While derivatives on ETFs exist both in Europe and the US, volume in a lot of these products has so far failed to take off in a meaningful sense and it is in a more indirect way which some have suggested the fund products could be a threat to futures, or at least have a bearing on derivatives markets.
As ETFs are not classed as derivatives they can be used by pension fund managers whose regulation prohibits them from freely using futures to go long or short the market. Scott Stark, CEO of pan-European electronic bond trading platform EuroMTS, said that this makes the products very attractive to institutional customers and added that the ability to trade the contracts at a share value of one has also been drawing in the retail market.
ETFs have been classed as stocks but provide exposure to an index or...