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New partnership gives mutual-fund dealers in Canada greater access to ETFs

With today’s potentially inflated market valuations, any significant surprise could lead to a sharp move as investors take profits off the table

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Canadian mutual-fund dealers looking to gain access to exchange-traded funds for their advisers can now do so through a joint partnership with Credit Suisse Securities Canada Inc. and fintech provider Vexo Technology Solutions Corp.

Currently, mutual-fund representatives in Canada are licensed to trade in exchange-traded funds (ETFs) that meet the definition of a mutual fund under securities legislation. In theory, this includes the majority of ETFs in the marketplace, but most of Canada's mutual-fund dealers do not actually have direct access to a securities exchange to settle an ETF trade.

Last spring, Vexo announced the launch of Vexo ETFbahn, a trading platform specifically designed to allow mutual-fund advisers to gain widespread access to ETFs. Several months later, the platform partnered with roboadviser Justwealth to offer them preselected ETF portfolio options.

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Now, by partnering with Credit Suisse's advanced execution services (AES) trading technologies and custodial services, Vexo can offer mutual-fund firms access to record keeping, execution and custody of all Canadian-listed ETFs for mutual-fund clients – all at institutional pricing, said Graham Jones, director of prime services at Credit Suisse.

"This partnership allows us to focus on what we do best globally, which is world-class equity execution," Mr. Jones said. "As a [securities] dealer who is self-clearing, this venture will also allow us to leverage our back office here in Canada to provide omnibus services for mutual fund dealers and their clients who hold ETF assets."

With approximately 83,000 mutual-fund advisers in Canada, the opportunity for ETF growth in the channel is staggering, yet getting them access to a securities exchange has been a slow-moving project for the ETF industry.

The Canadian ETF Association, along with other industry groups, provided a back-office solution in 2015 in which dealers could gain access to an exchange through a partnership with custody and trade-execution provider National Bank Correspondent Network.

Several mutual-fund dealers, who also have security-licensed platforms, were able to build in-house solutions, but those models were not scalable for the industry as a whole to adopt, Vexo president Fotios Saratsiotis said.

"We are pleased to be able to offer a solution that works for every dealer in the industry," Mr. Saratsiotis said. "With an institutional partner like Credit Suisse, onboarding is turn-key and a mutual-fund dealer can go live in less than a month. This is a game-changer for mutual- fund dealers, their advisers and their customers."

Currently, Canada has more than 600 ETFs (not all have been approved to be sold by mutual-fund licensed representatives). Using the Vexo platform, mutual-fund firms will be able to set parameters around the type and number of ETFs their advisers are able to sell to clients. For instance, firms will be able to eliminate products with higher risk levels, such as inverse or leveraged ETFs.

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