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What is the credit risk of the Currency ETCs?

April 26, 2017credit currency etcs risk

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What is the credit risk of the Currency ETCs?

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ETFS Foreign Exchange Securities Limited has been set up as a special purpose vehicle to issue Currency ETCs. The underlying currency exposure is provided by a counterparty: Morgan Stanley & Co. International plc. Counterparty risk is minimised by form of daily mark to market payments, and cash is used to enter repo transactions with Morgan Stanley & Co. International plc in exchange for eligible collateral. The eligible collateral is held by the collateral manager Bank of New York Mellon in a custody account and valued daily. The total daily mark to market value of the currency exposure is at least 100% collateralised. The collateral is held in the name of the issuer. In the event that ETF Securities were to go bankrupt, then the trustee would take control of the issuer’s assets, which should have no effect on the value of the Currency ETCs since the issuer is ring-fenced from ETF Securities. Click here to view the counterparty risk factsheet for Currency ETCs.