New ETP pricing structure leads to record number of issuances
In August of last year, VP Securities announced a new, simpler price structure for exchange traded products (ETPs, also known as structured investment products or SIPs).
The new price structure went into effect on 1 January, and reduced the price for issuers for opening new instruments to DKK 75 (EUR 10) per instrument– the lowest price in the Nordic region.*
* Prices for settlement and closing of instruments have also been significantly reduced. For more information about the new pricing structure, see VPs table of fees.
New price structure leads to increased issuanceOne of the reasons for the new price structure was to create a foundation for market growth in this instrument class. And we’re pleased to see that the market has responded positively to these changes. “We have the highest number of ISINs issued in Denmark ever, and we have doubled the amount of ETPs on the Danish market in the past two years,” comments Morten Skanning, Senior Product Manager at VP Securities.
“We’re approaching 3,000 ETPs issued out of VP and traded on various exchanges, and 180 new instruments have been introduced since the start of the year. We expect to see this growth trend continue.”
Simpler process benefits issuers and investorsThe new price structure makes it easier and more economical for issuers to quickly provide instruments that enable investors to follow market developments. “ETPs are quite flexible and can cover a variety of markets and sectors, so it’s possible to issue products that suit every investor’s investment strategy and profile,” Morten Skanning explains. “For example, say you have an investor who wants to invest in companies where over 50% of the board members are women, or companies that only work with wind energy. As an issuer, you can address that investor’s interest using an ETP. ETPs are a very cost-effective way for issuers to address all of the diverse investment interests in the Danish market.”
Once the instruments are available on the market, investors can access them with relative ease. “Since you invest in ETPs using the same infrastructure as with Danish stocks and bonds, investing in them is a straightforward process for investors,” says Morten Skanning. “And with ETPs, experienced retail investors can access markets and products that previously were only accessible to banks and professional investors.”
A market with large potential
“In the conversations we have with our clients, we can see that there is an appetite for a larger, and more diverse selection of investment products on the Danish market,” Morten Skanning observes. And if market conditions across the Sound are any indication, there is significant potential in the Danish ETP market. “The Swedish ETP market is more than 10 times the size of the Danish. By simplifying our price structure for ETPs, we aim to make it easier for financial institutions to issue an even wider range of ETPs on the Danish market. From a structural perspective, I don’t see anything preventing the Danish market from reaching the same size as the Swedish.”
See also "An introduction to exchange traded products" and "VP Securities lowers prices on ETP".