A star flickers in the dark, that is the ETF. Will it be the new driver of securities financing?

Blackrock and Markit statistics show that ETFs have seen growth in the last year but arguably with only $60 billion on loan against $3 trillion of securities, the ETF is not quite the fire starter. The panel believe that the ETF industry is set continue to grow.

Mark Weeks, ETF Securities commented that it is a high growth industry and a continually growing space. With over 170 ETF managers, the market is concentrated but growing.

ETFs are taking up an increasing proportion of the asset management business, with 12% of growth going into ETF products. The panel hopes that the increasing competition will mean greater players and products in the industry and also consolidation.

Comparisons between the U.S. and Europe were made. Trading lines in Europe of ETFs are relatively stagnat in comparison to the U.S. Volume is driving growth in the US and Europe needs to increase ETF trading. The problem of Europe is not taking action after discussing theory for a long time was considered. There may be a perception of liquidity in ETFs but until peers are seen to be trading and increased volume, the industry will remain illiquid. There was also a call for further education in ETFs to encourage growth in Europe.

Quote of the panel “there are more than 30 ETFs tracking the Euro Stoxx 50, it’s like choosing from the menu of a Chinese restaurant”.

The audience were also asked to vote in how important they thought ETFs are to the future of securities finance. The expandable and collapsible nature of ETFs creating the ability to borrow more physically backed ETFs than shares in issue raised the issue of possible systemic risk in the event of an unusual market move. Additionally, this characteristic also challenges the need for custodians.

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Last two reports can be downloaded from the links below:
ETF Landscape Industry Highlights
ETF Landscape Global Handbook