For professional investors only Trading European Exchange Traded Products June 2009 One of the most substantial shifts in markets and trading in Europe over the past year has been the dramatic increase in ETF turnover, both in absolute levels and as a proportion of total trading activity. Since January 2008 equity turnover has fallen by over 61% whilst ETF turnover has risen by 27% leading to European exchange traded products accounting for close to 11% of total trading. This document looks at spreads for ETFs over time and intraday trading patterns in terms of spreads and liquidity. On a pan-european basis we consider the trends in products in general with an overview of average spreads and market depth.
Table of Contents Introduction and Overview.......................................................................................3 Trading European Exchange Traded Products ( ETPs )..............................................................4 Daily Average Spreads ETF vs Underlying Index....................................................................5 European On-Exchange and OTC Volumes.........................................................................6 Intraday Trading Patterns........................................................................................7 Global Index Performance........................................................................................8 ETP Market Overview...........................................................................................9 Equity Index ETF Focus..........................................................................................10 Methodology..................................................................................................12 All trading and spread data as at end April 2009. All market performance related data as at end May 2009. ishares Europe Sales Strategy and Markets Team Nizam Hamid Managing Director Head of Sales Strategy, Europe +44 20 7668 8385 nizam.hamid@barclaysglobal.com Kris Walesby Senior Markets Analyst +44 207 668 7509 kris.walesby@barclaysglobal.com Slawomir Rzeszotko Markets Analyst +44 207 668 4272 slawomir.rzeszotko@barclaysglobal.com For further information please e-mail insights@ishares.co.uk 2
Introduction and Overview One of the most substantial shifts in markets and trading in Europe over the past year has been the dramatic increase in ETF turnover, both in absolute levels and as a proportion of total trading activity. Whilst equity and fixed income markets have been characterised by sharply higher volatility, with average levels of volatility reaching near record highs, trading volumes have behaved differently. In Europe, if one uses the STOXX 600 as a proxy for a broad group of pan-european equities, one can observe that turnover, on a monthly basis, peaked at 1,400bn in January 2008 but in April this year, it fell sharply to 542bn. Turnover has fallen by over 61% from this relative high point. There has been a similarly rapid decline in trading in Europe s leading futures contract, with notional turnover in the DJ Euro STOXX 50 futures falling from over 1,600bn at the beginning of 2008 to recent levels of 571bn, a decline of around 65%. Over the same period pan-european ETF turnover, as measured by both on-exchange and OTC trades has risen by almost 6% from 46.5bn to close to 59bn. In fact ETF trading activity in Europe peaked in October 2008 at close to 79bn at a time of extreme volatility and as investors generally sought to use high liquidity delta one products to manage portfolio exposures. ETF turnover over the past six months has risen by over 27%, whilst over the past year activity is 120% higher. The overall impact of these trends is that ETFs now feature as a considerably higher proportion of total trading activity in Europe. Over the past year they have risen from a relatively modest 2.8% of total turnover to over 10.8% at the end of April, a small reduction from peak levels of 11.3% reached in February 2009. This sustained growth in turnover, against a backdrop of weak market conditions and generally lower trading levels in underlying equities and other delta one products is a strong indication of investor preference for ETFs. Figure 1: European