Head of Sales Electronic Trading Solutions, Technology and Services
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The Swiss ETF market landscape has a large variety of listed ETF’s and issuers. Did you know that in 2017, over one million ETF transactions were reported at the SIX Exchange? The volume in ETF’s on SIX Exchange has increased by almost 40% since 2012. EY predicts that global ETF assets could reach US$ 7.6t by the end of 2020. MiFID II and other regulations may lead to even more inflows into the ETF space and therefore, we would like to share our most important findings when trading ETF’s. The rapid rise of ETF’s needs a professional adoption when selecting your trading strategy. The way you trade may have an impact on your costs. Trading on SIX Exchange can make sense for your retail flow. But what about your larger order for discretionary mandates and portfolios?
How do you trade ETF’s for your clients? We would like to provide you with a practical guide on how to trade ETF’s. Vontobel has built up a state of the art execution platform for ETF’s, using high-end tools and a broad counterparty network.
Our top findings are the following:
1. Working orders on the stock exchange: When opening the market, make sure that spreads tend to be higher within the first 15 minutes. Same accounts before important announcements during the day (eco figures, US market opening, etc.). It is therefore crucial to check prices carefully. Vontobel offers you trading at risk prices, which in most cases beat the prices on the stock exchange. During these periods, it is vital to focus on quoted spreads and volumes. Market spreads tend to be a better indication than quoted volumes.
2. Liquidity, spreads and underlying: Trade when the underlying markets are open. If the underlyings are difficult to hedge, the price quoted may differ from the fair value. The fewer information a market maker has, the wider the spread. For example, it may be better to trade Asian underlyings in the morning and US underlyings shortly after US opening. With ETF’s on the MSCI World, it makes sense to trade when most markets are open (i.e. after the US opening and when European markets are still open).
3. Do’s and don’ts: Do not use Algo strategies such as VWAP or TVOL as they do not make sense; the volumes of ETFs do not correspond to statistical patterns but, unlike volumes of equities, are purely coincidental. Instead, talk to our ETF trading experts about NAV, risk or on-exchange trading. They will provide you with in depth market knowledge and help you select the right strategy.
4. How can Vontobel help you: We trade ETF’s at NAV (Net Asset Value), risk or on listed markets. We are able to use TWAP strategies on markets and can give you an independent execution advice. We are highly competitive when it comes to commission rates for NAV and risk prices. Vontobel does not issue ETF’s and is therefore neutral. Vontobel has the right tools, knowledge and partners to execute your ETF orders according to your preferences.
How can we help you to execute your ETF’s? Our experts are looking forward to handling your ETF orders professionally and to providing you with more information.