Asset and Portfolio Management


ETF Market Making

November turned out to be another month of high volatility in equity markets, following on from the market sell-off seen in October that was sparked by investor concerns on the sustainability of economic growth, rising US interest rates and ongoing trade tensions. While major indices managed to recover ground at the start of the month, mid-month saw another dive in prices, with several indices closing near their October lows again.

In the US, the Nasdaq 100 fared even worse, reaching a seven-month low at 6,440 points. However, equity markets rallied in the last couple of days of November, allowing the Dow Jones and the S&P 500 to finish up around 1.7%, though the Nasdaq 100 closed slightly down on the month.

Elsewhere, European equities saw new lows in November. All major European indices including the EURO STOXX 50, DAX, CAC 40 and the UK’s large caps ended the November session in negative territory.

Emerging markets proved to be the strongest performers. Hong Kong’s benchmark Hang Seng rose 6% on hopes of a ceasefire in the US-Chinese trade war while India’s Nifty 50 climbed more than 4%. Brazil’s leading index, the IBOVESPA, crossed the 90,000-point line and reached an all-time high, backed by a supportive policy from the new government.

Commerzbank ETF Market Making saw a strong month once again, executing more than 194,000 transactions in November. The flow distribution was in favour of equities, which took an 87% share. Fixed income represented around 10% of all trades and commodities 3%. The overall trade volume was focused on the buy side. Transactions in both equities and fixed income were clearly focused on the buy side, which should come as no surprise with so many major indices trading higher at the end of the month. Trades in commodities, meanwhile, showed a balanced distribution to the buy and sell sides.

Within equities, the S&P 500 was once again the most traded underlying, taking 9% of the trade volume, followed by the MSCI World (7%), Germany’s DAX (4%) and the EURO STOXX 50 (3%). High volatility in equity markets led to a significant flow in those ETFs referring to low or minimum volatility strategies such as the MSCI World Minimum Volatility (1%). Trade in all the underlyings mentioned above was focused on the buy side.

Turning to geography, the US remained the most active region in November with 28%, followed by global (19%), Europe (12%), the eurozone (12%) and Germany (8%). Buy-side transactions were dominated by China, the US, Germany and Japan. Sell-side transactions were strong in ETFs referring to Asia-Pacific ex. Japan.


With regards to sectors, energy took the lead with 20%. Technology (16%) and healthcare (12%) took the second and third spots. Healthcare was also one of the market’s best performing sectors in November; the S&P 500 Health Care Index added 6.8% compared to a 2.1% loss from the S&P 500 Information Technology Index. The buy side was dominated by communications – backed by a strong performance in November (STOXX Europe 600 Telecommunication up more than 8.6%) and, furthermore, by industrials and banks. Sell-side activity dominated in insurance, consumer discretionary and energy – the latter was the worst performing sector in November with the S&P 500 Energy Index posting a 2.2% loss.

Within fixed income, the most traded underlying was the 
eb.rexx Money Market which dominated the buy side (0.88%). The Barclays EUR Corporate Bonds 1-5Y was actively traded on both the buy and sell sides. Additionally, trades were done in ETFs referring to US Treasuries. On a month-to-month basis, the 10-year US Treasury yield fell by 17 basis points to 2.99%. Italian bond yields fell sharply, backed by the governing coalition’s plan to reduce the budget deficit target for the next year.

Turning to commodities, the Bloomberg Commodity Index ended the November session in negative territory after hitting a new 17-month low. The most traded ETFs were those referring to gold and the CBK Commodity ex-Agri. Finally, trading activity was seen in WTI and Brent crude oil, with oil prices massively under pressure for the second month in a row. WTI and Brent Crude Oil Futures both crashed and lost more than 22%.

