More Flow Traders NV: Dominating European ETP Market

“There are two kinds of people in the world: 1) Those who can extrapolate from incomplete data

Oftentimes, when we are expanding an existing model – or, focusing in on a new modeling thread – it makes more sense to keep going until we have absorbed all the relevant data, even after we have already teased some of the findings on the Feed, than to stop and restart down the road. Better to stay in a patch of weeds once you are already stuck down in there. This is the case here. We have published some updated findings on Flow Traders last week – and its closest peer, Virtu Financial, the week before that – but there is still more of note to share:

We are fascinated by the role that the exchange traded product (ETP) market is having on the broader markets, on strategy selection and development, on asset manager growth (and decline), and on the evolution of investor behavior. We have recently been detailing how the growth in listed products has come mainly as a result of growth in ETP’s (aka ETF’s), in the article, “The Stock Market is Made of These.” And, we are particularly fascinated by those rarest of rare market creatures who deploy a ton of technology and know-how to operate closest to the sources of liquidity across cash, “pooled” (or, structured), and derivative products – mainly in US equities. (Our initial assembly of the Top 100 Players in US Listed Market Structure may prove instructive here, particularly now that we are on the verge of expanding that storyboard in the coming days.)

Most of these players – market makers, proprietary trading firms, a short list of legendary quant managers and a declining roster of sell-side firms – tend to specialize in one product class. We might go a step further to tag each of these players’ “wheelhouse” as including a product-asset class-region combo, like US cash equities or European equity ETFs of fixed income futures. However, what interests us most is the subset of these players who trade successfully across product classes and the potential to exhibit leadership across multiple product-asset class-region combos.

This cross-market prowess is a major artery of our research for the foreseeable future because we believe that the (few) players who succeed there are going to be the most dominant players in the #winnertakeall global markets going forward, and therefore, be the ones who impact all other players that come after them in the succession of strategies according to our asset management ecosystem map. So far, it is the option market makers and traders that possess the capacity to wield market dominance – if they haven’t already achieved it – because they are the one’s who demonstrate the capacity to play the computational equivalent of 3-dimensional chess…

Anyway, what we wanted to share here is along the lines of dominance (and concentration) in the ETP market. In the exhibit below, Alphacution presents the regional segmentation of quarterly ETP value traded from BlackRock (by way of Flow Traders’ quarterly financial disclosures). Here we simply want to illustrate to relative sizes of Americas, Europe and Asia ETP value traded (which average 85.3%, 5.6% and 9.0%, respectively, over the 21 quarter period).

Note: The World Federation of Exchanges (WFE) also publishes quite comprehensive statistics on the global ETP market, however, until we figure out how to reconcile those figures with BlackRock’s figures, we are going with the dataset that Flow Traders uses in order to make our point, which is this:

Based on public data, Alphacution has determined that Flow Traders has been interacting with one-third to one-half of the European ETP turnover for at least the past 5 years; a notably strong position as compared to the 1-2% market share of Americas and Asia ETP turnover.

Now, we don’t believe there is another player as dominant in the European ETP market as Flow Traders. Certainly, there isn’t much room for an equivalently-dominant player, but then again we don’t have the same level of transparency in European markets as we do in US markets (via 13F and other filings) to be sure. That said, our ongoing efforts at contextual modeling is likely to yield a means by which to estimate rankings in these and other markets.

Watch this space…

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By | 2019-05-29T22:18:58-04:00 May 28th, 2019|Alphacution Feed|

About the Author:

Paul Rowady is the Director of Research for Alphacution Research Conservatory, a research and strategic advisory platform uniquely focused on modeling and benchmarking the impacts of technology on global financial markets and the businesses of trading, asset management and banking. He is a 30-year veteran of the proprietary, quantitative and derivatives trading arenas. Contact:; Follow: @alphacution.