ETF Securities Ltd (ETFS), the global pioneers in Exchange Traded Commodities (ETCs) and independent provider of Exchange Traded Funds (ETFs), launches the ETF Exchange (Europe) (ETFX), the worlds first third generation ETF platform. ETF Securities is initially working with BofA Merrill Lynch, Citi, and Rabobank International who are participants on the platform, acting as distribution partners, authorised participants and swap providers, with scope to add additional participants in the future.
The vision for 3rd generation ETFs was pioneered by ETF Securities. The idea was inspired by investor demands for increased levels of transparency, liquidity and counterparty risk management. ETF Securities identified that the current ETF issuance model by single financial institutions could be strengthened by diversifying index replication across a consortium of the strongest financial players and concentrating liquidity within a single platform issued by an independent ETF issuer.
ETFX offers a total of 21 equity ETFs comprising Europes first ETF platform concentrating on resource-equity ETFs and double leveraged (2x) and double short (-2x) ETFs. These ETFs are listed across 5 European exchanges (the London Stock Exchange, Deutsche Borse, NYSE-Euronext Amsterdam, the Borsa Italiana and the Irish Stock Exchange) and traded in up to 3 currencies (USD, EUR and GBP). They are part of the ETF Exchange initiative driven by client demand for increased liquidity, innovative products and reduced credit risks and counter-party exposure. The ETFs are all swap-backed ETFs using multiple counterparties, allowing more efficient tracking, with collateral being held in excess of UCITS1. This issuance model is arguably amongst the most efficient and risk averse available today.
The ETFX equity ETF platform has seen strong trading growth since the introduction of thematic ETFs in the fourth quarter of 2008, and 2x short and 2x leveraged equity ETFs at the end of the second quarter 2009. Basic resource themed ETFs have seen particularly strong returns, led by a 126% YTD increase in the ETFX Russell Global Coal Mining Fund (COAL) and a 100% YTD rise in the ETFX Dow Jones STOXX 600 Basic Resources Fund (BRES)2. ETFX ETFs now have over $320 million AUM, up over 65% in the past three months.
This is an important milestone in the development of ETF Exchange, says Mark Weeks, the CEO of ETF Exchange. Working with banks of this calibre will provide investors with an unparalleled quality of service, across an innovative range of products. The ETFX platform is truly market-changing. We believe the evolution of ETFX will make redundant the current single bank issuance models.