The London Stock Exchange has created a new market specifically designed for investment products. The first products to be traded on extraMARK are expected to be exchange traded funds (ETFs).
Barclays Global Investors will be the first firm to list products on the new market, pending regulatory approval. BGI has said it hopes to introduce at least 10 new products to the extraMARK in the next year.
The key market for ETFs is likely to be continental Europe, where index tracking funds are only just starting to generate interest. In the U.S., about one-third of institutional funds are in index "trackers," as they are called in the U.K., where that figure is around one-quarter. In Europe it is only 5%, says Edmund Shing, equity strategist at U.K. brokerage Schroders. By getting in first, London could be well poised to capture this European business.
But the close links the London Stock Exchange and London's fund management community have to the FTSE International indexes could prove a constraint. Most of the initial ETFs are likely to be FTSE and Eurotop products. European investors, on the other hand, have stronger leanings towards the Dow Jones STOXX indexes and STOXX-linked products would probably be better received by continental investors.