Fragmentation and regulatory complexity pegged as main hurdles to European ETF growth

During the TradeTech event, panelists delved into the European ETF landscape, examining the natural comparison drawn between Europe and the US. They also discussed the existing challenges hindering Europe's ability to match the pace set by its American counterpart.

Simon Barriball, Virtu Financial

As ETFs gain momentum in Europe, speakers at TradeTech emphasized fragmentation and regulatory concerns as critical challenges that must be tackled to foster growth in the trading sector moving forward.

Simon Barriball, ETF and portfolio trading executive for EMEA at Virtu Financial, stressed the detrimental effects of Europe's fragmented venue landscape on assets, citing the multitude of listing venues, currencies, and settlement depots for each ETF. He highlighted Europe's double listings compared to the US, with only a fifth of the assets under management (AUM).

Barriball pointed out the regulatory challenges, emphasizing the difficulty in aggregating trading volume due to reporting across multiple venues and jurisdictions, even post-Brexit. He advocated for a consolidated tape, crucial for meaningful pre- and post-trade analytics, criticizing current proposals for lacking venue attribution and a clear timeframe.

David Smith, head of ETF sales at SIX Swiss Exchange, echoed concerns about fragmentation, especially in the ETF segment, leading to dispersed liquidity and uncertainty in trading and settlement methods, driving the popularity of RFQ protocol.

TradeTech discussions prompted inevitable comparisons between European and US ETF markets. Ben Miller, vice president of ETF specialist sales at Citi Group, noted the dominance of one exchange and clearer in the US versus Europe's fragmented landscape, advocating for centralized tape and clearing to enhance efficiency.

Miller highlighted the institutional adoption in both markets and the potential for retail growth in Europe to drive improvements. Tim Miller, senior trader at Fidelity International, provided a buy-side perspective, identifying an inflection point in ETFs. He cited technology as a key driver in solving ETF-related issues in Europe, enhancing infrastructure and trading volume efficiency, fostering continued growth in financial markets.