Euronext Launches Service for Large ETF Trades

Terry Flanagan

Euronext is launching a Request for Size service for exchange-traded funds as assets in exchange-traded products in Europe have grown faster than in the US this year.

Pedro Fernandes, head of European exchange-traded products at Euronext, told Markets Media that the average ETF trade size is currently between €30,000 and €40,000 while Request for Size is targetting orders larger than €500,000. The new service will launch in the fourth quarter of this year for all ETFs listed on the pan-European exchange and for all market makers.

Fernandes said: “A differentiator for Euronext is that all answers from market makers will be integrated in the central order book along with all other resting orders and available to all. Improving price discovery creates confidence in investing and makes the proposal attractive for issuers.”

A Request for Size message from a market participant is broadcast to the market on Euronext’s Universal Trading Platform.

“We are pretty confident that requests will be filled and the feedback we have received had been fairly positive,” added Fernandes. “At the moment market makers tend to display on the central order books only a part of the liquidity that they can supply, due to the need to manage the risk of having orders sitting in the book from opening to close.”

Euronext’s initiative comes as exchange-traded products listed in the Europe gathered $6.05bn in net inflows in May pushing assets to a record $459bn, according to preliminary data from ETFGI’s May 2014 Global ETF and ETP industry insights report.

Deborah Fuhr, managing partner at consultancy ETFGI said in a statement: “For the first time since 2010 asset growth in European listed ETFs/ETPs, at 9.9% year-to-date is outpacing asset growth in US listed ETFs/ETPs, at 6.1% year-to-date. The majority of net new assets in Europe went into equity exposures in May.”

In the first four months of this year Euronext reported the strongest growth in new ETF listings since 2011.

“The ETF market has been performing fairly well and innovation has not stopped. I would not be surprised to see more smart beta ETFs coming,” added Fernandes.

Smart beta products track alternative indexes, such as low volatility stocks or companies that pay higher than average dividends, rather than mainstream indexes.

“We are seeing good momentum in the the UK from both institutional investors and retail investors stepping in since the retail distribution review and the same thing is happening in the Netherlands since their retail distribution review,” added Hernandes. “There are also discussions within the pension funds world between passive versus active strategies and this could create some momentum in ETFs.”

ETFGI said that in the first five months of this year Blackrock’s iShares gathered the largest net ETF/ETP inflows in Europe of $9.4bn. Lyxor, owned by French bank Societe Generale, was second with $3.5bn followed by UBS GAM with $2.9bn, Source with $2.5bn and Vanguard at $2.3bn.

Blackrock’s ETP Landscape report for May said European equity ETFs gathered $4.6bn helped by expectations for European Central Bank stimulus and are on pace for their best year since 2009.

“While the recent growth momentum has slowed, investors continue to favor Europe as the ECB has shown clear commitment to further stimulate growth and combat low inflation,” added BlackRock.

Between January and May, Europe-listed ETPs have gathered $25.8bn, surpassing 2013 regional total inflows at $19.4bn according to BlackRock.

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