Tag Archives: ETPs

BATS-global-IPO-marketsmuse

BATS Takes 2nd Stab at IPO

The second time is hoping to be a charm for exchange operator BATS Global Markets as it announced a 2nd stab at an IPO, which will be led by Morgan Stanley and Citi and enable an exit for investors that include BAML and Knight Capital.

Bats Global Markets announced the launch of its initial public offering Monday, with a price per share expected to be between $17 and $19. The offering, which could value the company as high as $1.8 billion, comes as the U.S. IPO market has seen its slowest start in seven years.

The IPO has been widely anticipated in part because market observers have been looking for activity in this year’s slow IPO market. Just nine companies launched IPOs in the U.S. in the first quarter of the year, the lowest number in a quarter since 2009, according to data from Dealogic.

The valuation is more than double the size of Bats Global Markets’ attempted IPO in 2012. That effort, which was halted due to a technical glitch shortly after shares started trading, valued the company at around $760 million, according to Bloomberg.

The company has grown significantly since its last IPO attempt. In January 2014 it acquired Direct Edge Holdings LLC, including the two exchanges EDGX and EDGA. In March of last year it acquired Hotspot FX Holdings, the operator or an electronic FX trading platform. Then last September, Bats expanded its Hotspot acquisition by launching a Bats Hotspot platform in London. Last November the company launched the EDGX Options trading platform. It has also significantly grown its exchange traded product (ETP) trading in the past few years.

In its prospectus the company said it is the second largest exchange operator in the U.S. by market share (after the New York Stock Exchange) with a 21.1 share of the overall U.S. equity market as of Dec. 31, 2015. It is also the largest exchange operator of exchange traded funds (ETFs) and other ETPs by market share with a 22.4 percent share of ETP trading last year. The company also had a 9.6 percent share of the U.S. equity options market last year. In Europe, its Bats Europe was the largest European exchange operator as measured by notional value traded as of Dec. 31 of last year.

The prospectus listed several potential growth strategies for the company, including increasing penetration in U.S. options with new products and services, expanding its global FX platform into other currency instruments, and building strength in U.S. equities by leveraging its position in ETPs to expand listings. The company also said it aims to fully monetize the value of its market data and connectivity.

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

lse

London Likes The Dollar-PowerShares Lists New ETFs on LSE

MarketsMuse ETF update profiles the latest entry to land of exchange-traded-funds with spotlight on Invesco PowerShares listing of U.S. dollar share class versions of its three exchange traded funds (ETFs) on the London Stock Exchange, allowing investors to access U.S. equity markets and trade in the rising domestic currency. Giving credit when due, below is extract from ETF.com

Its three funds – the PowerShares EQQQ NASDAQ-100 UCITS ETF, the PowerShares FTSE RAFI US 1000 UCITS ETF and the PowerShares Dynamic US Market UCITS ETF now all trade in USD and GBP, in response to growing client demand, according to PowerShares. A note from the provider said that in 2014, there was over $110 billion worth of trades in USD across the LSE’s 600 ETP listings, which made up the vast majority of such ETP trades across Europe.

Bryon Lake, head of Invesco PowerShares – EMEA, said the trend for USD listings is increasing and that is why the provider now offers dual listings of its products.

“This is all part of our strategy to broaden our offering in Europe and to enable investors to gain further exposure to key investment strategies,” he said.

PSX to Re-Launch as ETP Market in May

tradersmagCourtesy of Tom Steiner-Threlkeld

Nasdaq OMX Group said it expects the re-launch of its PSX exchange as an exchange-traded fund marketplace to take place in May.

Final approval of the refashioning the “price size exchange” as a “price time” exchange focused on exchange-traded products must come from the Securities and Exchange Commission.

The exchange operator hopes to encourage trading in a wider variety of ETPs by created two types of market participants — Registered Market Maker and PSX Supplemental Liquidity Providers — which will take ”affirmative quoting” obligations.

