This article first appeared in ETF Insider, to read the full edition, click here.
In this Q&A, we dive into the role S&P Global Market Intelligence ETF and Benchmarking Management Solutions plays in supporting the ETF and index ecosystem as well as nascent corners of the markets such as active ETFs.
Anthony Rayar, director of product for S&P Global Market Intelligence’s ETF Management Solutions explains how the team aggregates, validates, and standardises global ETF composition data, ensuring those in the ETF ecosystem can access and use this information effectively.
Data-driven insights are an important part of product development and optimisation, emphasising how real-time data enables better liquidity, efficient pricing, and transparency in the fast-evolving ETF landscape.
These insights can also help to uncover particularly fast evolving segments of the industry – namely active ETFs – revealing the proportion of net flows or the average expense ratios within a specific category.
What does S&P Global Market Intelligence ETF and Benchmarking Management Solutions do?
As part of S&P Global Market Intelligence division, we focus on market data related to ETFs and Indices. Our primary function is to aggregate, validate, and standardise ETF composition data, which we then distribute to our clients. This process supports the workflows of liquidity providers, sponsors, allocators, and researchers, ensuring they have accurate and reliable information for their decision-making.
For example, data input from our sponsors may come in different formats, structured with varied formats. We streamline this process on a global scale across all asset classes, ensuring that market makers, traders, or authorised participants have the necessary data to execute trades efficiently.
In addition to ETFs, we also support index providers, not limited to S&P Dow Jones Indices, and others. Our services extend beyond data aggregation to include regulatory screening, sanctions, PCF generation and our own iNAV+ calculation engine, which recalculates ETFs in real-time, second by second with the ability to fair value.
How has data-driven analysis influenced the growth of the ETF industry in recent years?
Many decisions in the ETF industry are data-driven in one way or another. For example, when it comes to product innovation, two key factors are investor appetite and the financial backdrop. Other considerations, such as client demand, pricing, and operational logistics, are important too, but the foundation is whether there is demand for the product and if the financial and regulatory environment is favourable.
To make these decisions, accurate and timely data provision is key. First, you need to analyse the existing ETFs and identify market gaps. If there are 100 ETFs following strategy A, but only five following strategy B yet have gathered tremendous inflows, you might want to examine those five more closely. You would look at fund flows, performance, fees, reference index data – if applicable – and various other metrics to gauge their success.
Essentially, all these decisions are data driven. It begins with understanding which ETFs have the highest or more consistent demand via inflows and then peeling back the onion to understand the investment strategy behind the ETF to identify how this ETF is meeting the investor’s appetite.
How does data help optimise index construction for ETFs to better align with investor goals?
ETFs and indices have always been closely connected, but from an optimisation perspective, there are two key aspects to consider, product availability and the mechanics of trading. When an issuer is looking to launch an ETF with a unique strategy, they can often select an existing index to track or benchmark against. However, if no suitable index exists for the new strategy, a custom index needs to be constructed.
Having a broad view of the available index universe helps sponsors optimise their decision-making. They can decide whether to choose an existing index or create one that better aligns with their strategy, often based on data-driven analysis.
The second area of optimisation involves trading, particularly during rebalance periods. Since we provide composition data for both ETFs and indices, traders have access to the most up-to-date data. This allows them to effectively manage rebalancing by tracking changes in weights and constituents, ensuring efficient pricing and optimising their trading models.
Liquidity and tight spreads have made ETFs popular across asset classes. The ETF industry started with equities, then expanded into sectors, fixed income, commodities, and now spot cryptocurrency. ETFs add value by providing liquidity to assets that might lack it.
With INAV+, clients can price ETFs in real time and independently fair value the underlying assets. S&P Global Market Intelligence has a unique position within the ETF ecosystem being one of the only data providers able to offer both portfolio composition file construction and iNAV services.
How do you think real time data and analytics enable market makers to improve liquidity and narrow bid ask spreads?
The popularity of ETFs across various asset classes can be attributed to their liquidity and tight spreads. Initially focused on equities, the market has since expanded to include sectors, fixed income, commodities, and now spot cryptocurrency. ETFs have proven to be a fantastic price discovery vehicle especially when the underlying asset cannot be priced. This benefit was apparent in 2020 with fixed income ETFs.
As the ETF industry has evolved, so too have the analytics associated with it, enhancing the usability and tradability of these products. With INAV+, clients can price ETFs in real time and independently fair value the underlying assets. This transparency helps sponsors, market makers, and traders assess the health of ETFs, ensuring efficient trading and highlighting discrepancies in pricing. Our goal is to offer insights and improve transparency across the market.
How are you differentiated from competitors?
We have had the privilege and pleasure of serving market participants in the ETF ecosystem for over 20 years. Our success is driven by the breadth and depth of our data sets. We offer a one-stop solution, combining data from ETFs, indices, securities finance, regulation, and real-time pricing.
Clients can access multiple services under one umbrella, providing them with the flexibility to address various needs across front, middle, and back-office functions. Innovation, client feedback, and localised support are integral to our approach, enabling us to evolve with the industry and provide timely, accurate data using the latest technology. This is what sets us apart.
What role do you play in driving ETF product development through data insights?
We firmly believe in prioritizing people, process, and product. We are able to bring different parties together to share knowledge extracted from the underlying data to improve the process and promote innovation within the product.
ETFs have gained popularity due to their transparency, tax advantages, and liquidity. We aim to build on that transparency by offering sponsors a complete view of the ETF universe – whether it is tracking fund flows, analysing constituents held, market activity, reference data, or trading preferences.
Our job is to facilitate collaboration among stakeholders, using our data and insights to enhance the entire ecosystem for the benefit of investors and market participants.
The active ETF market is rapidly evolving, where do you sit within this?
When issuers analyse data or assess liquidity, having access to comprehensive underlying data is essential. This allows them to identify trends, such as the growing shift toward active management. By analysing fund flows and reference data related to ETF launches, we can see that many recent launches are focused on active strategies.
Our data indicates that active ETFs are capturing a significant share of new flows. Clients rely on these insights to monitor trends, and our data helps them identify where attention and investment are shifting, particularly towards actively managed products.
