Steven W. Poser, Director NYSE Research
Karl Topel, Director ICE Equity Derivatives Sales
Share of Notional Volume of Exchange Traded Climate ETPs
Climate and environmentally focused ETPs cover a wide range of technologies and strategies. There are ETFs based on clean water, renewable energy including water, wind and solar, carbon reduction, electronic vehicles, batteries, and green building construction.
There are also ETPs that are indexed to carbon-related futures listed on ICE exchanges. The table below shows the 10 most active NYSE Arca-listed ETPs with their average daily volume and total notional value traded in 2021 through mid-September.
ETP Share of AUM and Consolidated Volume
(by listing venue, 2021 YTD)
ETPs listed on NYSE Arca represent 62% of current AUM and account for 63% of total notional volume traded across all equity markets venues. NYSE Group exchanges captured 41.6% of exchange-traded notional volume this year.
This excludes trading off exchange, which accounts for 49.9% of notional value traded in these mostly less active ETPs.
Volume growth in climate-focused ETPs has been substantial, averaging less than one million shares per day in 2018 and 2019, growing to 4.6mn in 2020, and 13.2mn YTD. These products tend to be heavily retail-oriented1, with recent trading estimated to be nearly 38% retail. The chart below shows total and retail volume growth. High volatility earlier in the year may have temporarily slowed retail share of trading in these products.
Currently Active Climate-focused ETP CADV
(millions of shares)
Ten Most Active NYSE Arca Listed Climate-focused ETPs by Notional Volume (2021 YTD)
|Ticker Symbol||Exchange||Name||Listing Date||CADV||YTD Notional|
|TAN||NYSE Arca||Invesco Solar ETF||04/15/2008||1,822,180||$30,487,145,117|
|LIT||NYSE Arca||Global X Lithium & Battery Tech ETF||07/22/2010||1,018,302||$12,762,913,179|
|PBW||NYSE Arca||Invesco WilderHill Clean Energy ETF||03/03/2005||668,609||$11,997,977,243|
|ACES||NYSE Arca||ALPS Clean Energy ETF||06/29/2018||122,470||$1,751,227,162|
|KRBN||NYSE Arca||KraneShares Global Carbon ETF||07/30/2020||279,061||$1,737,254,940|
|LCTU||NYSE Arca||BlackRock U.S. Carbon Transition Readiness ETF||04/06/2021||255,386||$1,359,828,094|
|CNRG||NYSE Arca||SPDR S&P Kensho Clean Power ETF||10/22/2018||52,058||$1,085,978,477|
|PBD||NYSE Arca||Invesco Global Clean Energy ETF||06/13/2007||165,659||$1,003,074,534|
|FIW||NYSE Arca||First Trust Water ETF||05/08/2007||67,093||$985,882,333|
|FAN||NYSE Arca||First Trust Global Wind Energy ETF||06/16/2008||223,807||$906,670,526|
ICE offers investors access to the most liquid environmental markets available, providing transparent price signals which allow customers to price and manage climate risk globally.
ICE hosts the four largest and most liquid carbon cap and trade markets in the world. ICE’s European Emission allowance market is the largest in terms of volume, followed by ICE’s California Carbon allowances. With the successful introduction of the UK carbon market in May 2021, ICE UK allowances now contend with Regional Greenhouse Gas Initiative (RGGI) allowances as the third largest carbon market.
ICE, the leading exchange for MSCI Index derivatives, partnered again with MSCI to launch a suite of ESG and Climate index derivatives.
Introduced almost two years ago, ICE’s index futures contracts enable market participants to:
The full complex, up to end of August 2021, has a notional OI pushing past the $1bln mark, with the MSCI World ESG Leaders NTR Index Futures having an OI of over $500m alone, making it the fourth largest ESG derivative globally. ICE’s World future is joined by the MSCI Emerging Markets ESG Leaders NTR Index Future and MSCI USA ESG Leaders Index Future to occupy two of the top five and three of the top 10 global Equity ESG futures positions.
ICE MSCI ESG Index Futures Series - Notional Open Interest
ICE also offers multiple climate indexes that can be used as ETP, mutual or hedge fund benchmarks.
Market participants increasingly invest and trade climate-oriented ETPs, hedge carbon exposure, and incorporate climate-focused benchmarks into their strategies. Volume in climate-focused ETPs has grown nearly 1300% in the past three years, and open interest in the ICE Futures climate complex has surpassed $1bn. ICE and NYSE Group remain focused on innovation in climate-focused products and anticipate exciting new advances in the near future. As just one example, NYSE Group recently announced it is working with Intrinsic Exchange Group to launch Natural Asset Company listings to the US equity market, a new asset class focused on sustainability and land preservation.
Following the record-setting 40.1 million average daily volume (ADV) in the 1st quarter of this year, Q2 2021 options volume was the 2nd highest of all-time with 37.6 million contracts traded per day. Robust volume was driven in part by market anticipation of a potential earlier rise in interest rates and Fed tapering, as well as increased volume in options on new issues and continued activity in retail-focused stocks.
Financial Markets Focus on Climate »
As governments, corporations, and individuals focus more on human impact to the environment, international financial markets have responded with innovative products to help manage climate risk and invest in mitigating technologies.
Market Making and the NYSE DMM Difference »
Market makers play a key function in markets, committing capital to bridge timing differences between buyers and sellers. With the industry debating underlying market structure tenets such as tick sizes there has been renewed focus on different types of market making activity.