This month, the Toronto Stock Exchange and the global community celebrate the 35th anniversary of the world’s first exchange traded fund.
The ETF known as the Toronto 35 Index Participation Units (TIPs 35) listed on March 9, 1990. Over the years, it has evolved into the iShares S&P/TSX 60 Index ETF (XIU). With over $9.2 billion CAD in assets under management, it is now the largest Canadian ETF. TSX celebrated the milestone with a special market opening ceremony on March 6. The event brought together former TSE employees, industry veterans, and the key players in the ETF community.
The Early Days
In the early days of TIPs, few could have predicted the seismic impact ETFs would have on global markets. The product, which allows investors to buy a basket of stocks in a single transaction, was revolutionary in its simplicity and efficiency.
However, Canada’s first-to-market position was not without its challenges.
“The initial reaction to TIPS was ‘this will never work,’” said Bruce Thompson, former employee of the TSE, who was instrumental in the launch. “There were so many naysayers, especially from the retail broker community. It took a lot of education for them to come on board.”
According to Thompson, it took several teams working together, often across competing organizations, to structure a product that would fit Canadian market needs.
From Bond ETFs to Bitcoin
The favorable regulatory environment in Canada continues to encourage innovation. For example, in 1996, Canada also introduced the world’s first bond ETF, the iShares Core Canadian Universe Bond Index ETF (XBB). This was followed by another groundbreaking moment in 2021, when Canada became the first country to launch a bitcoin ETF, the Purpose Bitcoin ETF (BTCC).
Canada’s ETF industry has grown exponentially since the launch of XIU, with over $600 billion in assets under management spread across more than 1,500 funds and 46 ETF issuers. Investors now have access to a wide array of choices across multiple asset classes, from fixed income to cryptocurrencies to liquid alternatives to commodities. ETFs are available with active or passive investment strategies across multiple currencies. The range of offerings also includes ETFs with leveraged or inverse performance capabilities.
Leveling the Playing Field
One of the most significant impacts of ETFs is their role in democratizing access to financial markets.
“ETFs are a great delivery vehicle for investment solutions,” said Rohit Mehta, president & CEO of Global X Investments Canada Inc. “They really democratized access to solutions that were once limited to institutions or high net worth investors.”
Retail investors are now one click away from accessing their desired exposure without having to navigate complicated territory such as complex and thinly traded bond markets or liquid alternatives strategies that may require expertise in derivatives.
The ease of trading, diversification, and low costs of ETFs have since leveled the playing field.
Looking Ahead
As we look to the future of ETFs, the broader economic environment will undoubtedly continue to influence local market dynamics. The ongoing shifts in global trade, including the impact of tariff tensions, could lead to increased demand for ETFs that provide exposure to more diversified and resilient markets.
Canada’s role in the creation and evolution of ETFs is a source of immense pride for the Canadian financial industry.
“While the ETF industry celebrates its 35th anniversary, innovation and evolution in this space continues at an exciting pace, both globally and here at home,” said Graham Mackenzie, managing director, exchange traded products, Toronto Stock Exchange.
“Our ‘made-in-Canada’ success story is still unfolding, with many new milestones yet to be reached. It’s a thrilling prospect to consider what the future may hold for this transformative innovation, which began right here on Bay Street at TSX,” he added.
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