Though exchange traded funds seem to have conquered the U.S. market, the same is not true of Europe. Still, some experts see Europe as ripe for the expansion of ETFs.
Steve Grob, director of group strategy for Fidessa, said it can be difficult to get liquidity for ETFs in Europe, in part due to the fragmentation of the markets.
"Such ETFs as there are, are traded across a bunch of different European venues," said Grob. "An ETF based upon the largest European companies will be traded in London, in Frankfurt, in Paris, but it’s quite hard to see a combined view of the total liquidity available."
According to Grob, ETFs are growing in Europe, particularly in the Netherlands and the United Kingdom, but it will take years to catch up with the U.S. As ETFs in Europe gain more liquidity, however, they will grow more rapidly, as they do offer some clear advantages, he added.
The consolidation of exchanges has helped the liquidity problem in Europe. NYSE Euronext now owns the bourses in Paris, Amsterdam, Brussels and Lisbon. Laura Morrison, head of U.S. exchange traded products for NYSE Euronext, said investors can now instantaneously access liquidity for ETFs in Paris, Amsterdam and Brussels, with Lisbon also coming online soon.
With the ETF market on the other side of the Atlantic looking up, several U.S. issuers of ETFs are now exploring ways of expanding into Europe, Morrison said.
"They’ve had success here in the U.S., and they know that globally ETFs are building momentum in terms of interest levels by traders and investors," she said.
Reggie Browne, managing director of the ETF team at Knight Capital, said that while Europe has been slow to embrace ETFs, he suspects they will become more popular there over time.
Europeans might be forgiven for their shyness over ETFs, however. Kweku Adoboli, the alleged "rogue trader" at UBS who was arrested in London after supposedly losing $2 billion, worked in the bank’s ETF trading business.
