As exchange traded fund providers look to diversify among primary markets that host their products, NYSE Arca could find greater competition from the Nasdaq and BATS exchanges.
The majority of exchange traded products, which include both ETFs and exchange traded notes, are listed on NYSE Arca. According to the NYSE, there were 1,569 U.S.-listed ETPs on NYSE Arca as of November, 2015. There are currently 1,853 U.S.-listed ETPs from 85 fund sponsors trading on 3 exchanges, according to XTF data.
NYSE Arca has served as the primary listing exchange for the majority of ETFs when listings, including the SPDR S&P 500 ETF (NYSEArca: SPY), were originally found on the American Stock Exchange, which the New York Stock Exchange acquired in 2008.
However, while the NYSE Arca still enjoys the lion’s share of ETF listings, more ETF sponsors are beginning to look at alternatives exchanges to list their products.
For instance, BlackRock’s plans to switch the primary listing venue for 11 of its iShares ETFs, including one to BATS and 10 to Nasdaq.
As of February 2, the iShares MSCI EMU ETF (NYSEArca: EZU) will be listed on BATS. Additionally, the iShares S&P Asia 50 Index (NYSEArca: AIA), iShares MSCI New Zealand Capped ETF (NYSEarca: ENZL), iShares MSCI Brazil Small-Cap ETF (NYSEArca: EWZS), iShares Global Infrastructure ETF (NYSEArca: IGF), iShares Core MSCI Total International Stock ETF (NYSEArca: IXUS), iShares Morningstar Mid Value ETF(NYSEArca: JKI), iShares MSCI China ETF (NYSEArca: MCHI), iShares MSCI EAFE Small-Cap ETF (NYSEArca: SCZ), iShares 0-5 Year Investment Grade Corporate Bond ETF (NYSEArca: SLQD) and iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) will be trading on the Nasdaq exchange.
“Diversification is an important element of iShares listing strategy,” Samara Cohen, U.S. Head of iShares Capital Markets at BlackRock, said in a press release. “It encourages continuous innovation and ultimately improves the client experience. BlackRock maintains strong relationships with all major exchanges, and we thank BATS, NASDAQ and NYSE ARCA for their ongoing commitment to evolve in a rapidly changing marketplace.”
Van Eck Global, the money manager behind the Market Vectors brand, is also planning to change the primary listing venue of its Market Vectors Biotech ETF (NYSEArca: BBH) and Market Vectors Pharmaceutical ETF (NYSEArca: PPH) to Nasdaq around February 1, according to a press release.
“As part of Van Eck’s continuous risk assessment analysis, listing venue diversification has been identified as one element of our firm-wide strategy,” Ed Lopez, Director and Head of ETF Product Management, said. “Van Eck maintains a strong relationship with both NYSE Arca and NASDAQ and we thank them for their commitment to the ongoing success of the diverse ETP marketplace.”
By shopping around to find a primary listing venue, ETF providers could determine which type of exchange has the most beneficial rules and procedures to ensure orderly trades and ETF prices. As the markets have witnessed, ETFs with the most efficient trades are also the more popular, or quick to attract assets.
The recent changes may also be a result of the market shake-up in late August last year that resulted in large swings in a number of ETFs. On August 24, trading pauses in 471 individual securities known as LULD halts – limit up, limit down – occurred 1,278 times, which means that many experienced multiple halts, Michael P Regan reported for Bloomberg.
In an October report, BlackRock has stated that delays in the market open during periods of extreme volatility “are particularly harmful as they contribute to market uncertainty and alarm investors,” reported Miles Weiss for Bloomberg. On the other hand, BlackRock pointed out that BATS and Nasdaq were able to promptly open “in an automated fashion” on August 24 when volatility spiked while NYSE-listed equities were subjected to “excessive delays.”
“We believe it is in the best interest of ETF shareholders, our member firms and issuers to support harmonization on how ETFs resume trading after a limit-up-limit down (LULD) halt or reference prices at the open in the event an ETF does not have an opening print,” Jeff McCarthy, Vice President & Head of Exchange Traded Product Listings at Nasdaq, told ETF Trends.
Many in the industry have argued that the volatility in ETFs in August was a result of structural problems. Consequently, more fund providers may be shopping around different listing venues to find a better fit.
Max Chen contributed to this article.