South Korea’s Mirae builds up in European ETF industry

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South Korean monetary group Mirae has expanded its presence in Europe by shopping for the area’s third-largest market maker in trade traded funds.

Mirae is snapping up London-based GHCO, a challenger to the near-duopoly that Flow Traders and Jane Street maintain in off-exchange buying and selling of ETFs in Europe.

The transfer continues a flurry of exercise in the fast-growing ETF market by Seoul-based Mirae Asset Financial Group, which has divisions encompassing asset administration, life insurance coverage and brokerage companies.

In June it purchased ETF Securities, one of many pioneers of Australia’s ETF sector. This constructed on its acquisition of Global X, a New York-based issuer additionally lively in Europe and Asia, in 2018, and its buy of Canada’s Horizons ETFs in 2011. South Korea-based Tiger ETF can be in its secure.

Mirae additionally operates market making desks in South Korea and Hong Kong, an ETF buying and selling desk in New York and a small workforce of mounted revenue merchants in London, nevertheless it has no buying and selling infrastructure for ETFs in Europe.

“We have got a major Asian bank trying to meaningfully expand in Europe and in doing so they are genuinely inclined to invest to build a third alternative in what is otherwise a duopoly in market making in ETFs,” stated Dan Izzo, chief govt of GHCO, who will keep on in his position.

The deal might increase issues over a possible battle of curiosity, provided that GHCO is lead market maker on greater than 40 per cent of European ETF listings, in response to Izzo, and can now be owned by a dad or mum that could be a direct competitor to rival issuers.

GHCO claims to be the biggest market maker for on-exchange ETF buying and selling in Europe, with month-to-month buying and selling quantity of $3bn, in response to Mirae. But it’s a very small participant on “over-the-counter” off-exchange platforms comparable to Tradeweb and Bloomberg, the place the overwhelming majority of buying and selling takes place. Market contributors stated that ought to assuage issues.

“I think it’s a good thing. Market making has only a few players and having another one that is better capitalised is a good thing for all players in the ETF market from the issuers to the investors,” stated Hector McNeil, co-founder and co-chief govt of ETF issuer HANetf.

MJ Lytle, chief govt of Tabula Investment Management, a bond ETF specialist, stated the separation in operations between Mirae and Global X additionally helps. “They are in a lot of businesses and I would trust that they would run the business separately,” he stated.

Lytle stated the European ETF market making sector had not absolutely recovered from the retrenchment of banks comparable to Deutsche Bank and Société Générale from the sector in the wake of the 2008 international monetary disaster, when banks deleveraged and danger urge for food drained away.

Deutsche and SocGen have additionally moved their ETF companies from their funding banking divisions into their asset administration arms, loosening the connection between their market making and ETF operations, Lytle stated.

“I’m super happy if GHCO gets an infusion of capital because they do their business well, but they would of course benefit from having even more firepower,” he added.

“The market making space in Europe needs investing in,” Lytle stated. “It’s a space that has been squeezed on profitability and we have had people who have left the picture. That means it’s more dependent on entities that are thinly capitalised and more focused on quarter-on-quarter profitability, and if it’s not working for them they can divest.”

Izzo stated GHCO had 40 employees, a quantity that will probably be elevated by an extra 10 or so by the brand new funding.

“Having a new owner like Mirae that has lots of organic flows will help catapult us to greater volume in the OTC business,” he stated. “We are arguably a distant third. This is meant to give us what we need to take market share.”

A spokesman for Mirae Asset Securities UK stated that “adding an ETF arm at this time presents an opportunity to deploy resources into a well-established firm in a fast-growing market”.

Financial phrases weren’t disclosed.



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