Investors turned to ETFs during Tuesday’s market volatility

Investors turned to ETFs during Tuesday’s market volatility, with new MiFID II reporting rules shining a brighter light on trading activity:

$8.8bn traded across the iShares EMEA range, exchange volumes were equivalent to 340% of the average daily volume. By comparison, $5bn traded on June 24th the day after the Brexit vote.

As a result of MiFID II post-trade requirements, all over-the-counter trades are now reported creating more visibility for investors. Of the $8.8bn traded yesterday, about half [$4.9bn] was off exchange but newly visible to investors.

ETF trading was orderly throughout Tuesday’s market volatility, amid heavy global volumes.

Benoit Sorel, Head of iShares at BlackRock France commented: “The challenge for many European investors looking to invest using ETFs has been the inability to get a full picture of trading activity. MiFID II trade reporting requirements are changing all that, by shining a brighter light on where and how much ETFs are trading. As a result, we expect to see more investors building smart, modern portfolios using ETFs, both at the core and for tactical plays.”

Wei Li, Head of Investment Strategy, iShares EMEA comments on what ETF flow trends reveal about investor sentiment, and market outlook: “Two-way flows in developed market equity ETFs suggest divergent investor views. As markets were falling some investors were scoping out ‘buy-on-dip’ strategies citing strong fundamentals. We believe the slide was mainly driven by an unwinding of popular trades betting on low equity volatility. The pullback could be an opportunity to add risk especially as stretched valuation had been a concern. We favour equities in Eurozone, Japan and emerging markets in this environment.”

Top 10 European iShares ETF trades by volume on Tuesday, 6th Feb