equity and futures turnover Figure 2: European ETP market share 2,000.0 1,800.0 1,600.0 1,400.0 1,200.0 1,000.0 800.0 600.0 400.0 200.0 0.0 Jan-08 May-08 Sep-08 Jan-09 May-09 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Jan-08 May-08 Sep-08 Jan-09 May-09 STOXX 600 Turnover EURO STOXX 50 futures Notional ETF Turnover as % of market turnover, Citigroup Figure 3: European ETP turnover Figure 4: Average equity and fixed income volatility 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Jan-08 May-08 Sep-08 Jan-09 May-09 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 European ETF Turnover Average Equity Volatility Average Fixed Income, Citigroup 3
Trading European ETPs In this report we aim to provide detailed quantitative data relating to main features that investors should consider when trading ETFs. Trading is an important part of assessing the total cost of ownership for different ETFs, however, it can be one of the most challenging areas to analyse due to the plethora of trading venues, complexity and volume of data and the scale of the available number of products. One of the key attractions relating to ETFs is their on-exchange liquidity and accessibility. In order to further investors knowledge and understanding of the trading environment we believe that it is important to track variables such as intraday spreads, how these compare with the underlying securities, onexchange and OTC levels of liquidity and how spreads in general have evolved as market conditions have changed. Main European indices average bid/ask spreads An important comparative statistic for investors considering trading ETFs is how the bid ask spread for the ETF measures up against the equivalent measurement for the underlying equities at an index level. There is a natural benefit to secondary trading volume and general levels of activity when an ETF has a spread which is lower than the underlying securities in the index. It is also useful even in the context of the ETF primary market for investors to be able to compare and monitor trading costs. Ultimately the weighted average spread of the index and the liquidity of the underlying securities represents the best measure of total costs, especially in the context of physical ETFs. The charts on page 5 show the average intraday spreads for the index constituents in the FTSE 100, DAX and DJ Euro STOXX 50 on a daily basis since July 2008. The data, sourced from Citigroup, is based on weighted average daily individual constituent spreads and represents a useful indication of the trading costs for the underlying index, although it does not capture any estimate of expected market impact. The ETF related spreads are for the most liquid ishares ETF representative of the index and trading on the most liquid exchange. In both cases the data is shown using the average of 10 day s data in order to provide a better indication of general trends. Lower spreads highlight liquidity and lower trading costs If one considers the FTSE 100 Index and the equivalent ishares ETF, prior to the main jump in volatility in October 2008, these had broadly similar spreads at around 10bps. As market volatility increased the ETF experienced wider spreads with the differential over the index rising to just over 5.8bps at the beginning of November 2008. This was not sustained as ETF spreads rapidly decreased such that by the third week of November, ETF spreads were lower than the underlying equity market. This trend has persisted and whilst the widest subsequent spread was a discount of over 5bps in early Daily Average Spreads ETF vs Underlying Index Spreads and rolling 10 day average ETFs spread vs daily spread on underlying securities Figure 5: ishares FTSE 100 spreads Basis points 25 20 15 10 5 0 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 ETF Index, Citigroup Figure 6: ishares FTSE 100 volume m 140 120 100 80 60 40 20 0 Jul-08 Aug-08 Oct-08 Nov-08 Jan-09 Feb-09 Apr-09 4
