Source has released 18 ETFs tracking the Dow Jones Stoxx 600 Optimised Supersector indices, which the ETF provider recently created in conjunction with Dow Jones.
The ETFs provide both long and short exposure in a single product, while the improved underlying indices offer enhanced liquidity.
Source director of marketing Michael John Lytle says: "We saw that in the existing sector products in Europe, there was no filter for the liquidity of the underlying stocks in terms of turnover or stock lending. We viewed this as a major opportunity, as the European market has such a wide range of liquidity in individual stocks."
He adds: "So to improve the European sector market we decided to create optimised sector indices and then better funds on those sectors."
The indices take into account investors' ability to borrow stocks in the stock-lending market, by adjusting the index constituents on this basis. Data Explorers provide the stock lending and short interest information.
Source has also worked with its partners - Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley and Nomura - to create a liquid lending market for these sector ETFs, which is essential for allowing investors to use them for long and short positions, Source says.
Lytle comments: "Having optimised sector indices and delivering better ETFs are two important strands which come together in our sector ETFs."
While Source's partners are focused on stock lending for these sector ETFs, Source plans to roll out stock lending on all its products over time.
In terms of the increasing use of ETFs, Lytle says that Source is keen to introduce hedge funds into the ETF sector market. In the US, hedge funds represent 30%-35% of ETF trading volumes, whereas they represent less than 1% in Europe.
Up until now, hedge funds have not typically traded ETFs and those that use them generally do so for longer-term investment. Lytle says: "If we could bring them into the market place, this could have a huge, positive impact on the overall trading flows."
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From 6 April 2019