Nse hungers for more exchange traded products – nextmoney nextmoney

The Nigeria’s Exchange Traded Products, ETPs, recorded cumulative average growth rate of 8 percent over the last four years. This is even as the net flows from the Exchange Traded Funds, ETFs globally stood at $358 billion. “Globally, ETPs have grown remarkably this year recording net flows of approximately $358bn as at October 2018. According to ETFGI, the Global ETP industry had close to 15,000 ETPs listings on 71 exchanges with assets of about US$5tn cutting across 392 providers at the end of October 2018.

He said ETPs are one of the most significant financial innovations in recent decades and have shaped the financial markets.

“Since the introduction of ETPs in 1993, they have gained widespread acceptance in most developed markets. Over the last 15 years, investors’ demand for ETPs (both retail and institutional) has grown remarkably, which in turn has led to a greater variety of products offered by ETP sponsors.

“Since then, the ETPs space has grown steadily by a cumulative average growth rate of 8.0 percent over the last four years. Currently, there are nine ETPs listed on the Exchange, two thematic ETFs providing access to Pension-compliant and Shariah-compliant stocks, 2 broad equity market ETFs tracking the NSE 30 Index, 3 sector based ETFs, 1 commodity ETF, and 1 bond ETF tracking exposure to benchmark FGN Sovereign Bonds.”

“The cross-listing of ABSA’s Newgold ETF on the Nigerian Stock Exchange in December 2011, opened up the ETPs market. Since then, the ETPs space has grown steadily by a cumulative average growth rate of 8% over the last 4 years. Currently, there are 9 ETPs listed on the Exchange – 2 thematic ETFs providing access to Pension-compliant and Shariah-compliant stocks, 2 broad equity market ETFs tracking the NSE 30 Index, 3 sector based ETFs, 1 commodity ETF, and 1 bond ETF tracking exposure to benchmark FGN Sovereign Bonds.

He said the introduction of ETPs is one of the Exchange’s strategies to enhance diversification as well as broaden the options available in the capital market to support the efficient implementation of investment strategies across diverse asset classes and instruments. “I would like to use this medium to encourage ETP product issuers and intermediaries to expand their footprint by broadening distribution channels, introducing other asset classes/strategies, entering new markets, leveraging technology and data analytics to understand the market and demand. This year, in collaboration with issuers, we have focused on diversifying the ETPs space by supporting new product development and thus expect the launch of new ETPs in the short term.

According to Investopedia, exchange-traded products (ETP) are a type of security that is derivatively priced and trades intra-day on a national securities exchange. ETPs are priced so the value is derived from other investment instruments, such as a commodity, a currency, a share price or an interest rate. Generally, ETPs are benchmarked to stocks, commodities or indices. They can also be actively managed funds. ETPs include exchange-traded funds (ETFs), exchange-traded vehicles (ETVs), exchange-traded notes (ETNs) and certificates.

The low-cost structure of ETPs has contributed to their popularity. Many ETPs are lower-cost index funds, which continue to attract assets away from potentially higher-cost actively managed funds. However, the amount of money being pulled out of actively managed funds dwindled in 2017 after several years of more substantial outflows. Passively managed funds gained around $464 billion in net asset inflows in 2017, while actively managed funds saw net outflows of $7 billion during the same period, according to Morningstar. In recent years, actively managed funds had seen outflows in the hundreds of billions.

Portfolio diversification can be achieved using ETP, according to Michael Mgwaba. In his presentation, he disclosed that “Institutional investors across the globe are utilizing the exchange traded products as versatile tools to support the active portfolio management. These investors are integrating ETPs into nearly every aspect of their portfolios, across asset classes and into critical functions like risk, volatility and liquidity management. As such, ETPs are on track to becoming common instruments in institutional portfolios, alongside stocks, bonds and derivatives.

“The risk management has grown in importance as consequence of uncertain financial environment. This coupled with a search for long term performing assets with risk management element resulted in higher allocation to alternatives amongst institutional investors including pension funds. ETPs are cost effective and efficient structures to access alternative asset classes.

• Using gold ETFs/ETCs as an example – gold is the most liquid and largest of all commodities. It has a history of providing effective protection during market turmoil due to its negative correlation with most traditional asset classes. It can also act as hedge against inflation or local currency devaluation against USD. A good diversifier.

The first global multi-crypto ETP has the backing of Swiss startup Amun AG and will be listed under the ticker symbol HOLD. According to the announcement, the ETP will track five of the sector’s biggest cryptocurrencies: Bitcoin (BTC), Ripple (XRP), Ethereum (ETH), Bitcoin Cash (BCH) and Litecoin (LTC). Amun’s official website states that SIX Swiss Exchange is Europe’s fourth-largest exchange and has a market capitalization of $1.6 trillion.

The announcement also reveals that each of the five cryptocurrencies will obtain a degree of the market share within the ETP, although Bitcoin will reportedly make up roughly half of the ETP’s overall assets. XRP, the now second-biggest cryptocurrency, will make up 25.4 percent of the assets, followed by Ethereum with 16.7, Bitcoin Cash at 5.2 percent and Litecoin with 3 percent

However, the listing of the multi-crypto based exchange is not Europe’s first experiment with crypto ETPs. Swedish company XBT Provider has been running the lucrative CoinShares exchange-traded product since 2015. This listing is the latest crypto development in Sweden, a state well known for its open-minded approach to innovation in the fintech sector, as well as a country predicted to become the first “cashless economy.”

Coinshares has two Bitcoin trackers: XBT Bitcoin Tracker One (COINXBT) and XBT Bitcoin Tracker Euro (COINXBE). The two trackers trade in both euros and Swedish krona. The product ascribes 200 shares as equal to the price of one Bitcoin for trading in Swedish krona and 20 shares to one Bitcoin for the euro version. The product is accessible to investors from across Europe and has attracted over $1 billion since its 2015 listing on Nasdaq Stockholm, leading developers to launch additional versions in neighboring Denmark, Latvia, Finland and Estonia.

Deborah Fuhr, Managing Partner, Founder, ETFGI forecast that the ETF/ETP industry will reach assets of $8.9 trillion in 2020 and $22.3 trillion in 2025 globally. While Canada will list $164 billion in 2020 and $409 billion in 2025; US is expected to list $6.4 trillion in 2020 and $8.9 trillion in 2025. Finally, Europe will list $1.5 trillion in 2020 and $3.7 trillion in 2025