Deutsche to move three fixed income ETFs to Bats

May 24th, 2016 | By | Category: Fixed Income

Exchange-traded fund provider Deutsche Asset Management has announced it will change the primary listing venue for three Deutsche X-tracker ETFs to leading electronic exchange Bats Exchange from NYSE Arca.

Deutsche Asset Management to move three fixed income ETFs to Bats

Bats has experienced significant interest over the past six months from ETF providers looking to switch listing venues to their exchange due to issuer incentive programs launched in October last year.

The three ETFs, set to move on 9th June, track Solactive indices which target exposure to the emerging markets, US investment grade, and US high yield fixed income markets. All funds are designed to minimize interest rate risk across the yield curve – the risk that rising rates will cause bond prices to fall – by matching the interest-rate sensitivity of long high-yield bonds with that of short positions in US Treasury futures.

The following ETFs transferring to the Bats Exchange from NYSE Arca, are:
Deutsche X-trackers Emerging Markets Bond – Interest Rate Hedged ETF (EMIH) (Total expense ratio – 0.50%)
Deutsche X-trackers Investment Grade Bond – Interest Rate Hedged ETF (IGIH) (TER – 0.25%)
Deutsche X-trackers High Yield Corporate Bond – Interest Rate Hedged ETF (HYIH) (TER – 0.45%)

Current shareholders of these Deutsche X-trackers funds are not required to take any action and the transfer is not expected to have any impact on the trading of fund shares.

Bats has welcomed a significant number of ETF issuers over the past six months who have switched the listing venue of their products in favour of the Bats ETF Marketplace. A potential explanation for these moves is the popularity of initiatives launched by Bats in October last year that provide incentives for issuers to transfer their ETFs.

The BATS Issuer Incentive program offers an annual rebate to issuers based on the consolidated average daily volume (CADV) of trading occurring on their ETPs. Traditionally, issuers would be required to pay listing fees with an exchange, potentially as high as $55,000, on an annual basis. BATS has shaken up the industry by allowing these providers to offset these costs based on the level of trading on their products.

The amount of the rebate depends on a schedule of CADV trading brackets and their corresponding incentive levels. For an ETP to qualify for a higher bracket, it needs to maintain that CADV trading level for three consecutive months. The smallest CADV trading bracket runs from 1-3 million shares, offering a $3,000 incentive; the largest CADV trading bracket includes ETPs trading a daily average of over 35 million shares, offering a compelling $400,000 rebate.

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