Commerzbank ETF flow from 01/11/2018 to 30/11/2018

Asset class 
in % of total

Client sell

Asset class

Client buy

Asset class

Underlying

Underlying

87%

39%

Equity

48%

Equity

4%

MSCI World

6%

S&P 500

3%

S&P 500

3%

MSCI World

2%

DAX

2%

DAX

1%

MSCI EMU

2%

EURO STOXX 50

1%

EURO STOXX 50

1%

MSCI EMU

0.98%

MSCI Europe

1%

MSCI World Minimum Vol

0.84%

MSCI USA

1%

STOXX Europe 600

0.83%

MSCI Emerging Markets

0.98%

MSCI Europe

0.80%

MSCI Japan

0.92%

MSCI Japan

0.58%

MSCI World Energy

0.83%

MSCI Emerging Markets

10%

4%

Fixed income

6%

Fixed income

0.20%

Barclays EUR Corporate Bonds 1–5Y

0.88%

eb.rexx Fixed Income

0.18%

DB EONIA

0.28%

Barclays EUR Corporate Bonds 1-5Y

0.16%

Barclays US Govt Infl Lkd

0.27%

Barclays US Trsy 10 Yr Term

0.14%

Markit iBoxx Liquid High Yield

0.26%

Barclays Euro Gov 5Y Term

0.12%

eb.rexx Fixed Income

0.25%

Barclays US Treasury 1–3Yr Term

3%

1.31%

Commodity

1.64%

Commodity

0.29%

LBMA Gold Price

0.44%

LBMA Gold Price

0.25%

CBK Commodity ex-Agri

0.38%

CBK Commodity ex-Agri Hdg EUR

0.20%

Gold Spot

0.17%

Gold Spot

0.10%

WTI Crude Oil

0.12%

CBK Commodity ex-Agri

0.05%

DB Commodity Optimum Yield

0.08%

Brent Oil

Source: Commerzbank, ETF Market Making. Data as of November 2018

In % of total

Issuer

Underlying

Ratio

Client sell

Client buy

3%

iShares ETF

MSCI World

52%

48%

3%

iShares ETF

S&P 500

32%

68%

2%

Vanguard ETF

S&P 500

34%

66%

1%

iShares ETF

MSCI World Minimum Vol

27%

73%

1%

ComStage ETF

DAX

21%

79%

1%

db x-trackers ETF

MSCI EMU

57%

43%

1%

iShares ETF

eb.rexx Fixed Income

12%

88%

1%

iShares ETF

DAX

47%

53%

1%

iShares ETF

MSCI World

72%

28%

1%

iShares ETF

S&P 500 Euro Hdg

18%

82%

Most traded ETFs from 01/11/2018 to 30/11/2018
Most traded ETFs from 01/11/2018 to 30/11/2018
Source: Commerzbank Corporates & Markets / ETF Market Making

In % of total

Region

Ratio

Client sell

Client buy

28%

USA

42%

58%

19%

Global

48%

52%

12%

Europe

46%

54%

12%

Eurozone

47%

53%

8%

Germany

40%

60%

4%

Japan

47%

53%

4%

Emerging Markets

47%

53%

2%

UK

44%

56%

1%

China

29%

71%

1%

Asia-Pacific ex. Japan

50%

50%

9%

Others

44%

56%

Most traded ETFs by region from 01/11/2018 to 30/11/2018
Most traded ETFs by region from 01/11/2018 to 30/11/2018
Source: Commerzbank Corporates & Markets / ETF Market Making

In % of total

Sector

Ratio

Client sell

Client buy

20%

Energy

61%

39%

16%

Technology

50%

50%

12%

Healthcare

55%

45%

7%

Real estate

55%

45%

7%

Basic resources

56%

44%

6%

Banks

47%

53%

6%

Utilities

53%

47%

5%

Financials

57%

43%

4%

Consumer staples

58%

42%

4%

Automobiles

48%

52%

3%

Communications

39%

61%

3%

Construction

52%

48%

3%

Consumer discretionary

60%

40%

2%

Industrials

41%

59%

2%

Insurance

62%

38%

2%

Chemicals

58%

42%

Most traded ETFs by sector from 01/11/2018 to 30/11/2018
Most traded ETFs by sector from 01/11/2018 to 30/11/2018
Source: Commerzbank Corporates & Markets / ETF Market Making