January 2009, it has recently been relatively steady at around 4.5bps. Over the same period liquidity in the ETF has also remained robust especially in the context of dull underlying equity market activity. In the case of the DAX the trends have been different with the ETF having traded at a consistently lower spread than the equities underlying the index. Even at points of extreme market volatility, unlike with the FTSE 100, ETF spreads remained at a modest discount. The peak differential was over 5.3bps which occurred towards the end of November 2008 and since then the difference has, on average, remained relatively constant at around 3.5bps. The ishares DAX (DE) ETF was the highest ranked ETF in Europe in terms of on-exchange turnover in April 2009 with average daily traded volume of over 88m. Eurozone ETF spreads move in line with the market The Dow Jones Euro STOXX 50 (DE) spread profile in terms of both the index and ETF differs significantly from the trends shown in the FTSE 100 and the DAX. In particular at times of peak volatility in mid-october 2008, the ETF spread jumped to over 28bps and was at a 14bps premium to the spreads in the underlying equities. Overall ETF spreads remained higher than the underlying market until mid-january of this year and recently they have moved broadly in line with both the ETF and the underlying securities have spreads of around 10bps. Daily Average Spreads ETF vs Underlying Index Spreads and rolling 10 day average ETFs spread vs daily spread on underlying securities Figure 7: ishares DAX (DE) spreads Basis points 16 14 12 10 8 6 4 2 0 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09Mar-09 Apr-09 May-09 ETF Index Figure 8: ishares DAX (DE) volume m 400 350 300 250 200 150 100 50 0 Jul-08 Aug-08 Oct-08 Nov-08 Jan-09 Feb-09 Apr-09, Citigroup Figure 9: ishares DJ Euro STOXX 50 (DE) spreads Basis points 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 ETF Index Figure 10: ishares DJ Euro STOXX 50 (DE) volume m 450 400 350 300 250 200 150 100 50 0 Jul-08 Aug-08 Oct-08 Nov-08 Jan-09 Feb-09 Apr-09, Citigroup 5
European On-Exchange and OTC Volumes The increase in total trading activity in exchange traded products, both on-exchange and OTC has also coincided with changing underlying dynamics of the categories of products that are traded. Unlike in October 2008 when European regional ETFs dominated trading activity, over the past month the main focus has been in single country ETFs. These have accounted for close to 28% of total turnover and reached close to the highest levels seen over the past year. In terms of trading activity, non-delta one products, such as inverse, short and leveraged products are now the second largest category in Europe with trading at over 10.9bn and over 18.6% of total activity. The increased use of these products comes against a background of high levels of volatility that are generally detrimental to their performance in providing a suitable hedge to market moves. Regional ETFs, including indices such as the DJ Euro STOXX 50, have moved from a dominant position to being the third largest category with around 17.6% of the total market. The next most significant area is fixed income which traded over 7.7bn of ETFs giving a market share of over 13%. An important factor in assessing European trading activity is the sizeable amount that is neither reported on an OTC basis nor printed on-exchange. We have aggregated as much available data relating to trading, including OTC data that is reported under various sources such as Bloomberg and Clearstream. This helps provide a more accurate overall estimate of activity. In this context we note that OTC trading currently represents 38% of the total, with the Deutsche Boerse ranking second with 19% of all European trading activity. Figure 11: European ETP turnover by category m 25,000 20,000 15,000 10,000 5,000 0 Jan-08 May-08 Sep-08 Jan-09 May-09 Bond Commodity Country Currency Non Delta 1 Regional Sector Style World Country Table 1: European ETP turnover breakdown Category Turnover (Em) Turnover as % of Total Bond 7,721.6 13.15% Commodity 3,625.9 6.18% Country 16,342.7 27.84% Currency 13.9 0.02% Non Delta 1 10,944.9 18.64% Regional 10,346.6 17.62% Sector 3,404.0 5.80% Style 2,411.0 4.11% World Country 3,898.3 6.64% Total 58,708.9 100.00% Source: Barclays Global Investors, Bloomberg Source: Barclays Global Investors, Bloomberg Figure 12: April 2009 European on-exchange and printed OTC traded turnover by issuer Figure 13: April 2009 European on-exchange and printed OTC traded turnover by exchange CSFB XMTCH SocGen Other Xact Lyxor db x-trackers ishares 0% 10% 20% 30% 40% 50% 60% Stockholm Milan London EN Paris Other Frankfurt OTC 0% 10% 20% 30% 40% 50% 6
