Industry Updates

Tradeweb introduces notional ETF trading to RFQ platform

Investors are now able to submit ETF orders via Tradeweb’s RFQ platform based on a defined cash value

Tom Eckett

Adam Gould Tradeweb

Tradeweb has introduced notional-based trading for global ETFs via its request-for-quote (RFQ) platform, ETF Stream can reveal.

Investors are now able to submit ETF orders via Tradeweb’s RFQ platform based on a defined cash value which enables them to set a specific spend when executing with dealers.

To achieve this, Tradeweb will calculate the final number of shares using rounding logic, a process that takes the desired notional and divides it by the winning price.

The move will enable traders to execute orders without having to estimate the number of shares pre-trade and reduce requirements to adjust quantities post-trade.

ETF trading has historically been centred around shares trading, similar to trading equities, however, notional-based trading will now be available to investors across both risk and net-asset value (NAV) execution methods.

The firm said notional-based ETF trading is particularly important in Europe as the high fragmentation in on-exchange liquidity makes estimating share quantities a challenge.

Adam Gould (pictured), head of equities at Tradeweb, said: “As the client type demographic continues to evolve among ETF investors, we have seen increasing demand from asset managers, retail aggregators and the wealth community to handle ETF orders based on a notional value with an adjustable level of shares during the RFQ.

“The launch of notional trading for global ETFs is a great example of client-led innovation.

“For certain transactions, asset managers would rather use cash-value than number of shares. This product enhancement allows them to do exactly that in a more efficient and flexible way.”

Executing via RFQ platforms remains the preferred option for ETF traders in Europe. According to data from Jane Street, RFQ’s ETP trading market share grew to 50% last year, up from 48% in 2021 and 44% in 2020.

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