The ETF Revolution – The Hope & Bet Mifid II will spur European Growth

 

One of the product mysteries of the financial markets will start to emerge this month when the spotlight shines across Europe’s exchange traded fund industry.

Just how much trading occurs in ETFs across Europe has been an unsolved puzzle since the first of these low-cost index-tracking funds listed on Germany’s Deutsche Börse in April 2000.

ETF trading has since spread to 25 exchanges across Europe, but no accurate record of activity has been required by regulators. In part this is due to about 70 per cent of ETF trading in Europe going unreported because it occurs via private bilateral OTC transactions.

This will end from today with the introduction of MiFID II transparency requiring  comprehensive, detailed reporting of ETF trades.

The passive investment industry, which is dominated by BlackRock, State Street and Vanguard, are betting Mifid II will set their European businesses on a growth path akin to the US, where usage has spread far more widely and deeply.

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