Tag Archives: ETFGI


Bloomberg ETF RFQ Tool For Blocks: A Blockbuster

Bloomberg LP’s agency broker Bloomberg Tradebook is continuing to grab market share in the ETF execution space thanks to introducing a blockbuster approach that has proven to work across a universe of hard-to-trade financial instruments: RFQ (“Request For Quote”). The “Bloomberg ETF RFQ” tool, which, according to a statement issued by Bloomberg LP,  has triggered “a 3-fold increase in ETF volume compared to the same quarter in 2015” for the agency broker, is one that enables traders to source block trade liquidity from across a universe of liquidity providers who specialize in US-listed exchange-traded funds as well as ETFs listed in Europe, the latter of which are typically more difficult to secure tight markets for when using screen-based services that display actionable bids and offers.

Total notional value traded also tripled in European ETFs as the number of investors actively using the ETF RFQ service grew by more than 50 percent, according to a company press statement.

After launching over two years ago, Bloomberg has managed to extend its services to over 250 firms.

Market volatility and the demand for block liquidity in ETFs drove the value of the total ETF market last year. Research firm ETFGI reports that assets in global ETFs topped $3 trillion at the end of 2015.

“Institutions are finding new and increasingly strategic applications for ETFs, with 77 percent of them using ETFs to obtain Core Exposures,” said Andrew McCullum, a consultant for Greenwich Associates and author of Institutional Investment in ETFs: Versatility Fuels Growth.

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One of the stimuli behind the growth in this sector was the increase in ETF trading in the US throughout 2016. During Q1 2016, ETF assets climbed by 2.4% QoQ to $2.3 trillion in the US, which was fueled by retail channels, as calculated by Broadridge’s Fund Distribution Intelligence. In parallel to this trend, market volatility and the demand for block liquidity in ETFs also drove the value of the total ETF market to new highs over the same period.

In particular, its recent volumes have undergone a three-fold increase YoY in Q1 2016, relative to Q1 2015. In addition, Bloomberg Tradebook’s total notional value traded also tripled in terms of European ETFs, fueled in large part by the number of investors utilizing the ETF RFQ service grew – users of the service also swelled by over 50% YoY in Q1 2016.

Kiran Pingali, Bloomberg Tradebook

According to Kiran Pingali, Head of ETF Product Development at Bloomberg Tradebook, in a recent statement on the business’ performance, “Bloomberg Tradebook developed its ETF RFQ service to address the unique challenges facing ETF investors in the United States and Europe, while also meeting client demand for direct access to liquidity in a greater variety of ETF products.”

“In the United States, liquidity is concentrated in the top 150 ETFs by AUM, with more than 90 percent of them trading less than a million shares per day. Europe faces its own challenges in sourcing ETF liquidity because of market fragmentation and low transparency due to deficiencies in trade reporting,” Pingali reiterated.

Europe ETF RFQ Demo from Bloomberg Tradebook:



Bitcoin ETF: Navigating SEC Spider Web: Spider Woman

Call it a Rat’s Nest, a Rabbit Hole, or a Rubik’s Cube, but no certified marketsmuse can dispute the fact the ETF industry has become a Spider’s Web of complexity when it comes to the assortment of products being promoted. And, who more qualified to advocate on behalf of a Bitcoin ETF than Kathleen Moriarty, who is often referred to as the Spider Woman of the ETF marketplace for her long history of traversing the SEC in the course of championing innovative products.

(Reuters) –When one of the first exchange-traded funds launched in 1993, securities lawyer Kathleen Moriarty received a gift from her legal assistant: a Spider-Man comic-book cover altered to depict the superhero facing off against a hulking Securities and Exchange Commission.

Kathleen Moriarty, Esq. (photo courtesy of Reuters)

Twenty-three years later, Ms. Moriarty’s ability to navigate the arcane rules that govern financial markets and products has built her a reputation as a top lawyer in the ETF business and earned her the nickname “Spider Woman.” Her latest challenge is convincing regulators that a bitcoin ETF is appropriate for the market. That isn’t necessarily an easy sell, given the explosion of ETFs across the market and their fraught role in a market meltdown last August.​

“I tend to concentrate on more exotic products,” Ms. Moriarty said. “Zero of my plans include retirement.”

ETFs have grown to become one of Wall Street’s most popular product categories by offering investors low-fee access to wide swaths of the market.​Investors had close to $3 trillion in assets across nearly 4,500 ETFs globally as of March, according to London-based research firm ETFGI.