PSX also intends to create competition among market makers, by offering the largest rebate to a Lead Market Maker. Other registered market makers can compete for that designation and while making markets in ETPs receive rebates, at a lower level.

Rebates to liquidity providers can be as high as $.0028 per added share, according to a PSX pricing page. Fees to remove liquidity start at $0.0030 per .

”PSX is a key piece of our larger strategy to better service the ETP industry with a platform designed to incent high-quality liquidity, market incentive programs and ETP-specific functionality.” said Eric Noll, Executive Vice President of Transaction Services U.S. and U.K. at Nasdaq OMX, in a statement Monday.

The relaunch of PSX will create a second market that is focused on ETPs. NYSE Euronext’s Arca exchange currently operates as an ETF-focused exchange. NYSE Arca has both the largest market share in exchange-traded trading among national exchanges and 93 percent of ETP listings.

The move comes roughly 2 1/2 years after PSX was created as a Price Size Exchange that would give priority to the size of an order over the speed of arrival.

Nasdaq OMX CEO Robert Greifeld at the time called this the “most fundamental change in market structure” since the launch of the all-electronic Nasdaq Stock Market itself in 1971.

But the idea that “size matters’’ never took hold. In February, PSX accounted for three-fourths of one percent of total equities trading in the United States.  For the entire story from TradersMagazine, please click here

Assessing the Merits of an ETF: Debunking Common Myths

Extract of white paper published by Chris Hempstead, Head of ETF Trade Execution for WallachBeth Capital LLC

With respect to analyzing and selecting ETFs, one of the most common and frustrating mistakes that I overhear is “..unless the fund has at least some minimum AUM ($50mm in many cases), or has average daily trading volume less than [some other arbitrary number] (say 250k shares) it should be avoided…”

Some other arguments against ETFs go so far as to suggest that “..ETFs need to have a certain history or track record before they should be considered…” Adding insult to injury is the claim that “investors are at risk of losing all their money if an ETF shuts down.”

In light of recent articles being picked up by media from New York to Seattle, I would like to dismiss a few of these common, yet unwarranted reasons to avoid an ETF based solely on AUM, ADV or track record.

 First, let’s address AUM:

“ETFs with less than $50mm should be avoided”

In order for an ETF to come to market (list on an exchange) the fund needs to have shares created. This process is often referred to as “seeding”. The ‘seeder’ is the initial investor who delivers into the custodial bank the assets required to back the initial tradable shares of the ETF in the secondary market. ETFs issue shares in what are known as creation units. The vast majority of ETFs have creation unit sizes of 25k, 50k or 100k shares.

When a ‘new’ fund comes to market, they are usually seeded with at least 2 units of the fund. There are very few examples of ETFs that come to market with more than $5mm in AUM or an excess of 200k shares outstanding. One recent exception comes to mind: Pimco’s BOND launched with ~$100mm AUM and 1mm shares outstanding.

Understanding that ETFs have to start somewhere, it would be difficult to explain how more than 55% of ETFs (excluding ETNs, Leveraged ETFs and Inverse ETFs) have garnered AUM in excess of $50mm.

In other words, someone had to take a close look and invest into the funds. The ‘I will if you will’ mentality is probably not how the most successful fund managers find ways to outperform.

Ten of the top thirty performing ETFs year to date have AUM below $50mm.

(EGPT, TAO, HGEM, IFAS, SOYB, PKB, RTL, QQQV, ROOF and RWW)

Congratulations to the pioneers who ‘went it alone’, as they say. Continue reading

Post Peregrine Financial Fraud: Futures ETFs Offer Safe Haven For Commodities Players

Courtesy of Cinthia Murphy

In connection with all that news re futures broker Peregrine Financial’s fraud-induced collapse, Sal Gilbertie, head of Teucrium Fundsan ETF provider offering futures-based commodities ETFs—told IndexUniverse’s Correspondent Cinthia Murphy that futures-based ETFs might be the answer to retail investors’ futures-related concerns . Gilbertie, whose firm sponsors the red-hot, $100 million Teucrium Corn Fund (NYSEArca: CORN), argued that the transparency of the ETF structure ensures that investors’ interests are guarded closely.
Murphy: What makes fund providers like Teucrium immune to contagion from the negative publicity, or more importantly, from the apparent risks in the system? Where does the risk lie for an investor?