Intraday Trading Patterns Intraday trading patterns are important for many investors, especially those that access secondary market liquidity and have a greater focus on electronic connectivity and direct market access trading applications. Understanding the intraday volatility of spreads and the typical dispersion of liquidity can add significant extra information with respect to trading and execution strategies. In order to provide intraday data we have captured bid offer spreads on a minute by minute basis over the course of the trading day for a whole month. In this instance the trading volume can only reflect on-exchange activity that can be captured intraday. A useful example of how the information can be utilised would relate to the implementation of intraday execution strategies with different benchmarks from a performance perspective. Deciding on whether to use a Volume Weighted Average Price (VWAP), or Market on Close (MOC) is typically dependent on the liquidity profile in the secondary market. In the case of ETFs where there is an Figure 14: ishares DAX (DE) Xetra efficient creation and redemption process investors should also take into account the underlying physical assets trading characteristics. Generally one can observe that after the open, ETF liquidity tends to drift ahead of the US market open which is also typical of the underlying physical equity market. Other intraday factors that tend to boost trading volumes include the announcement of US economic statistics. Another important time that is specific to ETFs is the cut-off times for the fund. This is point after which the authorised participants no longer have the ability to create and redeem with the fund for that day. For ishares, many of these cut off times are 3:30 pm London time and it is evident how volumes decline after this point. This profile of on-exchange volumes for ETFs is not mirrored by the trading profile of the underlying securities, where liquidity tends to be concentrated at the open and in the closing market auctions. Figure 15: ishares FTSE 100 LSE 5.5 14.0 6.8 7.0 5.4 5.3 12.0 10.0 6.6 6.4 6.2 6.0 5.0 5.2 5.1 8.0 6.0 6.0 5.8 5.6 4.0 3.0 5.0 4.9 4.0 2.0 5.4 5.2 5.0 2.0 1.0 4.8 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 0.0 4.8 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 0.0 Spread (bps) Traded volume - Euro (rhs) Spread (bps) Traded volume - GBP (rhs) Figure 16: ishares DJ Euro STOXX 50 (DE) Xetra Figure 17: ishares DJ Euro STOXX 50 Xetra 10.5 10.0 10.4 5.0 10.0 9.0 8.0 10.2 10.0 4.5 4.0 9.5 7.0 6.0 9.8 9.6 3.5 3.0 9.0 5.0 9.4 2.5 8.5 4.0 3.0 9.2 9.0 2.0 1.5 8.0 2.0 1.0 8.8 8.6 1.0 0.5 7.5 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 0.0 8.4 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 0.0 Spread (bps) Traded volume - Euro (rhs) Spread (bps) Traded volume - Euro (rhs) 7
Global Index Performance A key feature of equity markets in May 2009 was the modest recovery across the board in the main developed market indices. In Europe the AEX rose by over 7.8%, whilst the more defensive Swiss Market Index was a relative laggard rising by only 2.4%. The outstanding performance in Europe came from Emerging markets with the MSCI EM Eastern Europe Index rising by 24.6%. There were similar trends in the American markets with key developed markets such as the S&P 500 rising by 5.3% in $ terms and with the Nasdaq Composite rising by 3.3%. The MSCI Emerging Market Latin America Index rose by 20.4% in $ terms and 12.6% in. At a single country level, Brazil, as measured by the Bovespa rose by 16.2% in. In Asia market returns were also buoyant with MSCI Japan rising by 6% and the broader MSCI Far East ex-japan Index rising by 13.4%. At a broad global level equity benchmarks managed to maintain the relatively sustained recovery that started in late March 2009. After the particularly weak start to the year, the developed market MSCI World rose by 8.6% in May whilst the broad MSCI Emerging Market benchmark rose by 16.7%. Table 2: Global market price performance Europe Index Related ishares ETF Region