Two months into MiFID II: How post-trade reporting is benefitting ETF investors

Mar 14th, 2018 | By | Category: ETF and Index News

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By Stephen Cohen, head of iShares EMEA at BlackRock.

Stephen Cohen, head of iShares EMEA at BlackRock.

Stephen Cohen, head of iShares EMEA at BlackRock.

Why trade reporting matters

Investors use ETF trading volumes in different ways: for asset allocators it is a useful, real-time window into where money is flowing through the trading day.

For others, visible flows provide comfort in knowing that there is sufficient liquidity within the products they intend to invest in.

ETF trade reporting was not mandatory prior to the arrival of MiFID II, and expectations that the regulation would be a significant leap forward in shedding light on volumes were high.

The illumination we are seeing since the regulation came in has certainly met expectations and supports our belief that the European ETF industry is at a real watershed moment.

We are seeing a virtuous cycle developing as more investors gain greater comfort in the breadth and depth of the European ETF industry to build smarter, more cost-effective portfolios using ETFs.

Key stats

  • Visible ETF trading in the iShares European UCITs range has jumped nearly three-fold, from average monthly volumes of $31bn in 2017, to $85bn for Jan and Feb (see chart below)
  • $88bn traded across the iShares EMEA range in February; which represents an increase of 9% month-on-month and 198% year-on-year, thus confirming the impact of MIFID II’s post trade transparency.
  • 38% of trading in January and February took place on exchange, while the remaining 62% traded off exchange – on multi-lateral trading platforms or over-the-counter (OTC), which has previously been ‘dark’ to investors.
  • Transparency of trading in the fixed income market is particularly pronounced, revealing that trading predominantly occurs over the counter – 76% of bond ETF trading occurred OTC, compared to 54% for equities in February.

iShares EMEA range spread and flow evolution

Source: BlackRock.

(The views expressed here are those of the author and do not necessarily reflect those of ETF Strategy.)

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