Just to remind you, according to Blackrock’s end-2009 ETF Landscape survey, Europe has 829 exchange-traded funds, but these have 2,371 listings on 18 exchanges from 34 providers. Then add in ten or so MTFs (multilateral trading facilities – no one seems to know the exact number), possibly 11 “dark pools” (crossing networks which do not display orders publicly), multiple clearing and settlement systems, and you have the kind of chaos on the trading front that leaves regulators struggling to cope.
“There are many things that are not very clear (about dark pools),” Eddy Wymeersh, chairman of the Committee of European Securities Regulators (CESR), told the European Parliament in December, according to Reuters.
Apparently the CESR is staffing up to try and cope with the proliferation of new trading platforms.
According to Roy Zimmerhansl, a 30-year veteran of the markets and owner of FinTuition, who invited me to his excellent in-house seminar on securities lending yesterday, European regulators are devoting great attention to the area of securities finance, since questions of collateral, collateral management and the interconnectedness of different trading and settlement platforms all affect the stability of the financial system as a whole.
Zimmerhansl expects 2010 to be a year of plentiful new regulations, with the SEC’s new short-sale restrictions (announced on Tuesday) an example of this.
All in all, though, this is not an easy area to understand and I’m sure plenty of us are struggling to get our heads around the complexities of the European share market infrastructure.
For that reason, I’m particularly looking forward to the two trading-related panels we’ll be holding at our Inside ETFs Europe conference in a little over six weeks’ time, where the invited experts should be able to throw some light on the subject. If you haven’t yet registered, please do so – places are filling up fast.
But, to try and answer the question you pose in your blog, Matt, there may be too many me-too ETFs in Europe, but this is an inevitable consequence of the proliferation of markets and trading venues. And while there may be too many DJ Euro Stoxx 50 ETFs – 12 at the last count – a commentator on the syndicated Seeking Alpha version of the blog pointed out that a UK investor has no ETFs on the benchmark CAC40 or DAX country indices to choose from. So while there are many ETF listings, there are still gaps in the product offerings available to retail investors in the different European markets.
All in all, this suggests to me that it will take some time before European ETFs can trade at the razor-thin, single penny spreads that are available for many US-listed funds. But we’re getting there, and the sheer number of participants in the European exchange-traded funds business is what makes this industry such a fascinating one to cover.