08 January 2018
Reporter: Zsuzsa Szabo

Moody’s: MiFID II to boost ETF securities lending appetite

The newly implemented reporting requirements of the second Markets in Financial Instruments Directive (MiFID II) could boost usage of exchange-traded funds (ETFs) in securities lending, according to Moody’s.

MiFID II’s ETF trading disclosure requirements will give more information about the trading volumes and liquidity of the funds, according to the rating agency.

Marina Cremonese, vice president and senior analyst at Moody’s, predicted that the greater trading and liquidity transparency for ETFs introduced by MiFID II will “likely prompt a larger usage of ETFs for securities lending and collateral purposes from institutional investors”.

Cremonese said: “The introduction of the second instalment of the European Union’s Markets in Financial Instruments Directive will bring widespread change to how asset management products are designed and sold.”

She added: “Fee competition in the asset management industry will intensify due to the increased cost transparency and easier product comparability.”

“The added cost transparency and ban on commissions for independent financial advisors will encourage greater use of low cost passive funds among retail clients, supporting the growth of ETFs.”

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