Charles Schwab appointed State Street to service its newly launched family of eight exchange-traded funds with custody, fund accounting, fund administration and transfer agency services. State Street has provided Schwab with these and and securities-lending services since 2005.
The custodian plays an important part in the creation of ETF shares because its the bank that actually holds the securities in the fund’s portfolio. Each night, the custody bank posts the fund’s actual portfolio and provides the stock to be bought and sold.
State Street, together with the American Stock Exchange, created in 1993 the first ETF, the Standard & Poor’s Depositary Receipts, or SPDRs (SPY). The Boston custody bank manages a family of ETFs under the SPDR name. It provides custody and administration for more than $18.8 trillion in assets and remains the custodian of the SPDR.