The first half of 2022 has proved to be another milestone year for ETPs at the London Stock Exchange, with the total number of ETP listings hitting 2,000.
Lida Eslami, Head of Business Development, ETP and IOB, London Stock Exchange, explains that last year was a strong year with 310 listings but this year there is added interest from even more ETP issuers. “New ETP issuers are emerging and listing in London on what we feel is the most international stock exchange in Europe, “ Eslami says. “We are seeing even more demand and interest.”
So far this year, in the seven months from January to July, there have been 168 new ETPs listed, split between 119 ETFs and 49 new ETC/ETNs. Out of the 119 ETFs, 55 have an ESG methodology.
The growth in ETC/ETN listings was driven by issuers from the short and leveraged community, based on commodities or US equities. Eslami reports that on days of increased volatility, these products dominated the exchange with the 3x Tesla or oil often appearing as the most traded ETP on the exchange.
“We are seeing a number of new potential ETP issuers looking to launch ETPs in Europe and list these on the London Stock Exchange,” Eslami says. “We increasingly see asset managers with no current ETP offering looking to launch active ETPs or converting an existing active fund as an ETP.”
In terms of turnover, the first seven months saw the total London Stock Exchange ETP order book reach over GBP100 billion, 8 per cent higher year-on-year? The exchange was also awarded Best European Exchange for Trading ETFs in this year’s ETF Express European awards in March.
The 8 per cent growth in orders meant that ETPs represented 15 per cent of the London Stock Exchange’s daily turnover over the seven months period, a 100 per cent increase over the last seven years.
“We are so pleased,” Eslami says. “ETPs are one of the fastest growing parts of the securities trading divisions of the London Stock Exchange.”As a result, the securities trading division has taken on more resources to support the growing market.
In another example of its strength, iShares, the largest ETP issuer globally, published a note, reporting that the iShares Physical Gold ETC (IGLN) reached record volumes on the London Stock Exchange on 14th July, trading a record USD612 million (18 x its three million ADV) since its inception, and was the most traded security on London Stock Exchange for the day.
iShares noted that most of the trades were executed algorithmically using iceberg orders (92 per cent) between 1:20pm and 4:30pm, with numerous large clips of greater than USD5 million traded throughout the period, and IGLN holding all top 10 on-screen trades on London Stock Exchange for the day across all its listed securities.
“The surge in on-screen trading via algo demonstrates the deep liquidity and access to algorithmic trading solutions for IGLN on the London Stock Exchange’s orderbook. This reflects the opportunity to utilise hidden layers of liquidity to facilitate large trades without impacting the market,” the firm writes.
“When people look at exchanges, issuers may ask if there is sufficient liquidity in an ETP,” Eslami says. “With this example you can see a deep pool of liquidity available on the London Stock Exchange with a tight spread, and also the growth of algo trading which achieves the best execution outcomes.”
The London Stock Exchange’s automated RFQ platform RFQ 2.0 has also seen growth over the year, hitting the milestone of 100,000 trades executed, reflecting GBP1.7 billion in value.
“This has been one of the most innovative order types that the London Stock Exchange has brought to the market in the last few years,” Eslami says. “It’s a new development and a different offering to the existing RFQ solutions out there. It’s a fully automated order type and clearing is part of the offering. We are keen to work with banks and help clients navigate how to get better execution outcomes when they are trading ETPs.”
This is comforting for clients who are concerned about CSDR regulations and settlement efficiency, she says.
The market saw more volatility in the first half of the year, which it took in its stride. Eslami says: “A key role of the London Stock Exchange is to keep the markets open and ensure orderly markets and fair prices for investors and clients who want to trade. It’s always a key part of our strategy and what we really care about.”
The second part of the year sees the exchange working with a number of asset managers who are looking to launch on the London Stock Exchange for the first time and Eslami confidently expects more products coming to the exchange.
“London is the most international stock exchange with the widest range of clients who are trading our products from all over the world – increasingly from Asia and South America. We also offer a range of trading currencies for ETPs and – 60 per cent of our ETP trades are in US dollars.”
The exchange’s multilateral trading facility, Turquoise Europe and Turquoise Global, plus London Stock Exchange, give the exchange three venues to offer clients different liquidity and trading channels. Turquoise Europe saw over 780 ETPs trading in the first half of 2022.