The sheer scale of the growth of European ETF Market aided by increased transparency of Mifid II has resulted in the Investment Banks taking note and looking to get in on the act, which up until now has been largely dominated by Asset Managers. This sentiment can only fuel this increasingly competitive area of the market which is governed by low margin and high volume with liquidity growth from $500bn in 2017 to estimates exceeding $2tn for 2018.
Europe’s exchange traded fund market has become a global battleground, with some of the largest investment banks busily honing their ETF trading capabilities. Société Générale, Citigroup, JPMorgan, Goldman Sachs, HSBC and BNP Paribas have all hired staff and invested in new facilities to respond to institutional clients’ appetite for ETFs. “Banks and brokers know they can’t afford to ignore ETFs. They can see new clients entering the European market, driving the growth in ETF assets and the increasing volume of ETF trading,” says Keshava Shastry, head of capital markets at DWS, the German IM. Rule changes have accelerated the shift. Sweeping reforms designed to improve market transparency and strengthen investor protection were introduced 12 months ago by European regulators. These rules... helped sweep away the opacity that made it virtually impossible to assess the scale of ETF trading in Europe.