A Very European Market
By Paul Amery | February 25, 2010

Just to remind you, according to Blackrock’s end-2009 ETF Landscape survey, Europe has 829 exchange-traded funds, but these have 2,371 listings on 18 exchanges from 34 providers. Then add in ten or so MTFs (multilateral trading facilities – no one seems to know the exact number), possibly 11 “dark pools” (crossing networks which do not display orders publicly), multiple clearing and settlement systems, and you have the kind of chaos on the trading front that leaves regulators struggling to cope.

"There are many things that are not very clear (about dark pools)," Eddy Wymeersh, chairman of the Committee of European Securities Regulators (CESR), told the European Parliament in December, according to Reuters.

Apparently the CESR is staffing up to try and cope with the proliferation of new trading platforms, but will that help?

According to Roy Zimmerhansl, a 30-year veteran of the markets and owner of FinTuition, who invited me to his excellent in-house seminar on securities lending yesterday, the UK’s Financial Services Authority recently had two separate teams studying the subject of stock lending – without even knowing it. They only found out when both teams arranged to interview the same person at the same bank in the same week (“I’m already meeting you on Thursday, aren’t I?” he asked one of the groups).

This is not to make fun of the regulators – I’m sure plenty of us are struggling to get our heads around the complexities of the European share market infrastructure. For that reason, I’m particularly looking forward to the two trading-related panels we’ll be holding at our Inside ETFs Europe conference in a little over six weeks’ time, where the invited experts should be able to throw some light on the subject. If you haven’t yet registered, please do so – places are filling up fast.

But, to try and answer the question you pose in your blog, Matt, there may be too many me-too ETFs in Europe, but this is an inevitable consequence of the proliferation of markets and trading venues. And while there may be too many DJ Euro Stoxx 50 ETFs – 12 at the last count – a commentator on the syndicated Seeking Alpha version of the blog pointed out that a UK investor has no ETFs on the benchmark CAC40 or DAX country indices to choose from. So while there are many ETF listings, there are still gaps in the product offerings available to retail investors in the different European markets.

All in all, this suggests to me that it will take some time before European ETFs can trade at the razor-thin, single penny spreads that are available for many US-listed funds. But we’re getting there, and the sheer number of participants in the European exchange-traded funds business is what makes this industry such a fascinating one to cover.