08.01.2014
By Terry Flanagan

Boost ETP Launches in Germany

Boost ETP, the European short and leveraged exchange-traded product provider, has listed funds in Germany for the first time and expects significant growth in assets as it enters Europe’s largest ETP market.

The issuer, which was acquired by WisdomTree in the US, has listed four ETPs on Deutche Boerse adding to its listings on the London Stock Exchange and Borsa Italiana.

Viktor Nossek, head of research at Boost ETP told Markets Media: “Germany is the largest ETP market in continental Europe and we expect significant growth. The German short and leveraged ETP market is more than $1.3bn, which is double the size of the market in Italy.”

Boost’s first German products are based on the Dax, the German blue-chip index, and the EuroSTOXX 50 index.

“The Dax has been the best performing index in Europe in the last couple of years,” Nossek added. “The two indices are also more volatile than the FTSE 100 as returns are driven by capital gains rather than dividend payments as in the UK.”

The short and leveraged products launched in Germany are designed to return three times the daily movement, long or short, of the underlying index. For example, if the DAX rises by 1% on a particular day, then the leveraged ETF will rise by 3% and the short ETF will fall by 3%.

Nossek said that the firm is also aiming to list commodity ETPs in Germany as both retail and institutional investors in the country are very sophisticated in their use of ETFs. He said Boost ETP has an advantage in entering the market as it is an independent issuer, not tied to a bank, and its products over-collateralised

Hector McNeil, co-chief executive of Boost ETP, said in a statement: “Having already assisted with the launch of short and leverage ETCs in Germany in the past, Boost’s founders look forward to continuing their relationship with the German market.”

In the fragmented European market, most ETFs are issued and traded on one or more national stock exchanges and settle in the national central securities depository of the exchange where the trade is executed.

To buy an ETF listed in one stock market and then sell the same ETF in another stock market requires firms to have accounts with multiple central securities depositories, to reconcile positions amongst different CSDs and to follow different post-trade market practices in each market which is expensive for firms, and ultimately investors, and can lead to errors.

In order to make European trading more efficient exchanges have begun to offer internationally settled ETFs which can be settled across borders more efficiently.

SIX Swiss Exchange said in a statement today ETF positions can be transferred into Euroclear, the Luxembourg-based European central securities depository, after settlement at SIX Securities Services.

The Swiss exchange said in a statement: “The enhanced trading service will ease cross-border ETF processing, increase liquidity and offer participants access to a wider range of ETFs.”

The first ETF with international settlement listed on SIX Swiss Exchange is the iShares Core MSCI Emerging Markets IMI Ucits ETF.

iShares, the ETF business owned by Blackrock, listed another ETF with an international securities structure on London-based Bats Chi-X Europe in June.

Leland Clemons, head of iShares capital markets in EMEA said in a statement at the time: “Market infrastructure improvements are imperative to support the rapid growth of the ETF industry and we hope to see this structure adopted by providers across Europe to continue to drive the ETF market evolution.”

Stephan Pouyat, global head of international markets at Euroclear, said in a statement: “We are ensuring that intermediaries purchasing this ETF will benefit from the safety of electronic delivery-versus-payment settlement, as well as delivering tangible benefits such as harmonised processing rules across trading venues and much improved asset servicing.”

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