Gilbertie: I can only speak for Teucrium and what we do. There’s a lot of transparency in the publicly traded ETP system, something you don’t always see at the FCM level, as many of them are not publicly traded. As a NYSE listed security, any Teucrium ETP is subject to the SEC reporting requirements of a public company, including regular independent audits. In the futures market, investors are protected by the clearing mechanism that backs-up their margin. Investors that leave excess margin in the hands of their FCM subject this excess capital to risk. Non-public FCMs are not subject to the same level of SEC required scrutiny and regulation that applies to publicly traded ETPs. The Teucrium family of NYSE funds sweeps its excess capital from our FCM on a daily basis.

Murphy: Should we assume, then, that in light of all that has gone down with Refco and Peregrine, investors will be less willing to leave excess capital sitting around? How would that affect the system?

Gilbertie: Professionals sweep their excess margin daily. Smaller investors may find it expensive and difficult to regularly sweep excess capital. As such, these investors may turn to professionally managed futures accounts or to publicly listed commodity-based ETPs that meet their investment objectives. Continue reading

10 New Commodities ETPs listed Down Under

By Ben Collins

ETF Securities has released 10 new exchange traded products that aim to provide direct exposure so the commodities boom.

The ten new exchange traded commodities products have been listed on the Australian Securities Exchange (ASX), bringing the total number listed to 15.

“Historically, gaining exposure to this asset class was typically achieved by investing in the shares of mining and resource companies or, for investors with adequate expertise, commodity futures markets,” said Fred Jheon, managing director, Asia Pacific, ETF Securities.

“ETCs provide a convenient, transparent and liquid solution to investors seeking more direct exposure.”

The products are structured as deferred purchase agreements based on the commodity ETCs that have been issued by ETF Securities since 2006. Five of the new ETCs provide exposure to individual commodities such as Brent crude oil.

For investors seeking broader exposure to this asset class, ETF Securities said four ETCs aim to replicate the performance of commodity baskets, in sectors such as energy and agriculture.

The ETFS All Commodities (CSP) provides exposure to 20 different commodities across a range of sectors, which ETF Securities said affords even greater opportunity for diversification.

The ten new ETCs are designed to reflect the performance of the Dow Jones-UBS Commodity Index and its sub-indexes. ETF Securities is an exchange-traded products provider specialising in commodities with US$26.9bn in AUM at 31 March 2012.

Hedge Fund ETF Weapons Turn Dangerous (?)

By Christopher Condon on May 31, 2012

 

If you are convinced, really convinced, the price of crude oil will rise today and U.S. stocks will fall, Factor Advisors LLC has an exchange-traded fund for you.

The FactorShares 2X: Oil Bull/S&P500 Bear (FOL) (FOL) offered by the New York-based firm makes a two-times long wager on crude oil futures and a short bet on Standard & Poor’s 500 Index futures, in effect delivering twice the daily change in the spread between the two positions. The product’s birth followed “a lot of feedback” from institutional investors, including hedge funds, Stuart Rosenthal, chief executive officer of Factor Advisors, said in a telephone interview.

As the biggest ETF managers capture assets from traditional mutual funds with benchmark-tracking offerings, smaller competitors are catering to sophisticated investors with an increasingly complex arsenal of products. Often based on derivatives, these can be weapons for savvy investors to amplify wagers on rising or falling prices of everything from stocks and bonds to currencies and commodities. The same tools, readily available through conventional and online brokers, have proven hazardous for individual investors who sometimes misunderstand and misuse them with costly consequences. Continue reading