ETF service providers welcome new asset classes

This report contains interviews with some of the winners in the service provider sector for the inaugural ETF Express US awards, held in New York City in October this year.

Speaking at the awards’ ceremony, Scott Szever, head of ETF Capital Markets at the NYSE, commented that everyone in the room was pretty closely connected and working together in some way. The audience was drawn from all the winners in the awards, representing ETF providers, market makers and authorised participants and service providers in the ETF industry. 

This is an industry that according to data from data provider ETFGI, for the third quarter of 2019, had assets of USD5.78 trillion invested in 7,787 ETFs/ETPs listed globally, representing growth in assets of 2.52 per cent over the quarter. During the third quarter of 2019, ETFs/ETPs listed globally gathered USD140.79 billion in net inflows. 

In his speech, Szever was also able to throw out some impressive ETF statistics for the NYSE, citing 2,300 ETFs with over USD4 trillion in assets and an average daily value in transactions of close to USD92 billion. At times of volatility ETFs have represented 30 per cent of the exchange’s trading. “There is a lot of money trading in ETFs,” Szever said. 

There was much to discuss in the room, starting with the ETF rule, the 6c-11, which was published in the Federal Register that very day. Szever said: “It’s pretty exciting. If you fit within the 6c-11 rule you can bring your products to market a little bit quicker.”

He also hinted about ‘exciting news coming’ about a different route to filing which could be a ‘game changer’ going forward: active, non-transparent ETFs. January will also see ETFs on the floor of the exchange.

There is a good spread of service providers interviewed in this report, from Tradeweb, which has brought its electronic trading platform to the US and is enjoying its reception in the land which until now has largely relied on what Adam Gould, head of US equities at Tradeweb, describes as ‘on phones and in chats’ to get its trading done. 

Market makers Jane Street, winner of Best US Liquidity Provider/Market Maker, celebrates the range of asset classes that are now being included in ETFs.

Jane Street’s Davor Zgaljic says: “Jane Street has been a natural partner and provider in the fixed income space because of synergies with our ETF market making business – we bring experience pricing baskets of securities rather than just individual line items, and our technology supports more efficient and scalable trading.”

Meanwhile, Frank Koudelka, Senior Vice President – ETF Product Specialist at State Street Global Services, winner of both the Best ETF Custody Provider and the Best ETF Fund Administrator in the awards, comments in this report on the regulatory changes mentioned by Szever. “The global regulatory environment continues to be more and more friendly to the ETF investment wrapper,” he says.

This has also been the experience of BNY Mellon, winner of Best ETF Back Office Tech Provider in the awards, with Jeff McCarthy, global head of Exchange Traded Funds, BNY Mellon, commenting: “We are consistently sought by issuers to bring new and first to market product ideas within the ETF wrapper regardless of the investment strategy.”

The range of investment styles and themes that can be included within the ETF wrapper is expanding and all the service provider firms interviewed in this report are stepping up to the new challenges. 

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Beverly Chandler
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