With researcher ETFGI counting funds listed on 25 exchanges in 21 different countries -- each with their own regulatory jurisdictions -- the fragmentation means assets are spread thin across similar products.
Attempts are being made to address Europe’s ETF liquidity problems. An overhaul of market rules known as MiFID II -- a successor to the Markets in Financial Instruments Directive -- will require trades to be formally reported, starting from January 2018, or a year later than initially planned. BlackRock Inc.’s Stephen Fisher says he welcomes the proposal, which is among the first to address the funds as separate instruments. The idea is to increase transparency and move more trades on exchange, which should in turn improve liquidity and attract more retail money, he says.
“ETFs are designed to be liquid and to trade like equities, but in reality what happens is that these funds mostly trade OTC,” Fisher, a managing director on BlackRock’s iShares public policy team, said by phone during a business trip to Brussels. “Liquidity in the European ETF market is fragmented. This makes it difficult for investors to get a true picture of the liquidity of any given fund, which has had an impact on the uptake of ETFs. It is our hope that this will change with MiFID II.”
This article was provided by Bloomberg News.