A specialist provider of exchange traded products for European investors, is launching thirteen Exchange Traded Funds (ETFs) and twenty two Exchange Traded Commodity (ETC) products today.
The launch represents the first product offering of Source, an open architecture platform created by Bank of America Merrill Lynch, Goldman Sachs and Morgan Stanley to enhance the performance and trading environment for exchange traded products in Europe. By creating common standards and augmented design features, Source’s products will offer investors improved liquidity, reduced credit risk, increased transparency and more efficient competition.
Despite recent market turbulence, demand for ETFs and similar products continues to grow, with net European inflows of over EUR47 billion in 2008. Investors clearly value the simplicity, transparency and low cost associated with these products. Source believes that the market has even greater potential, and that improved product design and an enhanced trading environment are critical for further growth.
One specific focus of Source is liquidity. In the United States daily on exchange trading volumes exceed USD 90 billion (17 per cent of ETF assets under management), while in Europe that figure is approximately USD 2 billion (less than 2 per cent of ETF assets under management). Source intends to close that gap by focusing all trading on a single stock exchange, Deutsche Börse, offering very efficient total return products and allowing multiple brokers to participate on an equal footing. These are significant improvements over existing products.
A second area of focus for Source is the tight control of credit risk. A combination of risk diversification, third party monitoring and self-imposed guidelines are employed to provide strong investor protection. Source’s commodity products, for example, are the only exchange traded products that are secured exclusively by G-7 government bonds and cash.
These and other initiatives mean that Source is confident that its unique approach to exchange traded products will deliver a superior investor experience and rapid growth in assets. Source is committed to expanding the partnership approach of its platform and is actively seeking additional participants.
Commenting on the launch of Source, Ted Hood, CEO said: “Source is very excited about the growth prospects of the European market for exchange traded products. We are convinced that we can bring about even greater growth by offering investors improved products and providing an enhanced trading environment. We will achieve this by creating common product standards focused on increased liquidity, reduced credit risk, greater transparency and more efficient competition.”
Source: ETFWorld.co.uk – Source
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