Tag Archives: etf liquidity in europe

Greece ETF Crumbles to Ruins

MarketMuse update is courtesy of Business Insider’s Sam Ro

MarketMuse has previously reported on the volatility the Greece elections created early this year now even more problems have ensued for the country. Following the the European Central Bank’s announcement that it lifted its waiver on minimum credit rating requirements for marketable instruments issued or guaranteed by Greece, Greece’s ETF crashed leaving just ruins left.

The Greek stock market closed hours ago, but the exchange-traded fund that tracks Greek stocks, GREK, crashed during the final minutes of trading in the US markets.

The euro is also getting walloped, falling 1.3% against the US dollar.

This comes following bad news from the European Central Bank (ECB) to Greece’s debt-laden banks.

Shortly after 3:30 p.m. ET, the ECB announced that it lifted its waiver on minimum credit rating requirements for marketable instruments issued or guaranteed by Greece.

To put it another way, Greek banks can no longer exchange their junk-rated sovereign bonds for cash.

“The waiver allowed these instruments to be used in Eurosystem monetary policy operations despite the fact that they did not fulfill minimum credit rating requirements,” the ECB said in a press release. “The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the programme review and is in line with existing Eurosystem rules.”

“In other words, the ECB doesn’t see Greece complying with existing bailout rules,” Bloomberg’s Lorcan Roche Kelly explained.

However, it’s not all bad. The ECB has another way for Greek banks to exchange their securities for liquidity. The cost of borrowing will however be higher.

“Liquidity needs of Eurosystem counterparties, for counterparties that do not have sufficient alternative collateral, can be satisfied by the relevant national central bank, by means of emergency liquidity assistance (ELA) within the existing Eurosystem rules,” the ECB said.

“The move from the ECB today is a copy of the suspension of Greek debt that occurred in February 2012,” Kelly noted.

“For Greek banks, this move by the ECB will not directly be a disaster as they have reduced their exposure to the Greek sovereign since 2012 and so are less reliant on that debt as collateral,” Kelly argued.

Still, it appears to be more bad than good. And judging by the reaction in the currency and equity markets, investors and traders were hoping for better.

For the original article, click here.

Professional ETF Trading Insight: Through The Lens Of A Leading Market Expert

One of the best video elements for sophisticated investment managers [and all others] seeking expert insight re ETF portfolio management. Interview below with one of the global ETF market’s most recognized trade execution experts is courtesy of financial industry publisher and conference producer MarketsMedia. Many thanks to them for making this clip available.

Tradeweb to Launch European ETF “Trading Hub” with “RFP” model

Courtesy of IndexUniverse.eu Rebecca Hampson

The electronic trading platform for exchange-traded funds launched at the end of last month by electronic market place provider, Tradeweb, has been backed by ETF issuer, Source who says that it will create a central hub of liquidity in Europe, which the market currently lacks.

Michael-John Lytle, managing director at ETF issuer Source, told IndexUniverse.eu: “In Europe, US$3bn of ETF trades take place on-exchange daily.  This is much less than in the US where, on average, US$50bn is traded. This move has the potential to expose the other two thirds of European market flows which trade over-the-counter (OTC). Transparency can in turn encourage further liquidity and this is vital to a thriving and growing ETF market. Hence, it is a very exciting development.”

He said: “Liquidity in the European ETF market is very fragmented and this platform has the potential to capture a meaningful portion of OTC liquidity in Europe.”

Tradweb’s platform will allows buy-side firms access to 5,000 European-listed ETFs’ prices on request. Because of the transparent nature of the platform it is hoped that it will boost trading and encourage more market participants to join.

Lytle said: “The platform will facilitate large trades that would be challenging to execute on-exchange.  These OTC transactions are currently executed over the phone.  This platform will allow an investor to simultaneously collect prices from up to five market makers.  If it is successful, this will be a big step forward for the European ETF market.”

“Tradeweb already has 11 ETF market makers on board and a couple of dozen clients. It also has a tried and tested technology platform used widely in fixed income. Concentrating flows in one venue has the potential to centralise and expose a meaningful amount of OTC activity.”

Noted former major exchange specialist and now industry consultant Jay Berkman of JLC Group, who was also a co-founder of BondNet, the electronic trading platform for corporate bonds introduced prior to when Tradeweb first launched in the late 1990’s, “Employing fixed-income type price discovery tools for ETFs such as “price on request” is certainly an interesting angle, but the fact is, ETFs don’t trade like bonds, particularly when the underlying benchmark used by market-makers and liquidity providers for hedging purposes is actually comprised of multiple components.”

Added Berkman, “Any e-trading platform that requires multiple mouse clicks in effort to first source block liquidity, wait for responses for bids and offers, and then execute a transaction needs to be populated at the outset with credible and actionable liquidity, otherwise I’m still much better off relying on the new hybrid “high-touch/high-tech liquidity aggregators” who leverage technology and navigate the OTC market-maker ecosystem.”   Continue reading