Giang Bui, head of exchange traded products at Nasdaq, said a number of issuers are evaluating semi-transparent exchange traded funds as the venue listed its first semi-transparent ETF last month.
The US Securities and Exchange Commission approved semi-transparent ETFs last year which allows issuers to report holdings on a monthly or quarterly basis, rather than daily, as in standard ETFs.
Bui told Markets Media that a number of issuers, from boutique to very large, are evaluating semi-transparent ETFs as the structure provides the best of both worlds.
“Active managers get the advantages of the ETF wrapper without having to give away their secret sauce,” she added.
Last month SS&C ALPS Advisors partnered with GSI Capital Advisors and Blue Tractor Group to launch the ALPS Active REIT ETF on Nasdaq, the exchange’s first semi-transparent ETF. The fund had total net assets of more than $8.7m as of March 8.
Bui joined Nasdaq in December last year from Cboe Global Markets where she had been director of listings.
“Nasdaq can differentiate itself in a number of ways for ETFs listings,” she added. “We can support marketing and distribution through Nasdaq’s organic channels and external partners, provide better market quality programs, a fee structure that allows issuers to scale without significantly increasing costs, and high-touch service.”
The exchange has a designated liquidity provider program for ETFs and will be announcing an improved model which includes additional key quoting metrics.
She continued that her near-term focus is to strengthen Nasdaq’s ETF offering and market maker program, and to build the Nasdaq ETF listing brand. At the end of last year Nasdaq listed more than 400 ETFs with assets under management above $1 trillion according to the exchange.
“Nasdaq also wants to be an advocate for the ETF ecosystem and market structure improvements,” said Bui.
In 2020 ETFs and ETPs listed in the US reached a record $5.5 trillion, an increase of 23.6% from the previous year, according to ETFGI, an independent research and consultancy firm.
“Last year the ETF structure proved its resiliency during market stress and we expect momentum to continue,” added Bui. “Inflows in the first two months of this year have been $155bn, more than double the same period last year.”
Bui continued that growth areas for ETFs include environmental, social and governance (ESG) funds, fixed income and thematics, particularly technology.”
Cryptocurrency ETFs
Germany’s Deutsche Börse on March 9 listed exchange traded notes issued by 21Shares and ETC Group on Ethereum and Bitcoin cash. The new ETNs are physically backed, listed on the regulated market of the Frankfurt Stock Exchange and will be centrally cleared by the exchange group’s Eurex Clearing.
Stephan Kraus, head of Deutsche Börse’s ETF segment, said in a statement: “With the expansion to Ethereum and Bitcoin Cash, we are now offering further investment opportunities to trade crypto products efficiently in a regulated on-exchange environment. This means investors no longer have to turn to unregulated crypto venues or set up their own crypto wallets.”
Kraus continued that central clearing significantly reduces the settlement risks and enables many professional investors to invest in crypto products.
Deutsche Börse launched the world’s first centrally cleared Bitcoin ETN in June last year. The exchange said the product has been heavily traded by both private and institutional investors and was recently the highest-volume product in the ETF & ETP segment on Xetra for some days.
In the US, Cboe Global Markets has filed with the SEC to potentially list and trade the country’s first bitcoin exchange-traded fund – the VanEck Bitcoin Trust.
The filing said the exchange first tried to gain approval to list an exchange-traded product to provide exposure to bitcoin in the US in 2016 – but this was rejected by the SEC. However, since that time the digital assets financial ecosystem, including bitcoin, and the regulatory landscape has progressed significantly. For example, the U.S. Office of the Comptroller of the Currency has said that federally-chartered banks are permitted to provide custody services for cryptocurrencies and other digital assets.
Cboe said the development of a regulated market for digital asset securities has significantly evolved, with market participants having conducted registered public offerings of both digital asset securities and shares in investment vehicles holding bitcoin futures. In addition, licensed and regulated service providers have emerged to provide fund custodial services for digital assets, among other services.
“The exchange understands the Commission’s previous focus on potential manipulation of a bitcoin ETP in prior disapproval orders, but now believes that such concerns have been sufficiently mitigated and that the growing and quantifiable investor protection concerns should be the central consideration as the Commission reviews this proposal,” added the filing.
In Canada last month Toronto Stock Exchange began trading the world’s first bitcoin ETF, Purpose Bitcoin ETF. TSX said in a statement that the fund is the first direct custody bitcoin ETF designed to allow investors to buy physically settled bitcoin.
Som Seif, founder & chief executive of Purpose Investments, said in a statement: “We believe bitcoin, as the first and largest asset in the emerging cryptocurrency ecosystem, is poised to continue its growth trajectory and adoption as an alternative asset, further cementing the investment opportunity it presents.”
