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The proposal, floated by the European Securities and Markets Authority as part of an investigation into the ETF market, suggests that a minimum number of market makers ought to be allocated to an ETF product, especially in cases where one dedicated market maker is affiliated to the ETF promoter. The proposal aims to ensure adequate liquidity in an ETF product and limit conflicts of interest.
However, in its response to the consultation, Deutsche Börse said that it “strongly” believed a single market maker “is sufficient to ensure orderly exchange trading of an ETF”, and said that such a requirement could significantly increase the cost of ETFs, especially in thinly traded products. “As a consequence, investors may be negatively affected”, it said.
The London Stock Exchange said that trading platforms should be able to determine the provision of market makers to their market.
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