New York Stock Exchange
ETFs Are Poised for Growth in 2017
By Doug Yones, New York Stock Exchange
In a nutshell, 2016 was a terrific year for exchange traded funds (ETFs). On most days, ETF dollar volumes account for nearly 30 percent of all trading in U.S. stocks. And at the end of 2016, ETFs had amassed over $2.5 trillion in AUM, representing more than 15 percent of the mutual fund industry assets. Throughout the year, ETFs saw a net inflow of over $260 billion in assets, and a daily trading volume of nearly 1.6 billion shares. Given the incredible industry growth we’ve seen over the past year, I’d like to share three compelling reasons we expect even more interest in ETFs in 2017:
Significant enhancements to the U.S. equity markets
Like any new, fast-growing product, the ETF market has experienced a tremendous amount of evolution – some of it organic and some driven by external forces. On the organic side, we’ve seen the rise of smart beta and a tremendous proliferation of innovative funds that go far beyond the original broad beta indexes. And our issuers continue to make investments in research and development, and product development in order to drive the next generation of ETFs. This is an exciting growth area to watch in 2017.
Some of the external forces impacting the ETF markets have also driven positive change. These include market structure enhancements in response to volatility events, an increase in daily market resiliency. And we’ve had multiple event-driven opportunities to test the upgrades over the last year – from the morning after the Brexit vote, to Trump’s unexpected presidential victory, our markets benefitted from enhancements to drive stability in volatile conditions – and they excelled in delivery. While many changes were led by the New York Stock Exchange, a large portion of the market enhancements were driven by unprecedented cooperation between the U.S. exchanges collectively. The result: U.S equity markets are stronger, more harmonized and are ultimately more efficient for issuers and investors seeking liquidity, regardless of market conditions.
Entry barriers have come down
During July of last year, the SEC approved a more streamlined process for active managers to bring actively-managed ETFs to market. What was once regulatory uncertainty is now a straight-forward launch process that is efficient and timely. This was the successful result of many years of hard work here at the NYSE in advocating for our issuers and the growth of the ETF market. It also reflects our industry’s need to continually assess where we are heading, and push for changes that reduce complexity and support business growth as new products emerge and markets evolve. Heading into 2017 we have a significant pipeline of new products and new issuers of all sizes from around the world, that are entering the ETF market using this new rule set. From new ways to invest in fixed income, to emerging markets investment styles, to blockchain and crypto-currency, the pipeline for unique and interesting investment options in the ETF space continues to grow.
Investor optimism and ETF adoption rates are at record highs
As we’ve seen over the last several weeks, markets have rallied and investor sentiment is high, which is a good sign for ETFs. And there are upcoming regulatory changes that have the potential to deliver even greater growth to our industry. The proposed Department of Labor changes are likely to compel advisors and investors to consider the benefits of ETFs, namely their low cost, tax efficiency, and transparency of investment ownership. The result is that a large portion of investment advice is likely to include a discussion on ETFs for the first time. This should bode well for increased ETF allocations and growth of AUM in 2017.
This promises to be another strong year for the ETF industry, with an increasing investor appetite for new products alongside new issuers. With greater ease of entry for new firms and reduced launch times for both index and actively-managed products, we anticipate another fast paced year of growth. I’m proud of what the team at the New York Stock Exchange accomplished in 2016 (read about them here) and I’m excited about what’s in store for our industry in the year ahead.
ETF Trends, NYSE Launch 2017 Market Outlook Channel
When it comes to investment outlook for 2017, plenty of uncertainty lies ahead with the market set to face the inauguration of Donald Trump as U.S. President, the likelihood of further interest rate hikes and widespread regulatory change across the financial industry.
To educate investors on the year ahead, ETF Trends and The New York Stock Exchange have partnered to present insight and strategy from leading ETF issuers with the launch of its 2017 Market Outlook Channel.
The channel features exclusive insight from ETF issuers such as John Hancock, Direxion, IndexIQ, Virtus, Natixis, Global X and Columbia Threadneedle to name a few.
Investors can learn about different segments of the ETF industry with issuers sharing their outlook and strategy to tackle the challenges ahead.
Douglas Yones, NYSE’s Head of Exchange-Traded Products said, “After a successful year of strong industry cash flows and new product listings, we head into 2017 feeling confident about growth opportunities. As the industry leader, we will continue to lead regulatory and market structure enhancements throughout the year. With greater ease of entry for new firms and reduced launch times for ETFs, we anticipate another fast paced year of industry growth.”
Tom Lydon, ETF Trends Publisher said, “As ETF adoption continues to increase within the financial advisor community, advisors are also turning to ETF issuing companies for strategy ideas in 2017. We’re thrilled to partner with the NYSE to get today’s best ideas from some of the top ETF providers.”
Click here to visit the 2017 Market Outlook Channel home page.
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