Commentary

John Turney
Traders Magazine Online News

Foreign Exchange Infrastructure: Yesterday, Today and Tomorrow

In this exclusive to Traders Magazine, John Turney, Global Head of Outsourced FX at Northern Trust, discusses the evolution of the fx infrastructure and what is to come.

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August 31, 2000

Exchange Traded Funds Ride to Amex's Rescue

By Sanford Wexler

Exchange-traded funds are breathing new life into the American Stock Exchange.

The exchange's average daily volume has nearly doubled from about 29 million shares in 1998 to 55 million shares today, thanks in large part to ETFs.

Two-thirds of the volume comes from these complex products invented by Amex rocket scientists. Howard Lasher, a floor broker at the Amex sees "explosive opportunities" for the floor community.

The asset value of ETFs has grown over the past six months from $35.8 billion to $52.6 billion, according to a report by Strategic Insight, a New York-based consulting firm.

ETFs are credited with helping Amex stay open as it struggles to sustain its traditional but ailing stock trading business.

The trading in these instruments, pioneered in 1993, has attracted institutional as well as a growing number of individual investors.

ETFs combine elements of indexing with the advantages of stock trading. The most popular ETF is the Spider, which represents the Standard & Poor's 500 stock index.

There are 59 ETFs traded on the American Stock Exchange, up from 30 at the beginning of this year.

They include indexes that track the Nasdaq 100 and the Dow Jones Industrial Average, as well as exotic ones that follow foreign exchanges, such as the Malaysian and Hong Kong markets. There are also ETFs that are based on industry sectors, that include Internet, technology, telecommunications, and financial stocks.

Gary Gastineau, a managing director at Chicago's John Nuveen Co. and a former director of new product development at the Amex, sees more promise ahead: actively managed mutual funds listed as exchange-tradable funds.