European ETF trading commentary for the week ending 22 January 2010, provided by LaBranche Structured Products Europe (LSPE).

The equity market lost around 3.5% last week, with most losses occurring from Thursday afternoon onwards. LSPE remained a buyer of ETFs from providers and accounted for a large portion of the creation units reported by iShares and Lyxor. In the primary market, we had a creation/redemption ratio of 6:1 in favour of creations, while in the secondary market, where volumes where around 40% lower than the previous week, we sold more to the market than we bought (by a 3:2 ratio).

Last week saw a lot more transition management trades (large basket trading orders), which is not unexpected considering current asset allocations and the tactical switching of funds and alpha strategies at this time of the year. As a result, we sold decent blocks of the iShares MSCI World ETF (LSE: IWRD), which accounted for over a third of our creations. We also saw large buyers of emerging markets funds such as the iShares MSCI Emerging Markets ETF (LSE: IDEM), in which iShares reported creations of US$100 million, and the Lyxor ETF MSCI Emerging Markets (NYSE Euronext: LEM), in which Lyxor reported creations of US$120 million (with LSPE accounting for over 40%).

We were very active in sector ETFs across the board and they represented 25% of our total creation/redemption flows. We sold institutional investors ETFs tracking the media sector (SXMP), such as the Lyxor ETF DJ Stoxx 600 Media (NYSE Euronext: MDA), and iShares (Deutsche Borse: SXQPEX) and Lyxor (NYSE Euronext: PHG) funds tracking the DJ Stoxx 600 personal and household goods index (SXQP). However, we bought the Lyxor ETF DJ Stoxx 600 Telecom (NYSE Euronext: TEL) for the second consecutive week as investors continued to sell following a strong performance over the last three months. We also bought construction and materials trackers such as the Lyxor ETF DJ Stoxx 600 Construction and Materials (NYSE Euronext: CST).

We witnessed large sales of commodity funds such as the ETFS Agriculture DJ-AIGCSM (LSE: AIGA), which has fallen 7.7% since the beginning of the year, with corn and soybeans, the two largest components of the ETF (47.25% between them), losing ground for the third consecutive week.

Finally, investors should bear in mind that Q4 earnings are coming out in the US, which could lead to some volatility in the equity markets.

This report is not an offer to sell or a solicitation of any investment products or other financial product or service, an official confirmation of any transaction, or an official statement of LSPE.