22 December 2017
Reporter: Jenna Lomax

ETFs hit record highs, according to Tradeweb review

Exchange-traded funds (ETFs) hit a record high with inflows of over $400 billion through November this year, according to Tradeweb’s annual review.

The review, which was released on 21 December, showed that as ETFs “ramp up” their investment, institutions are also changing their approach to ETF trading, increasing their use of over-the-counter platforms to support request for quote execution.

In the report, Tradeweb revealed that during Q3 this year it traded average daily shares close to $25 million.

In addition, activity on Tradeweb ETF platform topped 118 percent in compound annual growth, exceeding $900 million in average daily trading volume each of the last four quarters.

On its positive growth in ETFs, Tradeweb commented: “As investment in ETFs continues to grow and become more attractive to institutional investors, RFQ trading has helped support the adoption of products with access to liquidity, more competitive and transparent pricing, and an optimised workflow.”

The review, which also focused on MiFID II, suggested that Tradeweb was confident in its own preparation, stating: “Tradeweb’s multilateral trading facility is already seeing an increase in the number of inquiries from institutional investors ahead of derivatives trading obligation for specified interest rate and credit default swap instruments.”

In preparation for 3 January MiFID II deadline, Tradeweb also stated that its approved publication arrangement “leverages [its] network to allow a wider group of market participants to satisfy their post-trade reporting obligations without major changes to their existing trading workflows, and is already supported by sell-side firms representing 70 percent of over-the-counter non-equity trading volumes.”

The report said that Tradeweb’s Multilateral Trading Facility (MTF) is already seeing an increase in the number of inquiries from institutional investors ahead of the derivatives trading obligation (DTO) for specified interest rate and credit default swap instruments.

It also suggested that pre- and post-trade transparency requirements under MiFID II are also expected to encourage more activity on regulated trading platforms, which will assume all reporting responsibility for on-venue trades. Elsewhere, repo activity on Tradeweb’s liquidity platform increased to more than $190 billion in average trading volume, up 17 percent since January, representing approximately 20 percent market share in the US.

In the report, it stated that after a “wild and volatile 2016, this year was all about the business of adjusting to the new normal” — accommodating to the existing legislative and regulatory regimes, and also preparing for the looming implementation of MiFID II at the start of 2018.

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