HSBC is to launch its first ETF and plans to issue 30-50 funds over the next three years, Farley Thomas, HSBC’s global head of wholesale distribution, said this morning in a telephone interview with IndexUniverse.eu.

HSBC will list the ETF, to be called the HSBC FTSE 100 fund, on the London Stock Exchange, with a secondary listing on NYSE Euronext due before year-end, Thomas said. HSBC is planning to launch its next two ETFs, funds tracking the DJ Euro Stoxx 50 and CAC 40 indices, in October. The bank also has authorisation from the Irish Financial Regulator for a FTSE 250 ETF, although the launch date for this fund has yet to be determined.

The ETF is a subfund of a Dublin-based umbrella structure called HSBC ETFs plc, and the trustee for the fund is HSBC Institutional Trust Services (Ireland) Limited. HSBC's initial ETF launches will use full replication as their tracking methodology, although Thomas added that the bank is open minded about using partial or swap-based replication for future launches. He said the bank will also issue ETFs tracking fixed income and commodity indices.

HSBC’s new fund will be going head-to-head with one of the benchmark European ETFs, iShares’ FTSE 100 ETF (LSE: ISF.L), the fourth-largest ETF in Europe and the second-most actively traded, according to Deutsche Bank’s latest ETF Liquidity Trends report. The iShares FTSE 100 ETF has a total expense ratio of 0.40% per annum, while the new HSBC ETF will have a total expense ratio of 0.35% per annum.

HSBC’s move will be seen by many as a sign of intensifying competition in the European tracker products sector. The bank recently cut the total expense ratios on its index fund range by up to 75% in a move widely interpreted as a response to Vanguard’s arrival in the UK market. In his interview, Thomas told IndexUniverse.eu that he believes there is space for several new issuers to enter the European ETF market given that ETFs are increasingly seen as a mainstream investment structure and the European mutual fund industry has traditionally supported 15-20 major issuers across the region. HSBC believes that the European ETF market could grow to €500 billion in size by 2012 and, according to Thomas, the bank has an internal target of gaining a 10% market share by then.

“We believe our future is linked to indexation and ETFs and not just active management. The big firms with resources and trusted brands are going to be the winners in this game,” Thomas said in an earlier interview with the Financial Times.