“I don’t think anyone would have thought it was going to be this big,” said Ms. Moriarty, a partner at Kaye Scholer LLP, in an interview this year at her Midtown Manhattan office, which was adorned with decorative arachnids and the framed comic.

Ms. Moriarty, who turned 63 Tuesday, helped launch what is still the largest U.S.-listed exchange-traded fund—the SPDR S&P 500 ETF, or SPY—paving the way in 1993 for a booming industry.

“If you’re going to try to do something unique and novel in that space, you’re going to call Kathleen,” said Jim Ross, who heads State Street Global Advisors’ line of SPDR ETFs.

ast year, the agency proposed new rules that could limit ETFs’ growth and even slim down the current lineup, such as curbing the use of derivatives by mutual funds and ETFs and limiting their holdings of assets that are illiquid, or tough to buy and sell.

An SEC spokeswoman declined to comment for this article.

Ms. Moriarty said regulators’ concerns about the products’ proliferation is “extreme.”

“How many more mutual funds do we need? Nobody ever asks that question,” said Ms. Moriarty. (There are more than 8,100 mutual funds and about 1,600 ETFs in the U.S. as of February, according to the Investment Company Institute, a fund industry group.)

Ms. Moriarty cited bitcoin’s volatility as a risk in the filing she co-wrote. She said her proposed ETF’s structure is similar to that of the $32 billion exchange-traded gold product, the SPDR Gold Trust, that she helped launch in 2004 because it aims to give investors access to the commodity without having to hold it. The fund, GLD, has risen sharply along with gold prices this year.

“I’m optimistic,” Ms. Moriarty said about the bitcoin application.

ETP-3-trillion-dollar industry

ETF and ETP: Now a $3 Trillion Industry

Back in the day, when “trillion dollar” was a phrase not even contemplated by film writers, and barely envisioned by financial industry wonks (other than in context of US government deficit), and when even being a billionaire was limited to a universe of less than two dozen people, (e.g. Warren Buffett and Bill Gates 25 years ago), few would have predicted that a category of financial vehicle known as exchanged-traded products (ETP), with a sub-sect comprised of exchanged-traded fund (ETF) would become mainstream. Well, ETPs and ETFs are so mainstream now, assets invested in these products have surpassed $3trillion in each of the past two years.

(Traders Magazine) Assets invested in Exchange traded funds and ETPs listed globally have broken through the $3 trillion milestone for the second time at the end of Q1. At the end of May 2015 the assets in ETFs/ETPs listed globally first exceeded the $3 trillion milestone.

During March 2016, ETFs/ETPs listed globally gathered $45.30 in net new assets, according to research from ETFGI, a London-based market research firm. This marks the 26th consecutive month of net inflows. The Global ETF/ETP industry had 6,240 ETFs/ETPs, with 12,042 listings, assets of $3.07 trillion, from 277 providers listed on 64 exchanges in 51 countries, according to preliminary data from ETFGI’s March 2016 global ETF and ETP industry insights report.

U.S. equities rebounded in March ending the month up 7 percent. Emerging markets and Developed ex US markets also had a strong March ending up 12.5 percent and 7.2 percent respectively. Based on comments from the Fed there is a growing belief that interest rates will be held lower for longer than previously anticipated. The European Central Bank cut rates and announced additional stimulus will begin in April, accelerating the rate of bond purchases from 60 to 80 billion euros per month,” according to Deborah Fuhr, managing partner at ETFGI.

Some ETF numbers, via ETFGI:

In March 2016, ETFs/ETPs saw net inflows of $45.30 Bn. Equity ETFs/ETPs gathered the largest net inflows with $26.30 Bn, followed by fixed income ETFs/ETPs with $14.80 Bn, and commodity  ETFs/ETPs with $2.42 Bn.

In March 2016, 71 new ETFs/ETPs were launched by 27 providers and 30 ETFs/ETPs were closed.

iShares gathered the largest net ETF/ETP inflows in March with US$20.97 Bn, followed by Vanguard with US$9.74 Bn and SPDR ETFs with US$6.25 Bn in net inflows.

YTD, iShares gathered the largest net ETF/ETP inflows YTD with US$24.54 Bn, followed by Vanguard with US$17.82 Bn and SPDR ETFs with US$8.78 Bn net inflows.

S&P Dow Jones has the largest amount of ETF/ETP assets tracking its benchmarks with 27.5 percent market share; MSCI is second with 14.6% market share, followed by FTSERussell with 12.4 percent market share.

