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07/04/09 ‘ETF Exchange’: the world’s first ETF Issuer backed by a consortium

– ETF Exchange will be the world’s first multi sponsor ETF issuance consortium consisting of the….

world’s leading financial institutions

– ETF Securities has seen an overwhelming response from over 15 global banks and financial institutions to join the ETF consortium

– The objective of ETF Exchange is to provide investors with the most liquid and creditworthy Exchange Traded Products worldwide

ETF Securities’ ‘ETF Exchange’ involves a global consortium of banks and asset managers. Until now, all ETF issuers have been owned and run by single financial institutions.

Over 15 banks and financial institutions have registered a strong desire to join the ETF Securities’ consortium which includes major players across the key financial centres of Europe (including Germany, France, UK, Italy, Southern Europe and Scandinavia), the United States and Asia. Interested banks are particularly attracted by the opportunity to provide their clients with access to a platform of the most liquid ETFs across different indices and asset classes.

The vision for the platform was pioneered by ETF Securities. The idea was inspired by investor demands for increased levels of transparency, liquidity and counterparty risk management within the ETF industry. ETF Securities identified that the current ETF issuance model by single financial institutions could be strengthened by diversifying index replication across a consortium of the strongest financial players and concentrating liquidity within a single platform. Under the current ETF issuance model, if the sponsoring / issuing financial institution fails, it is highly likely that their respective ETFs would be greatly disrupted and potentially liquidated. The main achievement of ETF Exchange is that it is backed by a consortium of financial institutions providing a more liquid, stable and creditworthy offering for investors.

It is anticipated that ETF Exchange will shortly launch its first tranche of ETFs into the market. Each member of ETF Exchange will be greatly incentivised to sell and distribute the platform’s ETFs due to the ability to participate at all levels of the issuance value chain including trading, market making, index replication, management fees and the equity value of the consortium. Additionally, member banks will be able to issue selected white label products.

The legacy issuance model of single bank ETFs is now in the process of being usurped by this new and innovative model. ETF Securities developed this new ETF model due to increased concern about counterparty risks and fragmentation of liquidity across European markets. The new ETF model uses multiple and interchangeable counterparties for accurate and stable tracking of the index. The structure will help to mitigate risks (no reliance on a single counterparty) and provide enhanced liquidity enabling investors to poll multiple market makers for best price and get true competition and arbitrage. This has been made possible thanks to ETF Securities independence from any multiservice financial institution.

Commenting, Hector McNeil, Managing Partner, at ETF Securities, said: “We are continually striving to be the most innovative player in the ETF industry and the launch of ‘ETF Exchange’ further outlines our credentials in this field. It’s important we react to investor concerns and provide them with the best products in the market, so we are delighted with the benefits the platform will provide”

“Furthermore, we are delighted that such a number of top financial organisations have shown their support for our ideas and we look forward to continually building the best platform of ETFs in the world. The interest has been tremendous and the results should be very exciting”

“From an investor’s point of view we believe that there is a danger that every bank has an ETF Issuance business. Currently there are over 10 different Eurostoxx50 ETFs. We don’t need another 10. ETF Exchange will negate the need for banks to adopt this strategy. This has to be good for the investor!”


Source:ETFWorld.co.uk – ETFSecurities


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