Euronext and Markit target ETF opportunities
Both Euronext and Markit have spotted an opportunity to tap into the growth of ETFs
January has been a good month for ETFs, with the launch of two new products aimed at making it safer and cheaper to trade – and easier to get the information needed to make trading decisions.
European exchange group Euronext has just set out its plans to launch a multicurrency trading service for ETFs which includes the Chinese renminbi and the Hong Kong dollar for the first time on a US or European exchange. Due to go live on 17 February, the new service is intended to make it easier for investors to access international markets by giving them the chance to buy an ETF in multiple currencies.
The advantage of doing so is that it potentially reduces currency exchange risk and foreign exchange costs. Investors will also no longer need to create a separate fund with a different ISIN code to list in another currency.
“We are excited to offer such a large number of different currencies and particularly proud to be the first U.S. or European exchange to offer the Chinese Renminbi and the Hong Kong dollar,” said Lee Hodgkinson, head of markets and global sales Euronext. “This initiative makes trading ETFs in a different currency easier, simpler and more efficient for both issuers and investors. International investors can now buy ETFs in one of 20 different currencies on the Euronext platform giving them broader investment opportunities, while issuers can improve their product visibility and enlarge their target audience.”
The news is another step forward for the Chinese renminbi, which is rapidly growing as it internationalises. The RMB is the official currency of China. Earlier this month, the London Stock Exchange launched the first Chinese renminbi ETF listed in London, in a deal that was expected to help open the Chinese A shares market up to international investors. Created by Hong Kong-based CSOP Asset Management, and London-based Source, the new ETF was the first to qualify under China’s qualified foreign institutional investor scheme, which effectively restricts access to the Chinese market to firms with a licence.
Meanwhile, financial information company Markit has just loaded a set of ETF products into a new web application designed to help investors make sense of ETFs. Users get access to data on 5,100 ETFs, full daily portfolio holdings, announced and forecasted dividends and 1,300 analytical daily and historical calculations on the performance, liquidity, risk and benchmark tracking metrics from the launch data of each ETF.
According to Markit, the new service will make it a lot easier to understand ETFs at a deep, granular level. Brokers can also use the platform to provide information to their clients. The company also claims the service can help ETF issuers gain insight into wider ETF activity and trends.
“Until now, ETF investors looking for global exposure have had blind spots due to a lack of cost effective exposure to previously inaccessible asset classes,” said Mark Schaedel, managing director and global head of equity and index data services at Markit. “The integration of our analytics into the new ETF platform helps customers navigate this fragmented market that spans over 5,000 global ETFs, issued by more than 200 providers and which trade across 60 exchanges using a single view with a powerful analytics toolset layered on top”.
ETFs have been rising in popularity in recent years, due to their low cost and ease of use. ETFs are based on a basket of securities, often diversified across industry sectors to reduce risk. The concept underlying their success is the fact that returns from stock picking have performed relatively poorly compared to simple indexes. ETFs can offer quick and easy exposure to a potential growth market, without the commitment of choosing a particular stock.
