Stephan Kraus, responsible for ETF segment of Deutsche Börse
Release date: 31 Mar 2020
What made Deutsche Börse launch an ETF segment 20 years ago?
With the launch of an ETF segment in April 2000, Deutsche Börse was a pioneer in Europe. At that time, the first ETFs were already tradable in the United States. While the market was still small in size, we noticed that the products were attracting growing interest among investors. Consequently, we wanted to offer investors in Europe access to this product type. But we hadn't expected ETFs to become such a global success story.
Was it difficult to stimulate trading?
There were indeed several challenges. Since ETFs were almost unknown in Europe back then, we first had to convince both issuers and market makers to launch and support the products. Similarly, explaining the product to investors, who were familiar with equities and active funds, but not with the concept of a continuously tradable index fund, proved to be challenging.
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 investing has established itself over the past few years and is now also used in active investment strategies. The opportunity to invest in a broad variety of markets, sectors, trends and strategies in a cost-effective and diversified way is a particular important achievement. Smart beta ETFs and the rapid development of ESG products, which enable investors to pursue individual sustainability strategies, are recent examples of this impressive development.
How do you expect the ETF market to develop over the next ten years?
We expect that assets managed by ETFs will continue to show high grow rates. The number of products, which currently stands at over 1,500 ETFs, is also likely to continue to grow, but probably at a slower pace following the exceptionally high level of listing activity of the past two years. ETF providers will continue to show a good instinct for trends that address specific investor interests. Thematic ETFs in particular are very popular among private investors. For example, the first medical cannabis ETF, which was launched in Europe at the beginning of the year, recorded three-digit transaction figures on Xetra right from the start of trading.
What changes would you like to see in ETF trading?
We hope that ETFs will continue to establish themselves as a standard product in private retirement provision in Germany. E-T-F, these three letters could also stand for easy, transparent and flexible. Together with a low cost base, such product characteristics are key when it comes to convincing people of the advantages of private pension provision via capital markets. A look at the rising number of ETF savings plans puts us in a positive mood here; the figure currently stands at over 1.2 million in Germany – another significant increase compared to last year.
How do you as an exchange operator promote the awareness of ETFs among private investors?
We are taking action at various points: on the one hand, we offer an extensive range of trainings and news services for investors. These include face-to-face seminars, digital learning opportunities, webinars, newsletters and handbooks. On the other hand, we support investors with trading initiatives. To give you a recent example: We are no longer charging transaction fees for the execution of retail ETF savings plans and robo-advisory orders on Xetra. The aim of this initiative is to further enhance the attractiveness of ETFs as a long-term investment product and attract new investors to the capital market. The offer is available to all banks and brokers which sign an agreement for participation with us.
