Transcript Corporate Title Slide, Preferred Dark Arial 36pt Regular

ONE MARKET,
INFINITE POSSIBILITIES.SM
© 2008 NYSE Euronext. All Rights Reserved.
Single largest Exchange in the World
The marketplace where opportunity knows no borders. NYSE Euronext is leading the industry in terms of
global consolidation. Our strategy is transforming the NYSE from the world’s largest cash equities
exchange into a multi-asset class platform of securities markets in cash equities, OTC trading, options,
ETFs and fixed income.
Strategic Relationships
Americas
Europe
The world’s largest equity market
Gateway to the Eurozone
NYSE
NYSE Arca
Euronext
Alternext
Euronext Liffe
•
•
•
Cash Equities
•
Cash Equities
•
•
• Derivatives
Bonds
Depository Receipts
Cash Equities
•
Fixed Income
•
ETFs
•
Depository Receipts
Cash Equities
•
Equity Options
•
•
ETFs
ETFs
•
•
Certificates
Depository Receipts
•
Warrants
•
Depository
Receipts
Latin America
Bovespa Holding SA
• Equity stake
Asia
Tokyo Stock Exchange
• Strategic alliance
National Stock Exchange of India
• Equity stake
5
Exchange Traded Funds I
 What is an Exchange Traded Fund (ETF)?
 A investment fund traded on a stock exchange, much like stocks.
 That replicates the movements of an specific index, regardless of market
conditions.
 Tracking is achieved (in most cases) by trying to hold all the securities in
the index, in the same proportions – passive management.
 Liquidity is provided by a Liquidity Provider that guarantee spreads and
sizes throughout the trading session.
 The creation and redemption of shares enables Liquidity Providers to engage
in arbitrage and causes the value of the ETF to approximate the indicative net
asset value (iNAV) of the ETF.
Exchange Traded Funds II
 What are the advantages?
 Lower management fees: The lack of active management means
lower management fees.
 Transparency: As they are traded on a exchange, there is disclosure of preand post-trade information.
 Simplicity: With a single trade, investors get exposition to the index basket
without having to trade each component, thus lowering costs.
 Click and trade: Unlike other mutual funds, investors’ orders are executed
immediately at a known price.
 Liquidity: Liquidity Providers guarantee continued liquidity (spreads and
depth) during the continuous trading hours.
The origins of indexation III
10 Years 15 Years
Domestic
S&P 500 Index
Average Equity Fund*
Index Advantage
8.2%
7.8%
0.4%
10.9%
10.2%
0.7%
International
MSCI World ex US
Average International Equity Fund**
Index Advantage
8.0%
7.2%
0.8%
9.6%
9.3%
0.3%
Note: And these are the survivors!
*Consists of Morningstar Large Blend category.
**Consists of Morningstar Foreign Large Blend category.
Source: Morningstar, time periods ending March 31, 2007 (U.S.) and May 31, 2007 (Global).
The origins of indexation IIII
ETFs are the result of indexation success:
 1993: The launch of the first ETF in US, the Standard & Poor’s Depositary
Receipt, also known as “Spider”.
 2000: Listing of the first ETFs in Europe.
 2001: First ETFs listed on NYSE Euronext, iShares EuroStoxx 50 and iShares
Stoxx.
 2004: The creation of the first ETFs based on commodities, real state and
emerging markets.
 2008: The first ETF on hedge fund strategies and the launch the ETF Securities .
The growth of the ETF market I
 The Assets under Management (AUM) in ETFs in Europe and US registered
an annual increase rate of 40% in the last decade.
 The weight of the ETF AUM in the total mutual fund AUM is 5% US and 1.5%
in Europe. This weight continues to increase on both sides of Atlantic.
 Morgan Stanley forecasted that the ETF AUM will reach $2 trillion in 2012.
Assets under Management in ETFs
800
700
600
500
400
300
200
100
0
2000
*in €billion
2001
2002
2003
2004
Europe
2005
US
2006
2007
2008*
The growth of the ETF market II
 The number of listed ETFs has increased constantly since 2001. However,
2007 and 2008 are exceptional years.
 There are 328 based on equity, 47 based on fixed income and 9
commodities-based ETFs.
 The number of ETF issuers has increased from 4 in 2001 to 15 today.
NYX - Nb of listed ETFs
500
400
+157 ETFs so
far…
300
227
155
200
100
384
28
40
47
53
2001
2002
2003
2004
94
0
2005
2006
2007
2008*
The growth of the ETF market III
 The daily average turnover increased considerably in 2007 compared to 2006. The
daily average turnover should continue to increase but at lower pace.
 Turnover is still concentrated on the European blue chip ETFs and the national
indices - 60%. There was also significant boost on the strategy and money
market ETFs so far this year.
Daily Average Turnover
400
300
200
100
0
2001
*In €million
2002
2003
2004
2005
2006
2007
2008
Market Quality
 As ETFs are related to a basket of underlying securities, their liquidity is the same
as the underlying basket.
 The liquidity should be measured by the depth and spread of its order book and
not by the traded volumes.
 Liquidity Providers are the main source of liquidity, they are required to display
maximum spreads and minimum sizes throughout the trading session.
Best Bid Offer (BBO)
ETF
Spread (bp)
Depth
CAC ETF
7
€1.5 m
EuroSTOXX 50 ETF
8
€2 m
*September 2008
Strategic Initiatives I
 Single Order book (SOB)
 The SOB will consist of one single trading line for all listed securities.
 Along with the SOB, ESES will provide the Euronext market Central Securities
Depositories with an integrated settlement solution and harmonised custody service.
 Each security will be settled on one unique CSD and with SOB each security will be traded
on a unique marketplace.
ETF
Listed ETF
Listing
Trading
Netting & CCP
Settlement
Euronext Paris
Euronext Paris
LCH.Clearnet (France)
Euroclear France
Euronext Ams.
Euronext Ams.
LCH.Clearnet (Holland)
Euroclear Neder.
 Increase the use of ETFs by retail investors
 Transparency needs to be improved in the European mutual funds landscape (kick backs,
etc)
(1)
(2)
Still under review with regulators
Trading venue is the decision of issuer
Strategic Initiatives II
 Foreign currency trading
 Since the beginning of 2008, it has been possible to list and trade ETFs in foreign currency
(USD, GBP, etc).
 EasyETF was the first ever ETF issuer to list in foreign currency on Euronext Paris.
 Multi-decimal trading and market quality improvement
 19 ETFs are traded to 3 decimal places (EuroSTOXX 50, Eonia, etc), others will
follow…
 Multi-decimal trading and changes to the fee structure have improved spreads and
market depth.
 Borrowing and Lending market
 SecFinex, an NYSE Euronext subsidiary, recently announced the launch of
loan services for ETFs.
(1)
(2)
Still under review with regulators
Trading venue is the decision of issuer
ETF/Tracker team
39 Rue Cambon
75039 Paris Cedex 01
France
Tel: +33 (1) 49 27 1881
Fax: +33 (1) 4927 1922
Email: [email protected]
www.euronext.com/ETF