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Since 2007, global assets under management in ETFs skyrocketed from €0.8 trillion to €4.7 trillion – the market climbed 37% just in 2017. However, and despite the fact that US and European markets have each grown at a yearly average rate of approximately 18%, the latter represents only 16% of the global market.
The lag in the European ETF market demonstrates that: i) it is highly fragmented with multiple listings across many exchanges, ii) Europe’s capital markets have not been successful in attracting retail investors, iii) more on-exchange ETF trading is necessary, and iv) regulation and innovation can further develop and harmonise the market to move it towards more transparency and cost-efficiency. [...]
The European ETF market has grown significantly and continuously since its inception in 2000, as investors are attracted by lower costs and simpler trading. However, in order for the market to reach its full potential, expand further and attain US levels, certain handicaps have to be removed. Over the coming years, regulation and technology can help the market: i) move from off-book, OTC trading venues to on-exchange venues, ii) develop a distribution channel to appropriately promote and adequately inform investors for such investment products, iii) enable a higher participation rate by retail investors, and iv) streamline settlement at a single location.