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Currency ETCs supported by seven liquidity providers on LSE


ETF Securities says its newly launched exchange-traded currencies are now supported by seven liquidity providers on the London Stock Exchange.

In addition, two multilateral trading facilities have started quoting the Currency ETCs with another two MTFs planning to quote the new ETCs within the next few weeks.

The first 18 currency ETCs were listed on the LSE on 12 November and track MSFX Currency Indices.

Specialist market ¬making firms Flow Traders, Nyenburgh, Bluefin Europe and IMC will provide “on screen” liquidity and two way prices, while Morgan Stanley, Merrill Lynch and Fortis have signed up as authorised participants.

Liquidity providers are responsible for dealing in the ETCs and play an important role in providing liquidity in the marketplace through the posting of firm bid and ask prices with a minimum size for each ETC during exchange trading hours, while also facilitating the creation/redemption process. This ensures that there will always be a deep two ¬way market, that investors should always be able to buy or sell their holdings on equal terms and that the ETC tracks the underlying index.

MTFs have also shown strong interest in Europe’s first 18 Currency ETCs. The ETCs started trading on Plus Markets on 17 November and then Nasdaq OMX Europe on
23 November. Other major MTFs including Chi¬X Europe and Turquoise have also shown interest to quote the currency ETCs on their platforms in the coming weeks.

The 18 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.

Nicholas Brooks, head of research and investment strategy, ETF Securities, says: “There has been strong investor interest in access to global foreign exchange markets through exchange traded products including currency ETCs. Most of our investors are large institutions with diverse exposure to a range of markets and asset classes. FX is the one key asset class that most have not had access to in a convenient ETC format.

“In the first week of trading investors appeared more cautious on the risk trade following more subdued macro data. Accordingly, ETFS Short NZD Long USD was the leading currency ETC, gaining 2.2 per cent, while ETFS Short AUD Long USD followed closely with a gain of 1.9 per cent. Ongoing concerns about the UK government’s debt burden weighed on sterling, pushing ETFS Long GBP Short USD lower by 1.0 per cent over the week. In terms of LSE trading volumes, over 60 per cent of the volume involved AUD trades, with GBP trades accounting for 20 per cent of volume and EUR trades making up around 12 per cent.”

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