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european etf

European ETFs Displace Futures Products

(MarketsMedia) European ETFs and ETPs have gathered record net new assets in the first 11 months of this year, in many cases using as a displace to futures products. ETF Issuer BlackRock expects the size of Europe’s exchange-traded product market to double over the next three to four years.

ETFs/ETPs listed in Europe had gathered $72.6bn in net new assets at the end of last month, 18% above the record set at the same time last year, according to consultancy ETFGI’s Global ETF and ETP insights report.  ETFGI said in the report: “This marks the 14th consecutive month of positive net inflows.”

Source, the European ETF issuer, estimated that $100bn of assets have been switched globally into ETFs from futures over the last two years as ETF fees have fallen. Source added that investors who switch out of futures contracts into ETFs during the quarterly ‘roll’ this December could make record savings of 30 to 50 basis points on an annualised basis. December stock market futures expire on the 18th and investors would typically roll in the week leading up to this expiry date.

So far this year equity ETFs gathered the largest net inflows of $42.3bn, followed by fixed income with $24.9bn and then commodities with $1.2bn.

BlackRock’s ETF arm, iShares gathered the largest net inflows of $28.7bn in Europe in the year-to-date followed by Deutsche Bank’s db x/db ETC with $10.3bn. In third place was Societe Generale’s Lyxor AM with $8.6bn.

Robert Kapito, president of BlackRock, said this month that the asset manager remains very optimistic on its organic growth opportunities given secular tailwinds in ETFs and solid performance in active equity according to an analyst note from Goldman Sachs. Kapito presented at the Goldman Sachs US Financial Services Conference in New York on December 8.

The analysts said: “BlackRock expects the ETF industry to double over the next three to four years driven by an increasing number of uses for ETFs, specifically as an alternative to futures, increased adoption by broker-dealers to hedge risk and portfolio precision instruments.”

For the full story from MarketsMedia, please click here

ICE plan active ETFs

ICE Plans for More Active-Traded ETFs Put On Ice

The NYSE, a  division of Intercontinental Exchange (ICE) has encountered a slippery slope in the exchange’s effort to secure a bigger role in the ETF marketplace through a scheme that would expedite the creation of so-called actively-traded ETFs, which some MarketsMuse followers have dubbed ‘exchange-traded funds on testosterone.’

WSJ-The New York Stock Exchange this month withdrew a proposal to the Securities and Exchange Commission that would have expedited the regulatory approval of some exchange-traded funds, a setback for the fast-expanding ETF industry.

What the Intercontinental Exchange Inc. unit sought is known as a generic listing standard, which would have cut months off the process to list actively managed ETFs. Listing currently requires a fund-by-fund evaluation by the SEC that can take several months. The SEC reported the withdrawal on Oct. 19.

Generic listing standards for many index-based products, which seek to mimic the performance of a particular index, have slashed the time and cost of getting an exchange-traded fund to market, helping fuel a record number of new issuers this year.

The setback for efforts to secure similar standards for actively managed products highlights the limits facing the industry after years of rapid and broad growth.

The SEC declined to comment on the withdrawal. A person familiar with the process said there were concerns at the SEC about the open-ended use of derivatives that could occur if the rule were approved. A narrower proposal could limit the types of new funds or tools they use should the SEC eventually approve the listing standards.

For its part, NYSE still sees value in a faster approval process for these funds, an exchange spokeswoman said.

A person familiar with the matter said NYSE would tweak and refile the proposal.

“I think it’s the SEC being extra cautious,” said Todd Rosenbluth, head of ETF research at S&P Capital IQ. “I think they want to fully understand the risks that investors take on with these products.”

Exchange-traded funds hold baskets of stocks, bonds or other assets and trade on an exchange like a stock. Most are passive, with holdings dictated by the rules and weightings of the index they are designed to track. Actively managed products, in which a fund manager can change the holdings, account for only about 130 of the 1,787 exchange-traded products in the U.S., according to ETFGI, a London-based consulting firm. They have about $21.6 billion in assets, a fraction of the some $1.98 trillion in all exchange-traded products in the U.S.

But actively managed funds represent a frontier for ETFs, and exchanges are eager to speed up the process of listing them, particularly as the competition for listings heats up.

For the full story from WSJ, please click here.

