ETF market-maker sets up in Singapore

With institutional demand for exchange-traded funds growing in Asia, a Dutch ETF market-maker set up a sales trading desk in Singapore last month, leveraging off of its established market-making business in Europe.

Flow Traders started in 2004 as a prop-trading house in Amsterdam focused solely on ETFs, developed into a market-maker and has since become the biggest specialist ETF market-maker in Europe, with over 150 staff across Amsterdam, New York and now Singapore.

The sales trading team provides professional investors with two-way OTC bid-ask prices and liquidity for more than 95% of all ETFs and exchange-traded commodities listed in Asia, Europe and the US.

The Singapore desk is run by Bernardus Roelofs, global head of ETF sales trading at Flow Traders Asia. He was joined by Steve Kinoshita in August, while another person is about to join, and there are one or two more sales traders in the pipeline for the coming months.   

Roelofs says the firm chose to locate its office in Singapore due to the city state's growing importance as an Asian ETF hub.

"To be an ETF market-maker, you need to know virtually all the products on the market, and that’s the advantage of being a specialist firm," says Roelofs. “We know the ins and outs of every single ETF, all the hedges you need to make. We are delta-neutral – we don’t take positions.”

The desk started three weeks ago, he says, and feedback has been very positive from both investors and issuers. “They say it’s good we’re doing this as an independent company,” says Roelofs.

As a neutral party, he adds, Flow Traders does not offer investment advice, but can provide unbiased views based on its extensive experience of questions asked frequently by fund managers, such as about the differences between ETFs and how and when they can trade.

Roelofs points out that he has been an ETF-only sales trader for eight years. “Normally a cash equity trader doesn’t have the in-depth knowledge of all the [ETF] products out there – there’s a large number and it’s continuing to rise.”

Asked about the volume traded by the firm, he would say only: “We are at least as competitive as any on the street and offer competitive spreads.”

Roelofs suggests Flow Traders doesn’t compete directly with the big equity brokers – “for them, this is one product of many,” he says. “We are focused on a niche product or market.”

The firm trades most Asia exchanges, although not China because of the difficulties foreign players face in doing so.

It also provides liquidity for European and US ETFs and trades almost 24 hours. At least 50% of ETF trading volume done by Asia-based investors is done on exchanges outside Asia, according to industry estimates. Flow Traders has been trading Asia ETFs out of Europe since 2004.