20 Years Of ETF Trading In Europe

Exchange Traded Funds, better known as ETFs, have seen increasing demand from investors for years due to the continuing trend towards passive investing. More and more private investors are now using ETFs, especially to build up long-term wealth. 11 April marks the 20^th anniversary of the launch of the first two products in Europe.

Congrats to this anniversary to @Xetra 20 years of collaboration with the exchange and years of liquidity provision by our members. https://t.co/rGdpmRnDVi

— FIA EPTA (@FIAEPTA) April 15, 2020

It all began with two exchange-traded index funds by Merrill Lynch International, which were listed on Deutsche Börse’s Xetra market, enabling investors to participate in the performance of the EURO STOXX 50 and the STOXX Europe 50 indices. Today, more than 1,500 ETFs are listed on Xetra. With this selection and a monthly trading volume of €13 billion, Xetra is the leading one for ETFs in Europe.

“The breakthrough of ETFs was achieved thanks to the steadily growing demand for passive investments”, explains Stephan Kraus, who is responsible for Deutsche Börse’s ETF segment. “More and more private investors are making use of the opportunity to track a wide range of markets, sectors, trends and strategies with ETFs.” The share of private investors on Xetra, measured by order size, is now around 8 percent – this has almost doubled in five years.

Within the various ETF categories, thematic ETFs are currently attracting a lot of interest. These offer investors targeted access to megatrends such as automation and robotics or cyber security. In addition, ETFs on sustainable investment strategies (ESG; environmental, social and governance) are also among the fastest-growing categories; one tenth of all tradable ETFs now focus on sustainability.

However, the greatest interest in ETFs continues to be in classic benchmark indices such as DAX, EURO STOXX 50 and S&P 500. In addition, investors focus on investments in broadly diversified European and global indices such as STOXX Europe 600 or MSCI World. They continue to serve as a basic tool for long-term investing and are popular indices for ETF savings plans.

“We assume that ETFs will continue to be the standard product for private capital accumulation,” explains Kraus. “The three letters E-T-F could also stand for easy, transparent and flexible. Together with a low cost base, these are key characteristics to convince more savers of the benefits of long-term investments via capital markets”.

Costs have always been a high priority in ETF trading – even within the industry. Increasing competition and numerous new products – over 180 new ETFs were launched on Xetra in both 2018 and 2019 – have meant that the already comparatively low management fees for passive funds continue to fall steadily.