Chalk one up for the
New York Stock Exchange. Thanks to an imminent merger among exchanges, Vanguard is getting ready to move 34 exchange-traded funds from the American Stock Exchange to the NYSE Arca.
The expected transfer comes on the heels of
NYSE Euronext's (NYX) proposed $260 million acquisition of the Amex, which was recently approved by members of the Amex Membership Corporation.
The deal is expected to receive
SEC approval later this year, at which time the Vanguard ETFs will begin trading on the NYSE's Arca trading platform. "We're looking forward to listing all Vanguard ETFs on the Arca exchange, which continues to make significant strides in picking up ETF trading market share," said Gus Sauter, Vanguard's chief investment officer. "Arca has a robust electronic platform with an innovative market-making function and a strong commitment to the development of its ETF business."
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The merger will extend the reach of NYSE Euronext in the ETF universe. At present, the NYSE Arca has captured about 55% of ETF and ETN assets under management in the U.S. With nearly $590 billion of ETF and ETN assets, it has the most of any exchange.
Vanguard is no stranger to ETFs either. The company launched its first ETF, the
Vanguard Total Stock Market ETF (VTI) in 2001.
The fund holds blue chips such as
Exxon Mobil (XOM),
General Electric (GE),
Microsoft (MSFT),
ChevronTexaco (CVX) and
Bank of America (BAC).
Vanguard's most recent launch was the
Vanguard Total World Stock Index ETF (VT), which seeks to track the performance of the FTSE All-World Index, a benchmark of about 2,900 stocks in 47 countries.
The merger will be a significant win for NYSE Euronext in the ETF Arena, as both the NYSE and the Amex had been battling for ETF market share. At the end of 2007, 240 ETFs and ETNs were listed on NYSE Arca. Amex has more than 200 of its own ETFs that have grown to be worth more than $300 billion in assets.
The Vanguard ETF family will be especially significant, as 34 of its 38 ETFs have been listed on the Amex since their inception. The fund company has emerged as a force in the space, and its ETF assets grew 62% over the past year (ended May 2008), to nearly $51 billion in total assets.
With the Amex rival out of the way, NYSE Euronext will likely face its steepest competition for new ETF listings from the
Nasdaq, which currently controls 36% of all U.S. ETF volume.
The merger will leave ETF providers with less choice in terms of listing venues. And that could allow the Nasdaq to receive more consideration prior to future ETF listings.
Vanguard does not expect the consumer to notice any major changes. "In some respects the short-term impact should be negligible," says Martha Papariello, who runs Vanguard's Financial Advisor Services business unit. "From a cost standpoint, there will be absolutely no change for investors. We expect no change in our spreads, and there will be no impact on our expense ratios."
Over the long run, the merger could prove to be advantageous to the growth of Vanguard's ETF business. "NYSE Arca has very strong technology in its trading platform," says Papariello. "If we are to take advantage of the NYSE-Euronext partnership, it could open additional doors for us."
Vanguard is still awaiting the passage of the comment period on the merger before it will be able to make its move official. "We are still a little ways away from the move taking effect," says Papariello. "The fall time frame would be a reasonable expectation for the move."
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