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Nomura And Tradition Launch ETF Trading Platform
By Staff | 20 February, 2012

Investment bank Nomura and interdealer broker Tradition have together launched a new electronic platform that they say represents a “step-change in the future of ETF trading”.

The multilateral trading facility, called Navesis-ETF, has been designed to allow all market participants—including institutional traders, sell-side banks and market makers—to engage in intra-day trading at prices linked to net asset value (NAV) prices.

In addition, there will be a daily 15-minute auction that will effectively allow clients to become market makers for a period.

As at today’s launch, the facility will offer the option to trade only at end-of-day NAV prices, though intra-day NAV pricing may be introduced in future.

The thinking behind the new platform is that it will increase efficiency and competitiveness in the ETF market by creating a central marketplace and cutting out the need for laborious price discovery in the primary market.

Lee Burrows, head of Delta One, EMEA at Nomura said: “The ETF industry has enjoyed a rapid ascent over the past 10 years, but structural inefficiencies have meant that the market has not reached its true potential. As leaders in liquidity management, and as a large player in the ETF market, we know from first-hand experience that Navesis-ETF fulfils the desires of participants and regulators. This is the first of its kind to market and will be a leading provider in the space. We expect this to become the primary marketplace for ETF trading.”

But its ability to achieve the desired streamlining of the market will depend on the level of take-up among market participants. During the early testing and beta phase, Nomura signed up a number of clients, including Credit Suisse, UBS and HSBC. However, it will need to add a good roster of market makers to provide the level of pre-trade price transparency it is hoping for.

The new platform has also been designed with forthcoming regulatory changes in mind, particularly the ramping up of post-trade reporting requirements expected to be introduced in MiFID II.

Rupert Hodges, managing director at Tradition said: “We believe it will help to grow liquidity, increase transparency, and be seen as a positive industry initiative ahead of regulatory reform on both sides of the Atlantic.”

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