Banking Technology: BATS Chi-X Europe will bring down the cost of European ETFs

11 October 2013

According to chief executive Mark Hemsley, BATS Chi-X Europe's upcoming move into the European listings space will help bring a much-needed reduction in costs that could help to make the European ETFs market stronger.

“There’s a lot of friction in the ETF market caused by the current approach to listing", Hemsley said. “ETF listings are often split across multiple national venues – so the market making liquidity is fragmented. Worse still, ETF listings on each national exchange are cleared and settled at separate CCPs and depositories – so if you happen to hold a long and a short position on two different venues, it’s very expensive to net those positions off. We are here to offer a better alternative.”

Hemsley added that investors in countries such as Germany and France may not necessarily be interested in trading on a national specific exchange such as the UK’s LSE, but they might be more likely to trade with each other’s markets on a pan-European venue that pools the liquidity from all three countries. “The primaries are cursed by history into only offering national products", he said. “They are locked into vertical silos. What they’re not offering is a pan-European solution, especially when it comes to the post-trade challenges facing investors. It’s a very convoluted process you have to go through and it’s largely caused by the outdated historic need to go to a national exchange to list and trade.”

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