Resetting the Standards: ETFs’ Role in an Evolving Buy -Side Tool Chest

There has been a general assumption that much of the market would migrate from the bespoke (and soon-to-be subject to onerous margin treatments) OTC markets to standardized and stable futures markets as regulations impose transparency and execution standards on opaque markets. This futurization of markets within the US and Europe has not played out as anticipated, giving rise to a new focus on cost and performance within the buy-side and is expected to drive growth in low-cost, broad-exposure products. For a growing population of institutional investors, the first-order reaction has been to use an old tool in new ways.

This has meant that the number of buy-side firms directing flow toward the Exchange Traded Fund (ETF) market is building momentum. Over 2,000 individual ETFs are available to investors within the US across asset classes today and well over 5,000 globally. Assets under management (AUM) across ETF asset classes is now over $2.77 trillion, up over (400%) from just under $600 billion ten years ago. TABB Group projects that by the end of the decade US listed ETF AUM may very well breach the $5 trillion mark

This TABB Group report, “Resetting the Standards: ETFs’ Role in an Evolving Buy-Side Tool Chest,” assess the degree to which global regulatory reform has influenced product migration within derivatives for US and European participants and the extent to which ETFs fit in the existing derivatives trading ecosystem.