ETP volumes spike as volatility hits markets but flows remain stable

As the markets experienced large falls this week, European ETP trading soared but there have been no large re-positionings.

ETP turnover in Europe spiked yesterday in the wake of the global market drops but overall flows have remained flat this week.

Turnover in exchange-traded products increased 54% this week across Europe. Euronext, which has markets in Amsterdam, Brussels, Lisbon and Paris, saw trading increase to €853million yesterday compared to a year-to-date average of €443.2 million.

ETF turnover on the London Stock Exchange leapt to £541.38 million (€622.98 million) yesterday, up from its monthly average of £364.9 million (€419.9 million).

Despite this huge increase in trading activity caused by falls across the main global indexes, ETPs have not experienced huge outflows. There have also been no large re-positionings from riskier assets into safe-havens such as gold.

"It's mainly trading... At the beginning of the week we had quite positive inflows into Cac and Dax, over the past couple of days there have been some outflows but not of the sort you would expect given how far the market has fallen, it's an odd situation," says Nizam Hamid, head of ETF strategy, deputy head of Lyxor ETFs in London.

"Part of it's down to the fact that market moves are exaggerated because people are on holiday. People redeem assets when doing full scale asset allocation changes and those decisions makers are not making that decision at the moment."

The biggest changes have been in leveraged and inverse products, he says, some have had increases in turnover of as much as 100%. Regional products - most of which are on the Eurostoxx 50 - have had a 96% increase in turnover.

The main outflows have been from Asia Pacific products, Hamid says. He attributes this to people wanting to invest closer to home, where there is less currency risk.