It’s been an eventful first half of the year for the financial markets. Between historic volatility in March, the swift return to near-record highs and record volumes across all investable markets, investors and ETF issuers have weathered constant uncertainty due to the impact of COVID-19. Since our last update, ETFs have continued to show tremendous value as both investment vehicles and price discovery mechanisms under both normal and irregular market conditions. As a result, we’re seeing new entrants to the market and a strong debut from active, semi-transparent ETFs.
As I told Bob Pisani on CNBC back in May, 2020 is shaping up to be the year of active management. As of the end of Q2, 56 actively managed ETFs have come to market this year, which is nearly half of all launches for 2020. There are half a dozen active, semi-transparent products now live; most recently, American Century launched the first two ETFs that use the NYSE’s proxy-based solution. Decades of work to make active management a full force in the ETF industry appears to be culminating this year, kicking off what we expect will be a period of significant growth for active ETFs.
Last month we were also thrilled to welcome Allianz Investment Management to the ETF industry with the launch of two buffered outcome ETFs on NYSE Arca. These products allow Allianz to expand its risk management solutions for global investors, further demonstrating how an ETF strategy can augment and grow your entire asset management business.
Innovation also continues to spark across the industry, as the world adjusts to social distancing and remote connections. One of my favorite examples is the new Work From Home ETF (NYSE Arca: WFH) from Direxion, providing investors access to the companies driving the rapid digital transformation of the past few months. We anticipate seeing more of this creativity and ingenuity throughout the rest of the year. We look forward to bringing your ideas to market at the New York Stock Exchange, the Home of ETFs.
For more industry updates and insights, find our Q2 2020 report below. As always, reach out to me or the NYSE ETF team with your thoughts or to discuss how we can support and grow your business.
I hope you and your families continue to stay safe and healthy, and are able to enjoy the summer.
Douglas M. Yones, ChFC®
Head of Exchange Traded Products
New York Stock Exchange
Active ETF Update
The active ETF space has ramped up over the past few months, following the launch of the first six semi-transparent ETFs under the Precidian ActiveShares and proxy-based structures. This is just the beginning. With more than 20 additional active, semi-transparent products in the SEC approval and filing stages, we expect to see continued growth and engagement throughout the second half of 2020. We look forward to seeing much of this growth take place at the NYSE. And, in case you missed it, last month the SEC approved NYSE Arca’s very own version of proxy-based active, semi-transparent ETFs. The first two products using the NYSE methodology went live on July 15, with a strong pipeline of launches for the near future. Contact us to learn more about the additional flexibility for active management in this proxy-based solution.The NYSE ETF team recently debuted an Active ETF Newsletter to provide updates, statistics and insights on the latest developments in our industry. To be added to the mailing list for the fortnightly update, please email us at [email protected].
NYSE Phased Reopening
On May 26, following a two-month temporary closure, the NYSE reopened the doors to the iconic Trading Floor at 11 Wall Street. In the first phase of reopening, we welcomed back a subset of Floor Brokers, many of whom work for small, independent businesses that were impacted financially by the closure. Our second phase began on June 17 and allowed for Designated Market Makers (DMMs) to also return to the Floor at a reduced headcount. We’ve implemented a number of health and safety protocols, including social distancing and face mask requirements, to reduce the risk to the Floor community as they return to their posts.
We were honored to mark the initial reopening with Governor Andrew Cuomo ringing the Opening Bell. We continue to look ahead to when we can celebrate in earnest with the NYSE issuer community once we’re all able to gather at 11 Wall again.
News from ICE ETF Hub & ICE Data Services
Q2 was yet another record-breaking quarter for ICE ETF Hub: notional volume grew to $148 billion compared to $137 billion in the first quarter — an increase of 9%.
In June, both Credit Suisse and Wells Fargo joined the ICE ETF Hub as authorized participants (APs) and advisory committee members. Both firms bring extensive equity markets expertise to the platform, which will prove valuable as the ETF Hub continues to expand its breadth of products and functionality.
ICE also recently launched functionality for the automated assembly of custom baskets via APIs and ICE ETF Hub’s user interfaces. ICE Chat functionality is planned to launch in the third quarter of 2020. Connectivity between ICE ETF Hub and ICE FI Select for integrated secondary market cash bond execution is also planned to launch during the third quarter, and support for U.S.-listed international equity ETFs is planned for later in 2020.
Additionally, ICE Data Services has launched real-time data publication for several of its most popular fixed income indices, offering participants a comprehensive market view throughout the trading day. The enhancement of these indices complements ICE Data Services’ equity and commodity index families, which are already published on a real-time basis.
NYSE Webinars and Issuer Educational Events
Over the past few months, the ETF industry has sprung to action to find new ways to connect and share educational tools and resources while we continue to operate remotely. Our team has been pleased to host a number of webinars with industry leaders, including executives from BlackRock, Pacer, State Street Global Advisors, VanEck and World Gold Council, on topics ranging from Fixed Income ETF performance to investing in Real Assets. Catch up on these sessions on our ETF Insights page and stay tuned for more in the coming months.
We also have a host of resources on ICE Market Pulse, where our experts regularly publish insights on the energy, equities and fixed income markets. The latest posts include a look at the differences between Brent and WTI futures and a deep dive on price and net asset value for ETFs.
Additionally, to help promote your firms’ efforts, we’re circulating a weekly roundup of NYSE issuer events. The schedule is viewable online, along with articles, white papers, recorded videos and podcasts available for download. To ensure your firm’s activities are included, please email us at [email protected].
ETN Filing — Options-Linked Securities
NYSE Arca has filed a proposed rule change with the SEC to allow an ETN to be based on an index that contains options on any ETP and certain equity indexes. If approved, these rules would greatly expand the capabilities of ETNs to include defined outcome, buy-write and put-write strategies. This would mark the most significant change to ETN rules in over a decade, providing additional opportunities for both investors and issuers as they consider the rule.
50 Shareholder Rule Filing
The NYSE has filed a proposal to eliminate the 50 shareholder requirement for ETFs. The requirement does not represent an accurate measure of liquidity for ETFs and its elimination would further reduce regulatory burdens for issuers. This proposal is particularly important now as more active ETFs are coming to market, as it provides new products more time to build performance track records — a key factor that active fund investors consider in their investment decisions.