The introduction of Exchange Traded Funds (ETFs) in Germany and Europe was initially marked by challenges and initial rejection by banks. This rejection primarily stemmed from concerns about revenue losses from traditional funds. The following discusses the historical development of ETFs, the initial skepticism of banks, and the impact on the investment landscape.
Historical Development of ETFs
On April 11, 2000, the Deutsche Börse was the first exchange in Europe to introduce trading of ETFs. This marked a significant milestone in the financial industry. Initially, only two ETFs were available, focusing on European stock indices from the STOXX index family. Today, Xetra offers over 2,400 ETFs, making it one of the leading providers in Europe.
Initial Rejection by Banks
The introduction of ETFs initially faced resistance from banks. The main reason for this rejection was the concern over revenue losses from traditional funds. Banks earned significantly from management fees for active funds, whereas ETFs were seen as cost-effective, traded alternatives.
Impact on the Investment Landscape
The introduction of ETFs fundamentally changed the investment landscape. They provided investors with a cost-effective way to invest in various asset classes, leading to increased transparency and flexibility. ETFs enable investors to respond quickly and efficiently to market developments.
Changes in Cost Structure
One significant advantage of ETFs is their cost efficiency. Compared to traditional funds, ETFs are often cheaper, as they generally have lower management fees. The Deutsche Börse recently reduced settlement fees for ETFs, further enhancing cost efficiency.
Current Developments and Future Prospects
On the 25th anniversary of ETFs in Europe, the Deutsche Börse introduced a new package of measures aimed at further improving efficiency and transparency in ETF trading, including automatic price improvements and free real-time market data.