ETF Securities introduces largest exchange traded currency platform

ETF Securities (ETFS) has announced planning to launch the largest and Europe's first exchange traded currency (currency ETCs) platform with trading expected to begin the week of November 9.

With over $3.2 trillion of currency trading daily, it is one of the last asset classes to be packaged in the form of an exchange traded product. ETFS has accumulated over $15 billion in assets and recent trading of around $1.4 billion a week.

Initially, 18 currency ETCs will be listed on the London Stock Exchange (LSE) which will track recently launched MSFX Currency Indices. The initial currency ETCs provide long or short passive exposure to G10 currencies versus the US dollar and include the Australian, Canadian and New Zealand dollar, Swiss franc, the euro, sterling, the Norwegian krone, the Swedish krona and yen.

The ETCs also provide exposure to local interest rates in addition to foreign exchange movements between the relevant currency and US dollars.

The currency ETCs will be fully collateralised to mitigate counter-party risk and will be listed in the ETC segment of the LSE.

Currency ETCs are used by investors that want to diversify their portfolio through the addition of a new asset class which has a low correlation with equities and bonds or for investors that want to take advantage of tactical or strategic macro opportunities using the foreign exchange market.

Similar to exchange traded funds (ETFs), ETCs can be created and redeemed on a continuous basis by market makers, matching the liquidity of the underlying foreign exchange markets and can be traded by investors on a regulated exchange in the same way as any equity.

Currency ETCs will provide accurate and transparent currency exposure to recognised benchmarks in a single trade. There is no requirement for a foreign currency account and no trading or management of futures/forward contracts since ETCs are priced off new currency indices published by Morgan Stanley.

The Currency ETCs will track Morgan Stanley Foreign Exchange Indices (MSFXSM Indices) and are designed to replicate a fully collateralised long or short investment in one of the G10 currencies against the US dollar while providing exposure to local interest rates. The indexes follow an objective and systematic methodology overseen by an index committee and are based off publicly available data sources that reflect actual quotes / trades by market participants.

Investors will be able to buy and sell the ETCs on the LSE through regulated brokers or ETFS’s network of approved market makers and authorised participants. Currency ETCs will be traded with all the same order types available to equities.

The minimum trade size is one security. Settlement is T+3 (trade date plus three business days) in CREST and each currency ETC is subject to a 0.39% a year management charge.