Despite gathering more assets under management, ETFs have reportedly witnessed a dip in trading volume. As a way to rekindle investment interest within the ETF space, a new marketplace and new fund structure are in the works.
ETFs have gathered over $1.4 trillion in assets under management, but ETF daily volume declined 22.0% last year to 941,000 shares a day, reports Tom Steinert-Threlkeld for Traders Magazine.
“Investing in ETFs is continuing to increase. It’s just happening in places other than the secondary markets, like NYSE Arca or Nasdaq or BATS,” Laura Morrison, senior vice president for global indices and exchange-traded products at NYSE Euronext, said in the article. “It really is critical to us that volumes stay at the levels they are at,” or pick back up.
In an attempt to stoke interest in the ETF space, Nasdaq, NYSE and BATS have been providing market makers with incentives in less-liquid funds to create more volume.
Next page: New developments
Now, Nasdaq OMX has repurposed the PSX exchange as an ETF-focused exchange to compete with the NYSE Arcah, a leading market maker for ETFs. Additionally, Nasdaq is planning to introduce indices for use in future ETF development, and the company is engineering an ETF-specific order type tied to the fund’s net asset value. [Nasdaq to Launch ETF Marketplace]
“If immediacy of execution is something that you’re interested in, this is probably not a product for you,” LaValle, vice president and head of ETP Listings at Nasdaq OMX, said in the article. “But this is a product that is going to give greater certainty on the quality of executions. This will offer protection to any investor who wants it.”
Moreover, if Eaton Vance’s new exchange traded managed futures structure passes regulatory scrutiny, the new fund product could help pull billions, if not trillions, out of the $13.5 trillion mutual fund industry. [ETMFs Could Change the Fund Industry]
The ETMF would offer all the same market efficiencies investors enjoyed in ETFs, but active portfolio managers would not have to disclose ETMF holdings on a daily basis, writes Steinert-Threlkeld in a seperate Traders Magazine article.
Eaton Vance has already stated that it would relaunch some of its mutual funds as ETMFs if approved, and many other mutual funds may follow suit.
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.