The trend towards exchange-traded funds (ETF) investing, which has been growing fast in the US, is now coming to the European stock exchanges.
The Deutsche Börse has launched the XTF Exchange Traded Funds, a new market segment for ETFs, while in the UK the first fund of this type has been launched.
“By getting this segment off to an early start, Deutsche Börse has taken the initiative with another attractive theme market that puts it in the vanguard of development,” says Volker Potthoff, member of the executive board of Deutsche Börse AG.
The new segment aims to be as transparent as possible, providing information on the current value of the EFT, its net asset value to data providers and financial institutions, as well as internet access.
The two initial products will be issued by the European Exchange-Traded Company and will track the two European STOXX 50 indices. Deutsche Börse expects the number of issuers to increase soon.
Shares in the funds, which can be purchased as simply as equities, can cover an entire portfolio of securities. The price of a share corresponds to a fraction of the index value set by the issuer, without mark-up or premium over the purchase or issue price.
Deutsche Börse is the first European exchange to provide a framework to initiate trading in ETFs on a segment of their own, though similar funds have been trading in Brussels and Luxembourg for some time and are now being launched in the UK by iShares.
Called iFTSE 100, the first ETF in the UK will provide investors with instant diversification and exposure to the largest companies in the market through the FTSE 100. The iFTSE will be managed by Barclays Global Investors and listed on the London stock exchange within its recently announced market, extraMARK. The traded price of iFTSE 100 will be available continuously throughout the day and closing prices are intended to be published daily in the media and a web site.
ETFs are now used extensively in the US by both retail and institutional investors including pension funds asset managers and insurance companies (see page 37). Paula Garrido