Your guide to Portfolio Composition Files (PCFs)

PCF data may originate from a variety of sources, including investor service entities like custodians, administrators, and depositaries (sometimes consolidated into a single entity), as well as brokers, exchanges, alternative trading platforms, and index providers. 

A PCF must outline the quantities, weights, and values of all instruments to enable the construction of a basket that underlies an ETF.

As the PCF encompasses all assets held, it also includes asset allocation, which can be determined by categorizing individual holdings into asset classes, geographical regions, or other relevant groupings.

PCFs must delineate the weights for each instrument, with the majority of these weights subject to change throughout the trading day in response to market price fluctuations.

PCF metrics encompass various factors, such as the quantity of instruments included in a PCF and the frequency of updates to the PCF valuation.

PCFs can be transmitted through one or a combination of methods, including flat files typically through SFTP (Secure File Transfer Protocol), API data feeds, or user interfaces (UI).

Using specialized portfolio management software for PCF calculations is logical, as it's tailored to handle and manipulate market prices, index values, currency exchange rates, and pertinent data effectively.

Market and index data for PCFs can originate from exchanges, trading platforms, index providers, and data vendors, often requiring licensing for data usage.

While spreadsheets are an option, they are considered less reliable and accurate than dedicated software designed for portfolio management and ETF operations.