Innovation and partnership at the heart of LSE win
The London Stock Exchange | Best European Exchange for Trading ETFs - “At the London Stock Exchange Group our focus is on innovation and partnership, driving efficiencies on order book that help our trading community achieve better execution outcomes, and these attract further listings from our issuers and adoption of ETFs by investors,” says Lida Eslami, Head of Business Development, ETP and IOB at the London Stock Exchange.
“Our clients are responding. 2021 was a strong year for our ETF business with turnover reaching GBP152 billion and 311 new ETP listings,” Eslami says. There are now close to 1,900 ETPs listed on the London Stock Exchange plus more available for trading via Turquoise Europe, its LSEG majority owned Multilateral Trading Facility based in Amsterdam that enables members – via a single connection – to trade shares, depository receipts, and ETFs of up to 17 European countries beyond UK and Switzerland.
“ETFs surged to a record 13 per cent of order book activity on the London Stock Exchange. With ETFs representing more than 30 per cent of daily turnover in the USA, the trend of growth of UK and European ETFs on order book is set to thrive, and we are thrilled to be a part of this journey supporting our ETF issuers and traders through innovation in partnership,” Dr Robert Barnes, Group Head of Securities Trading & CEO Turquoise Global Holdings says.
RFQ 2.0 is one example of this. Designed specifically to enhance the trading of ETFs, the innovation of RFQ 2.0 is the seamless integration of an automated request for quote mechanism within the LSE’s order book that feeds a central counterparty that ensures anonymity throughout the value chain and straight through processing for on-time settlement.
More than GBP1.2 billion has traded via RFQ 2.0 since its launch in December 2020.. “The average price improvement through RFQ 2.0 this year increased to 2.6 basis points vs best bid-offer, compared with 1 basis point in 2021,” Eslami says.
“Historically the buyside would take their block trades elsewhere. Today, we are seeing an increasing use of our anonymous multilateral order book liquidity to get their business done. We are seeing many examples where an ETF is trading up to 100 or 150 times its average daily turnover without moving their spreads on the order-book The benefits of using RFQ 2.0 and order book for ETF trading are no information leakage, minimal market impact plus potential price improvement,” Eslami says.
“Listening to our issuers and market participants, we also invested to improve price monitoring protection mechanisms for ETPs, to prevent poor trading outcomes for end users. Following positive feedback we received on our circuit breakers during opening auction, we are looking to adopt the same methodology for intraday trading and the closing auction. We are the pioneer in this space and the attractiveness of our industry leading quality is evidenced by the fact that other exchanges are implementing our efficient and secure methodology.”
“We are proud of our track record of customer engagement and innovation. With a relentless focus on collaboration that includes listening closely to our community of issuers, investors, and intermediaries, we are here to deliver an ever-improving front-to-back trading and clearing workflow and an unrivalled client experience from issuance to trading that attracts further issuance and multilateral participation on order book. The result is a virtuous cycle of innovation and partnership, thank you to you, our customers,” Barnes says.