Focus Money ETF Magazine 01/20: "Firmly established today"

03 Mar 2020

Focus Money ETF Magazine 01/20: "Firmly established today"Interview with Stephan Kraus

Stephan Kraus, Deutsche Börse AG

The head of the ETF segment at Deutsche Börse on the development of ETF trading and the future development of the ETF business in Europe.

1. How did Deutsche Börse come to start with an ETF segment 20 years ago?

With the launch of ETF trading on Xetra in April 2000, Deutsche Börse was a pioneer in Europe. Although the first ETFs were already being traded in the United States at that time, the market was still quite small and manageable. Nevertheless, it became apparent that these funds were attracting interest. So we also wanted to give investors in Europe access to them. But we didn't expect ETFs to become such a big global success story.

2. Was it very difficult to get trading going?

There were several challenges to overcome. Since ETFs were virtually unknown in Europe until then, we first had to win over both issuers and market makers for the launch and support of the products. Communication with investors who were familiar with equities and active funds, but not with the concept of an index fund that could be traded continuously over the stock exchange, proved to be similarly challenging.

3. What were the most important milestones in the ETF market over the past 20 years?

One of the biggest milestones was certainly the fact that passive investments have become firmly established in recent years and are now also used in active investment strategies. Especially the possibility to represent a variety of markets, sectors, trends and strategies cost-effectively via a diversified investment is an important achievement. Recent examples include smart beta ETFs and the rapid development of ESG products, which allows investors to pursue individual sustainability strategies.

4. What development of the ETF market do you expect in the next ten years?

We expect that the assets managed by ETFs will continue to grow at a high rate. The number of ETFs is also likely to continue to grow from its current level of over 1,500, but probably at a somewhat slower pace after the recent exceptionally high level of listing activity. ETF providers will continue to show a good feel for trends that can be used to address investor interests in a targeted manner. For example, theme ETFs in particular are very popular with private investors. A prime example is the first medical cannabis ETF launched in Europe at the beginning of the year. On the first few trading days, this theme ETF generated three-digit transaction figures on Xetra every day.

5. What changes/improvements would you like to see in ETF trading?

We hope that ETFs will continue to establish themselves as a standard product in private pension provision in Germany. E-T-F, these three letters could also stand for easy, transparent and flexible in 2020. In combination with low costs, these are the core characteristics when it comes to convincing people of the advantages of retirement provision via the capital market. A look at the rising number of ETF savings plans makes us feel positive here; the current figure in Germany is over 1.2 million - another significant increase on last year.

6. What are you as an exchange doing to make ETFs even better known to private investors?

We are taking action at various points: On the one hand, we have an extensive range of training and news for investors. These include our face-to-face seminars, digital learning opportunities, webinars, newsletters and manuals. On the other hand, we support investors with trading initiatives. A current example: We no longer charge transaction fees in Xetra trading for the execution of ETF savings plan and Robo-Advisory orders. In this way we aim to further enhance the attractiveness of ETFs as a long-term investment product and attract new investors to the capital market. The offer applies to all banks and brokers who register with us for this purpose.



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