The New York Stock Exchange, the largest venue for exchange traded funds listings, is slowly losing market share to rivals Nasdaq Inc. (NasdaqGS: NDAQ) and Bats Global Markets (BATS: BATS).
For the first time in five years, NYSE Arca’s ETF listings have declined year-over-year, with over 30 ETFs switching to Nasdaq and Bats this month, reports Asjylyn Loder for the Wall Street Journal.
The latest batch to defect are eight ETFs from Deutsche Asset Management’s line of DB X-tracker ETFs, including the Deutsche X-trackers Dow Jones Hedged International Real Estate ETF (BATS: DBRE), Deutsche X-trackers MSCI Southern Europe Hedged Equity ETF (BATS: DBSE), Deutsche X-trackers MSCI Spain Hedged Equity ETF (BATS: DBSP), Deutsche X-trackers MSCI Italy Hedged Equity ETF (BATS: DBIT), Deutsche X-trackers MSCI EAFE Small Cap Hedged Equity ETF (BATS: DBES), Deutsche X-trackers Japan JPX-Nikkei 400 Hedged Equity ETF (BATS: JPNH), Deutsche X-trackers MSCI Emerging Markets High Dividend Yield Hedged Equity ETF (BATS: HDEE) and Deutsche X-trackers MSCI Eurozone High Dividend Yield Hedged Equity ETF (BATS: HDEZ).
NYSE Arca is still the leading exchange listing for ETFs, with 1,543 exchange traded products and $2.3 trillion in total assets under management, but competition is heating up after the so-called mini flash crash in August 2015 that caused many providers to consider alternative listing venues. Bats and Nasdaq, though, only list about $200 billion in combined ETP assets.
“What they really care about is the volume, and Bats and Nasdaq have done a great job of taking ETF trading flow,” Eric Noll, president and chief executive of Convergex, told the WSJ.
Moreover, back-to-back market glitches also shook confidence in NYSE Arca last week, along with other minor trading problems, which helped steer sponsors to other exchanges.
“New York can kind of rationalize and say, OK, it’s only a few ETF listings,” Larry Tabb, founder and research chairman of Tabb Group, a research and consulting firm, told the WSJ. “But by the time the big players turn around, the innovators have breached the castle walls.”
NYSE’s competitors first tried to chip away at the behemoth’s staunch position in the ETF industry through cheaper or fee-free listings along with other sweeteners, such as advertising on Nasdaq’s electronic billboards in Times Square. Bats has also paid incentives to issuers if certain targets are met.
“The listings business is going to change dramatically in the coming years,” Bryan Harkins, executive vice president and head of U.S. markets at Bats, told the WSJ.
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