETF provider, the ETF shares serving as collateral for the underlying transaction and not being subject to the reserve requirements.