The European exchange-traded product (ETP) industry is set to undergo substantial structural change over the next few years, according Hector McNeil, Co-CEO of Boost, the London-based specialist ETP provider.

Hector McNeil, Co-CEO of Boost.

Speaking at an APCIMS seminar dedicated to ETPs, McNeil said: “These are exciting times for the European ETP industry where significant and radical change is expected and indeed anticipated.”

He added: “We will continue to see strong asset growth into ETPs alongside major structural changes, which includes industry consolidation, both in terms of the number of providers but also the number of products.”

McNeil, a former joint Managing Partner and Head of Sales at ETF Securities, expects that the largest European ETF and ETP institutional asset managers will subsume the medium-sized issuers, taking out competition and also increasing their market share considerably.

He reckons these large players – the likes of BlackRock’s iShares, SSgA’s SPDRs and ETF Securities – will continue to dominate both domestically and globally, especially given the price compression seen in the plain vanilla products, while smaller independent issuers will find the main opportunities in specialised, value added areas, such as short and leveraged products, volatility, commodities and other innovative niches.

“I have been forecasting for some time that, in particular, many banks would exit the ETF market due to increased regulation and revenue pressure on their ‘silo provider’ model,” he added.  “We believe that the BlackRock acquisition of Credit Suisse’s ETF business will be just the start of this consolidation and that we are likely to see a 30% reduction in the numbers of ETF providers in Europe.” [See BlackRock to acquire Credit Suisse’s ETF business].