ETF Securities has launched the world’s largest and Europe’s first exchange-traded currency platform with trading expected to begin next week.
Currencies are the most liquid asset class with over USD3.2trn of trading each day, yet it is one of the last asset classes to be packaged in the form of an exchange-traded product.
The first day FX could be traded on the London Stock Exchange was 12 November 2009.
ETF Securities launched the world’s first commodity ETC platform in Europe between 2003 and 2006.
The first 18 currency ETCs listed on the LSE on 12 November track the recently launched MSFX Currency Indices.
The initial currency ETCs provide long or short passive exposure to G10 currencies versus the US Dollar and include AUD, CAD, CHF, EUR, GBP, JPY, NOK, NZK and SEK.
The ETCs also provide exposure to local interest rates in addition to FX movements between the relevant currency and US dollars.
The new currency ETCs are fully collateralised in order to mitigate counterparty risk and listed in the ETC segment of the LSE.
Currency ETCs are intended for investors wishing to diversify their portfolio through the addition of a new asset class which has a low correlation with equities and bonds, or for those investors wanting to take advantage of tactical or strategic macro opportunities using the foreign exchange market.
The currency ETCs will track newly launched Morgan Stanley Foreign Exchange Indices and are designed to replicate a fully collateralised long or short investment in one of the G10 currencies against the USD and also provide exposure to local interest rates.
The indices follow an objective and systematic methodology overseen by an index committee and are based off publicly available data sources that reflect actual quotes/trades by market participants.
Nik Bienkowski, chief operating officer, says: “ETF Securities is extremely proud to be able to offer this exciting platform of 18 currency ETCs for the first time to UK and European investors. This broadens the asset classes ETF Securities offers to include currencies on top of equities and commodities.
“Our investors have demanded access to new asset classes in a liquid and secure package. Currency ETCs will deliver this through an open-ended exchange traded security which is fully collateralised and available through ordinary brokerage accounts. After the events of the past year, transparency and security have been demanded by our investors and as a result of the ETC structure, assets in our commodity ETC platform have increased by approximately USD10bn this year to reach USD16bn with recent weekly trading volumes of USD1.4bn.
“ETF Securities’ currency ETC platform provides 18 long and short collateralised currency securities with exposure to G10 currencies. Currencies have been one of the best performing asset classes, along with commodities, over the past one year, three years and five years. Currencies also have low correlation to other asset classes and low volatility, making currencies an asset which can improve portfolio performance through increased diversification. Currencies are the most liquid class available while currency ETCs also provide access to local interest rates, which have averaged around 4.8 per cent per annum over the past five years in the case of the Australian dollar.”
