Trading activity for European listed exchange traded funds jumped last week as concerns about the debt crisis in the US and Europe prompted volatile trading across global financial markets.
On-exchange trading in ETPs (funds and products) in Europe rose to €31.9bn ($45.8bn) last week from €18.2bn in the previous week, an increase of 75 per cent, according to data just released by Lyxor.
“There was a healthy increase in ETP trading volumes in Europe last week with investors taking advantage of the liquidity offered by ETPs to hedge their portfolios and manage risks at a time of heightened market volatility,” said Nizam Hamid, head of ETF strategy at Lyxor.
Reported on-exchange ETP trading rose to 13.6 per cent of equity market activity, up from less than 10 per cent before the crisis escalated.
The majority of ETP trading in Europe is still conducted on an over-the-counter basis in bilateral deals. As a result, the on-exchange trading statistics do not capture the full extent of the increase in ETF trading last week. However, the available data does suggest that the increase in European ETP trading mirrored developments in the US where there was a significant increase in ETP trading activity.
Trading activity for commodity ETPs listed in Europe doubled last week as investors looked to gold as a haven from the turmoil in equity markets.
Leveraged and inverse ETPs saw trading activity rise by just under 80 per cent. Lyxor saw trading in its leveraged and inverse ETPs rise by more than 47 per cent. Mr Hamid said these increases reflected investors using leveraged and inverse ETPs as short-term trading instruments to hedge their underlying positions.
Trading activity in fixed income ETPs rose by more than 90 per cent last week in spite of mounting concerns about the sovereign debt crisis in Europe and the threat of a downgrade for France. Mr Hamid said this reflected strong interest in money market ETPs which have been seen as another haven for investors.
Lyxor’s ETPs saw net inflows from investors in spite of the turmoil in markets last week. Mr Hamid said the flow data suggested that clients were putting money back into equities with some prepared to put on large “long” positions (bets on equity prices rising).
“Overall, the ETP market in Europe continued to function efficiently last week and these trading activity statistics are a testament to investors’ confidence in exchange traded products as efficient and liquid instruments,” said Mr Hamid.
Get alerts on Exchange traded funds when a new story is published