Better known for trading derivatives since the firm’s inception back in 1986, Optiver began its ETF business nearly 10 years ago by providing liquidity on-exchange in a small range of liquid ETFs. That all changed in 2016 when Optiver seized the opportunity to facilitate growth in the sector to become one of Europe’s leading ETF liquidity providers.
Optiver’s Head of Delta 1 Andrew Meyer explains how they made the transition: “As market-makers in derivatives, we provide continuous liquidity and warehouse risk. The idea was to create a setup where we were able to do the same for all ETFs. We put together a team of experts and focused on building out a strong technology infrastructure to underpin our pricing and execution engine. Automation is the foundation of our strategy to target the fragmented ETF landscape and tighten spreads across the board.”
According to Meyer, two years later the goal remains the same: to provide continuous pricing on all products. Moreover, Optiver works tactically with ETF issuers to ensure tight spreads in key products no matter how the market behaves.
Meyer shares his reaction to being recognised by ETF Express: “It’s an honour to receive the award for Best European Market-Maker again this year because it is our aim to proactively stimulate growth in the industry. There are various difficult products where we are the only market-maker on the exchange. When an issuer has a client who wants to buy a specific product, we are there to provide liquidity from day one.”
The Optiver ETF team includes 10 traders, a bespoke technology team, a dedicated contact for issuer partnerships and five multinational institutional trading representatives to work with direct counterparties across various European regions.
With a solid team in Europe, Optiver now has its sights set on Asia-Pacific. “Our Sydney office is leveraging our progress in Europe to expand into the key APAC regions”, Meyer explains. “We are already the dominant market-maker on-exchange and by the end of this year we will extend our coverage to all Asia-Pacific listed ETFs.”
He goes on to say: “We engage with issuers and investors to understand what the ETF landscape needs to be successful. Our vision is to help provide the answers to those needs on a more global scale.”
The period of volatility in early February really put the new systems realised by Meyer and his team (pictured) to the test for the first time. The outcome? They passed with flying colours, providing continuous liquidity in otherwise empty books and processing over one million trades smoothly as though it were a regular day.
“Our systems held up and supported our high standards of reliability and consistency,” Andrew remarks. “We are proud to be providing continuous liquidity in all our products. By making markets in the ETF space, we are being true to our mission to improve the market and staying committed to adding value to the marketplace.”
Andrew does note that Optiver ramped up their presence in the ETF industry a lot quicker than expected. “We went from market-making around 50 ETFs to thousands in just two years. When we take a decision we execute it properly, in a professional and well-resourced manner. It was a natural call to make because it builds on our core strengths: strong pricing and risk appetite. We’re happy to warehouse risk. In the end it contributes to a healthier trading ecosystem and that’s what Optiver stands for.”