It is now official.  Bolsas y Mercados Españoles (BME) announced this morning that it had granted licensees to four ETF managers to launch ETFs based on the globally recognized IBEX 35 index, which is comprised of the 35 most liquid stocks listed on the Spanish market.

Contrary to speculation around the banking industry in Spain that was reported last week in a number of Spanish publications and on this Web site, the BME has decided to grant licenses to trade ETFs based on the IBEX 35 to four fund managers,  BBVA Gestión, Santander Asset Management, Barclays Global Investors and Lyxor Asset Management. The BME also indicated the possible launch, "in the near future" of new products based on other indexes from the IBEX 35 and LATIBEX families as well as international indexes.

The BME announcement ran contrary to speculation that the BME would grant IBEX 35 licenses to only the two largest Spanish banks, and would exclude the international entrants from this product, while allowing them to launch ETFs based on other indexes in the future. 

Likely, despite the possible fragmentation of market that has been so common in Europe, the announcement is good news to Spanish investors, as it seemed likely that BBVA and Banco Santander might see these products more as offerings aimed at international investors (thereby protecting margins on their current investment products) and a way to block international players from chipping into the Spanish investment market.  With four players competing, it raises the odds of a more serious marketing and price competition within Spain

The IBEX 35 is comprised of the 35 most liquid Spanish companies.  The constituents are determined by trading volume, and it is rebalanced semiannually. The index is both cap-weighted and free-float weighted.  Interestingly 2 of the 3 largest constituents by weight are the two Spanish banks that are prospective issuers (Banco Santander Centro Hispano and Banco Bilbao Vizcaya Argentaria (BBVA).  Currently the #2 company in the index after Banco Santander is Telefonica, the former national telecommunications giant. To view the companies that currently comprise the the IBEX 35, together with their weightings, you can view this report from the BME,

A Long Time Coming

Spanish investors should be pleased, because it appears - at long last that they will have access to a reasonably priced series of mutual funds - in the form of Exchange-Traded funds.  Because of my associations with Spain, I have long followed the market here fairly closely, and I've been aware of the development of ETFs here since at least the year 2000.  The rub was that the Spanish investment banking market was (is) so tightly controlled by two enormous banks that were not necessarily interested in decreasing their profit margins.

The high margin culture has pervaded - to an almost absurd degree - down the chain and through smaller banks as well.  Study of the investment products that dominate the market here would bring out an investigation and handcuffs in the U.S. faster than you can say "Eliot Spitzer" A glance through my own bank's book of investment options shows index funds sporting a nifty 7% load and 250 basis points of annual expenses. Ironically, many of the international funds in Spain are simply ETFs wrapped and sold w/ a markup (for example from SPDRs for the S&P 500 offering of 10 bps plus costs to 250 bps plus load). No more, for the savvy in Spain (though the brokerage fees may still get them).  ETFs are on the way.

So why is Spain finally coming out with ETFs after all these years and launches by every country from Isreal and Indian to Iceland and Turkey?  Well it appears that Banco Santander and BBVA may have been convinced that because of the widespread use of ETFs globally, that the IBEX products might appeal to international investors.  And I think there may have also been some self-consciousness that a country that has otherwise fully entered the mainstream Europe economically has lagged so far behind in investment innovation.

In any event, it appears that ETFs are coming to Spain.  The BME did not announce a possible launch date for the products, but it is thought that with the licenses granted, these products could launch in the near future, possibly as soon as April or May, and almost certainly in 2006. 

It is now official.  Bolsas y Mercados Españoles (BME) announced this morning that it had granted licensees to four ETF managers to launch ETFs based on the globally recognized IBEX 35 index, which covers the stocks of 35 of the largest companies driving the Spanish Economy.

Contrary to speculation around the banking industry in Spain that was reported last week in a number of Spanish publications and on this Web site, BME has decided to grant licenses to trade ETFs based on the IBEX 35 to four fund managers,  BBVA Gestión, Santander Asset Management, Barclays Global Investors and Lyxor Asset Management. The BME also indicated the possible launch, "in the near future" of new products on other indexes from the IBEX 35® and LATIBEX families as well as international indexes.

The BME announcement ran contrary to speculation that the BME would grant IBEX 35 licenses to only the two largest Spanish banks, and would exclude the international entrants from this product, while allowing them to launch ETFs based on other indexes in the future. 

Likely, despite the possible fragmentation of market that has been so common in Europe, the announcement is good news to Spanish investors, as it seemed likely that BBVA and Banco Santander might see these products more as offerings to international investors (thereby protecting margins on their current investment products) and a way to block international players from chipping into the Spanish investment market.  With four players competing, it raises the odds of a more serious marketing within Spain

The IBEX 35 is comprised of the 35 most liquid Spanish companies.  The constituents are determined by trading volume, and it is rebalanced semiannually. The index is both cap-weighted and free-float weighted.  Interestingly 2 of the 3 largest constituents by weight are the two Spanish banks that are prospective issuers (Banco Santander Centro Hispano and Banco Bilbao Vizcaya Argentaria (BBVA).   To view the companies that currently comprise the 35 companies in the IBEX 35, together with their weightings, you can read this report from BME,

A Long Time Coming

Spanish investors should be pleased, because it appears - at long last that they will have access to a reasonably priced series of mutual funds - in the form of Exchange-Traded funds.  Because of my associations with Spain, I have long followed the market here fairly closely, and I've been aware of the development of ETFs here since at least the year 2000.  The rub was that the Spanish investment banking market was (is) so tightly controlled by two enormous banks that were not necessarily interested in decreasing their profit margins.

The high margin culture has pervaded - to an almost absurd degree - down the chain and through smaller banks as well.  Study of the investment products that dominate the market here would bring out an investigation and handcuffs in the U.S. faster than you can say "Eliot Spitzer" A glance through my own bank's book of investment options shows index funds sporting a nifty 7% load and 250 basis points of annual expenses. Ironically, many of the international funds in Spain are simply ETFs wrapped and sold w/ a markup (for example from SPDRs for the S&P 500 offering of 10 bps plus costs to 250 bps plus load). No more, for the savvy in Spain (though the brokerage fees may still get them).  ETFs are on the way.

So why is Spain finally coming out with ETFs after all these years and launches by every country from Isreal and Indian to Iceland and Turkey?  Well it appears that Banco Santander and BBVA may have been convinced that because of the widespread use of ETFs globally, that the IBEX products might appeal to international investors.  And I think there may have also been some self-consciousness that a country that has otherwise fully entered the mainstream Europe economically has lagged so far behind in investment innovation.

In any event, it appears that ETFs are coming to Spain.  The BME did not announce a possible launch date for the products, but it is thought that with the licenses granted, these products could launch fairly soon, possibly as soon as April or May, and almost certainly in 2006.