When European ETF Execution Becomes a Stand-Out Factor, PM’s Step Out Orders

logo_financial-news  courtesy of DowJones’ Peter Davy

Dec 10 2012

Exchange-traded funds may be seen as a low-cost investment option but the huge choice of how to trade these products can have expensive consequences for institutional investors.

“It can have a very significant impact. Get a bad execution and you start with a drag on the performance,” said Deborah Fuhr, partner at ETFGI, the research and consulting firm.

In Europe, unlike the US, only a minority of ETF trading is done on stock exchanges. About 70% of ETF trading takes place over the counter, off-exchange, according to ETFGI. That may mean going to an “authorised participant” that is registered to allow it to create or redeem shares of the ETF with the product provider, or simply buying or selling the ETFs without going through the exchange.

For smaller trades and big ETFs tracking a major index, such as the FTSE 100, that may not be necessary. There an investor may trade up to £3m on exchange with few problems. For the bigger trades undertaken by institutional investors and for more esoteric ETFs such as those based on emerging markets or commodity indices, trading on exchange is likely to affect the price (since ETFs on exchange can trade at a discount or premium to the value of the underlying assets they track), requiring them to look elsewhere to avoid doing so, or just to get a better price than available on the exchange.

Thorsten Winkler, co-founder at Frankfurt-based Advanced Asset Management, which manages ETF funds of funds, said it is natural to turn to the investment banks linked to ETFs when looking to trade those products. He said: “You would think they should be able to provide the best execution of their own product.”

In other circumstances, such as trading an iShares ETF, for example, since BlackRock doesn’t have a broking arm, many investors instead turn to specialist marketmakers, committed to providing continual prices to buy and sell ETFs, such as Flow Traders, Susquehanna and Knight Capital.

At Evercore Pan Asset, another fund manager constructing portfolios of ETFs, co-founder Christopher Aldous is keen on WallachBeth, the US institutional broker that entered the European market earlier this year in a joint venture with North Square Blue Oak. It does no principal trading – in which the broker takes ownership of the ETF – but works purely on commission to try to find the best price for clients from marketmakers and other liquidity providers. Aldous said: “For us it is like outsourcing our ETFs sales trading service.”

Laurie Pinto, North Square Blue Oak chief executive, argues that using agency brokers is the only way investors can be sure they are getting the best price. He said: “How can you trade with a marketmaker knowing he is making money out of trading with you – not taking a commission and getting the best price but making money out of the trade? They make their entire living trading against you.”

However, the marketmakers counter that agency brokers have to deal with them. Matthew Holden, managing director and head of ETF trading for Europe at Knight Capital, said: “Agency order aggregators cannot exist without marketmakers.”

For the full article courtesy of FinancialNews, please click here (subscription required)

Flows Spike in Asia ETF Market: The New Fortune Cookie

Courtesy of Tom Lydon

The exchange traded fund business in Asia has seen new inflows of $5.5 billion plus, thanks to recent regulatory changes that have created an opening. This follows a $1.42 billion inflow of new assets seen in September for the Asian ETP industry, confirming the trend.

Debbie Fuhr, a partner at ETFGI, said regulatory changes in China in recent months had made it easier for both foreign investors seeking exposure to the country and domestic investors, reports Sarah Krouse for Dow Jones Newswires. [China ETFs: Wolrd Bank Cuts Growth Outlook for East Asia]

A major game changer allowed Hong Kong subsidiaries of mainland asset managers to launch products that offer investors access to mainland China ‘A’ shares. A-shares are renminbi-denominated shares that are traded on the Shanghai and Shenzen stock exchanges for mainland Chinese investors. The newly launched physical ETF products differ from many mainland products.[ETF Boom Predicted in Asia]

Another rule change gave equities the go-ahead to trade on multiple exchanges, instead of tied to just one, giving greater flexibility to equity funds. [ETF Market Heats Up in Asia]

“If you look at the history of ETFs for the first 11 years, it was all equity benchmarks. I think it’s the natural evolution of the market that most of the products start out being on equity benchmarks that people know and understand, and then they migrate to other asset classes as investors become more comfortable,” Fuhr said.

Furthermore, about 90% of the new $2.6 billion in inflows into emerging markets was via an ETF. Godfrey Obioma for Business Daily Online reports that Asia ex-Japan inflows saw the most growth in the region, from $310 million to $1.2 billion.

The renewed interest in Asia can be viewed as the opposite of the total global economic picture. In other regions of the globe, net inflows dragged in October, slowing to $13.5 billion, according to ETFGI data.

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