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Morgan Stanley added to Boost ETP platform
19 June 2013
New addition brings the total of authorised participants to six
Boost ETP has signed up Morgan Stanley as a new authorised participant (AP) to bring the total of APs to six, all of which are world class ETF Market Makers (MMs). Boost ETP works with more than 17 MMs and investment banks.
Boost operates an open and competitive market making model which promotes deeper liquidity across its range of ETPs; this is in contrast to the single AP model adopted by many of Boost’s competitors, which means investors in Boost ETPs should benefit from greater liquidity and tighter pricing through an open model due to increased competition.
Hector McNeil, co-CEO of Boost ETP, welcomed Morgan Stanley to its platform by noting that the ETF market maker will enhance the liquidity of Boost’s products. “Continuing inflows into the short and leverage ETP market show that short and leverage ETPs are useful tools for investors, not least because they can be used to hedge portfolios or profit in falling markets. As equity indices hover around medium-term or all-time highs, we have seen an increase in investors wanting to go short the equity market,” he said.
“One of the main reasons we focused on three times short and three times leverage ETPs was because investors were telling us they wanted an efficient, robust and transparent way to trade short and leverage. Boost ETPs are liquid, transparent, cost-effective and fully collateralised. In addition, Boost provides a number of simple and comprehensive educational tools which allows investors to understand how short and leverage ETPs work and how they might be used in a portfolio.”
In December 2012, Boost listed a platform of three times short and three times leverage ETPs consisting of 10 ETPs and 10 Exchange Traded Commodities (ETCs) on the London Stock Exchange, the first of its kind in Europe.
The ETCs and ETPs are designed to return three times the daily movement, long or short, of the relevant benchmark index. For example, if the FTSE index rises by 1% on a particular day, then “3UKL” will rise by 3% and “3UKS” will fall by 3%. However, if the FTSE index falls by 1% then “3UKL” will fall by 3% and “3UKS” will rise by 3% (less fees and adjustments).
Global short and leveraged ETP assets rose by $5.1bn (11.5%) in the first five months of 2013 to $49.3bn, as investors continue to increase their usage of short and leveraged (S&L) ETPs, according to the Boost Global Short & Leveraged ETF/ETP Report published May 31 2013. As a result of this increased usage and interest in S&L, Boost is seeing an increase in investor interest, and as a result, an increase in APs and MMs wanting to join the Boost ETP platform.
According to the Boost report, globally exchange traded volumes have also increased for S&L ETPs, increasing from $113bn to $154bn per month between December 31 2012 to May 31 2013, representing a 36% increase.