Market operator Tradeweb has launched a multi-dealer-to-customer market for European-listed exchange-traded funds (ETFs) to improve access to liquidity for institutional buy-side clients.
The new instruments will be offered via the firm’s Tradeweb Europe multilateral trading facility, which currently trades bonds and derivatives. Buy-side traders will be able to send requests for quotes to multiple counterparts and view responses on a single screen. The market supports trading on a risk, closing or net asset value basis and members can allocate trades to sub-accounts on a pre- or post-trade basis.
“The platform offers integrated trade processing and a number of functions, such as direction locking and identifier matching, that reduce the risk of errors and substantially improve efficiency”, said Adriano Pace, director of equity derivatives at Tradeweb.
According to research from consultancy ETFGI cited by Tradeweb, assets under management in European ETFs have grown by 39.6% annually over the last 10 years, reaching US$309 billion in Q3 2012. However, fragmentation of ETF liquidity means many trades are conducted over the counter.
By attempting to consolidate ETF liquidity through its platform, Tradeweb said market makers are forced to compete on price. There are currently 11 dealers that provide ETF liquidity to Tradeweb.
“Proving best execution is increasingly important for our institutional client base and we expect that this requirement will continue to be a focus in upcoming MiFID II regulations. Electronic trading helps asset managers meet best execution requirements”, added Enrico Bruni, head of European markets at Tradeweb.