The Exchange-traded Funds Marketplace in 2017

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An Independent Assessment of Bank- and Vendor-provided Trading Technology Solutions

This report, produced by GreySpark Partners in collaboration with capital markets technology vendor Itiviti Group AB, examines the landscape of the exchange-traded funds marketplace in 2017. In 2017, the ETFs market globally is becoming increasingly structurally complex as a result of the growing involvement of Tier I and Tier II investment banks in the products manufacturing and distribution process, both of which are corners of the overall landscape that were historically considered as being under the specific purview of asset management firms.

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As a result, the secondary ETFs marketplace is gradually becoming less exchange trading-centric and more OTC in nature. This structural model is most prevalent in 2017 in the European ETFs marketplace, but it is slowing growing in prominence globally. Investment banks are at the heart of this change in the structure of the ETFs marketplace.

Meanwhile, dealer-to-client trading venues or exchange operators are creating new RFQ or request for stream ETFs liquidity pools that are designed to allow banks to provide their asset manager clients with more transparent pricing for block-size trades. GreySpark believes that the efforts of both banks and D2C trading venues to interpose themselves more directly between their asset manager clients and the on-exchange ETFs marketplace – thus disintermediating the involvement of high-frequency hedge funds in price-making and market-making – are being driven by a desire to bring long-only institutional investor client money to the table.

This report explores a variety of Tier I and Tier II bank perspectives and opinions related to their current levels of satisfaction with specific sets of ETFs trading systems functionality offered by both in-house built trading and market-making platforms and by third-party technology vendors. The report also explores a range of both general and specific ‘pain points’ that six anonymised banks and four anonymised technology vendors currently commonly associate with the running and long-term maintenance of ETFs trading systems.

Published on: 31 Mar, 2017

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