Investment Operations

The ETF Ecosystem: Building Herd Immunity

Aite's Spencer Mindlin

According to the latest Aite Group report, regulatory structures and industry infrastructure are maturing and support continued growth for global exchange-traded funds.

The global industry has experienced significant evolution and maturity across most of the value chain: The number of ETF listings has exploded, issuers offering different types and styles of ETFs have flourished, the ETF intermediaries have reached enormous scale, and the cost to invest, in some cases, has gone down to zero. The regulatory structure and market infrastructure supporting ETFs have evolved in several significant ways, too. A new Aite Group report, The ETF Ecosystem: Building Herd Immunity, explores what other trends will affect the trading of ETFs and the overall ecosystem—and what risks and opportunities face the industry.

“The ETF industry has come along way since its 1993 beginnings. Alongside the enormous growth in assets under management and listings, the landscape of issuers, liquidity providers, and infrastructure providers has strengthened and achieved tremendous scale efficiencies,” said Spencer Mindlin, analyst at Aite Group. “ETFs have weathered multiple storms, and more recently the industry has collaborated with regulators to modernize ETF-specific regulations and guardrails to reinforce investor confidence. All told, the ETF industry looks poised to continue its trajectory,” he explains.

This report discusses some of the current trends affecting the ETF ecosystem and outlines the most relevant innovations that key players across the supply chain are deploying to deliver one of the most innovative investment products ever produced. It is based on Aite Group interviews conducted in Q3 and Q4 2019 of over a dozen U.S. participants from ETF market-makers, ETF issuers, buy-side investors of ETFs, and technology vendors working to solve problems in the ETF market.