Legal Eagle View

December 08, 2015


The first ETF in the UK invests in Chinese money market instruments. Is that an interesting choice?
It is perhaps a sign of the increasing interest from international investors, notably from the UK, in gaining exposure to the Chinese economy and part of the internationalisation of the renminbi—encouraging interest in RMB denominated securities. It is fair to say there has also been a political will behind the development of closer ties between the UK capital markets and the Chinese fund management industry and vice versa.

The whole process to get the Commerzbank ETF domiciled here took six months but could take less time with a reasonable track record. In every sense, it was a novel product.

Does this rather niche ETF launch mean we’re unlikely to see the full range of ETFs—from FTSE 100 to S&P 500 ETFs—being domiciled here?
If I were to be optimistic on UK PLC, I would like to see the full range of products being domiciled in the UK. I have spoken to one of the main ETF providers about this issue and there has been a lot of encouragement from the Treasury and the Financial Conduct Authority to make more domiciles happen here. But realistically I would expect [future ETF launches] to be more niche than develop as a full range of funds, as you need a fairly good commercial reason to duplicate the fund range you have already as an issuer.

Do you have any views on the ETF structure post 24 Aug., which brought trading flaws, discounts and price swings into the spotlight?
I have no particular view, although with the general rise in AUM and increased attention on ETFs, it’s not surprising to see more detailed focus on the nuts and bolts of these funds.

Euronext has launched a competing listing venue to the London Stock Exchange here in the city. Will that improve the liquidity of ETFs listed across Europe?
Clearly competition is good for consumers but liquidity comes from increased numbers of buyers. Whether a new trading venue will offer this, or simply dilute existing buyers, is yet to be tested.



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