Raymond Backreedy, CIO at Sparrows Capital, has said the biggest hindrance to ETF growth in the UK is the major platforms continuing to favour mutual funds while the lack of a consolidated tape continues to plague the wider European ETF ecosystem.
Speaking on the fourth of ETF Stream’s webinar series, ETF Ecosystem Unwrapped, entitled Capital Markets: Making the ecosystem tick, Backreedy (pictured) bemoaned the major platforms’ decision to not upgrade their technology to incorporate ETFs.
The lack of ETFs on platforms is one of the biggest issues stunting usage with the majority of IFAs and wealth managers serving their clients through the different platforms.
While the issue has been ongoing for a number of years now, major platforms still argue the demand is not there for ETFs while ETF issuers claim platforms simply do not want to spend the money on the required changes.
Backreedy commented: “Getting ETFs on platforms is definitely the biggest challenge facing the UK market.
“The newer platforms offer that flexibility between mutual funds and ETFs but the major players do not offer ETFs.”
Anecdotally, fund selectors have told ETF Stream their allocation to ETFs would dramatically increase if platforms made the required changes.
Elsewhere, Backreedy highlighted the need for a consolidated tape in Europe so investors can see the true liquidity of the ETFs they are investing in.
In the UK, for example, investors can only see the liquidity of the ETF on the London Stock Exchange and not on the other 20-plus exchanges across Europe.
Steps have been made since the MiFID II directive looked to enforce its implementation with Bloomberg launching an ETF Aggregate Volume field which is estimated to cover 85% of the market.
Last month, the European Fund and Asset Management Association (EFAMA) called on the European Commission to enforce its creation arguing it constituted “a barrier to transparency”.
“Investors can only see a fraction of the ETF trading,” Backreedy continued. “A consolidated tape would be a huge benefit to investors who would be able to see where ETFs trade across different European markets.”
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