Apr 2009 - Close May 2009 - Close MTD % change local currency MTD % change EUR DJ Euro STOXX 50 EUE & SX5EEX Pan European 2375.34 2451.24 3.2 3.2 FTSE 100 ISF United Kingdom 4243.71 4417.94 4.1 6.5 DAX DAXEX Germany 4769.45 4940.82 3.6 3.6 SMI SMIEX Switzerland 5225.92 5349.74 2.4 2.4 FTSE MIB IMIB Italy 19176.54 19883.63 3.7 3.7 AEX IAEX Holland 240.76 259.45 7.8 7.8 MSCI EM Eastern Europe IEER Eastern Europe 133.96 166.86 24.6 16.5 US and Americas Index Related ishares ETF Region Apr 2009 - Close May 2009 - Close MTD % change local currency MTD % change EUR S&P 500 IUSA USA 872.81 919.14 5.3-1.5 Dow Jones Industrial Average INDUEX USA 8168.12 8500.33 4.1-2.6 Nasdaq Composite NDXEX USA 1717.3 1774.33 3.3-3.3 MSCI Emerging Market Latin America LTAM Latin America 2528.39 3043.38 20.4 12.6 Brazil Bovespa Stock IBZL Brazil 47289.53 53197.73 12.5 16.2 Asia Index Related ishares ETF Region Apr 2009 - Close May 2009 - Close MTD % change local currency MTD % change EUR Nikkei 225 NKYEX Japan 8828.26 9522.5 7.9 4.4 MSCI Japan IJPN Japan 521.03 557.31 6.0 3.5 MSCI Taiwan ITWN Taiwan 222.16 251.92 13.4 9.3 MSCI Korea IKOR Korea 373.93 380.59 1.8-2.6 MSCI Far East ex-japan IFFF Pan Asia 318.14 360.76 13.4 6.1 Global Index Related ishares ETF Region Apr 2009 - Close May 2009 - Close MTD % change local currency MTD % change EUR MSCI World IWRD Global 893.02 970 8.6 1.6 MSCI Emerging Markets IEEM Global 662.73 773.12 16.7 9.1 8
ETP Market Overview A ranking of European exchange traded products by on-exchange turnover helps to highlight their position in the context of traded equities. The ETF with the highest traded volume in April was the ishares DAX (DE) ETF on Xetra, with turnover of over 88m which ranked in as the 77th most traded product across main pan-european exchanges. Overall, there are five ETFs in the top 100 traded equities in Europe. It should be noted that many products have multiple listings that splits turnover. In general, average spreads fell during the course of the quarter whilst there was generally an improvement in average depth that investors can trade. Generally ETFs with the highest assets under management have tended to have higher traded volumes. Whilst this still holds for most traditional ETFs, the relatively new short ETFs had relatively high turnover relative to their AUM. Out of the top ten ETFs in Europe in April, the Lyxor CAC 40, had the lowest average spread at 5.38bps, a decrease of over 2bps. The largest depth, at the indicated spread, was in the ishares DJ Euro STOXX 50 (DE) ETF traded on Xetra, with average market depth of over $2.3m, which represented a 15% improvement over the previous quarter. Table 3: European ETP statistics top ten most traded ETPs (by volume) ETF name Lyxor ETF CAC 40 151 CAC FP 3055 43.3 ENEXT 5.38 7.44-27.62 1.53 1.30 17.74 * negative change is a tightening in spread Equity ranking Symbol AUM EUR millions Average spread (bps) Average depth ( m) Highest Apr volume % ADV exchange Apr 09 quarter Change* Apr 09 quarter % Change ishares DAX (DE) 77 DAXEX GR 1636.5 88.1 XETRA 5.84 7.21-18.99 1.79 0.97 85.14 ishares FTSE 100 82 ISF LN 3322.5 79.7 LSE 6.42 9.22-30.37 0.51 1.27-60.24 XACT Bear 91 XACBEAR SS 151.9 69.8 SSE 12.32 11.74 4.90 0.26 0.14 87.81 Lyxor ETF DJ Euro STOXX 50 92 MSE FP 4603.5 69.7 ENEXT 7.65 8.57-10.67 1.44 0.97 48.99 ishares DJ Euro STOXX 50 97 EUE GR 3286.6 67.9 XETRA 9.53 11.80-19.27 1.36 1.15 18.38 db x-trackers ShortDAX 121 XSDX GR 637.7 55.9 XETRA 5.45 6.95-21.57 1.38 1.49-7.50 ishares S&P 500 135 IUSA GR 3582.7 49.3 XETRA 17.77 18.54-4.16 1.56 0.93 68.50 ishares DJ Euro STOXX 50 (DE) 138 SX5EEX GR 3296.3 48.7 XETRA 10.39 10.33 0.62 2.31 2.00 15.58 XACT Bull 143 XACBULL SS 207.8 46.6 SSE 11.15 13.80-19.18 0.23 0.21 6.79 Table 4: European ishares statistics top ten most traded European ishares (by volume) ETF name Equity ranking Symbol AUM EUR millions Average spread (bps) Average depth ( m) Highest % Apr volume Change ADV exchange Apr 09 quarter * Apr 09 quarter % Change ishares DAX (DE) 77 DAXEX GR 1636.5 88.1 XETRA 5.84 7.21-18.0 1.79 0.97 85.1 ishares FTSE 100 82 ISF LN 3322.5 79.7 LSE 6.42 9.22-30.4 0.51 1.27-60.2 ishares DJ Euro STOXX 50 97 EUE GR 3286.6 67.9 XETRA 9.53 11.80-19.3 1.36 1.15 18.4 ishares S&P 500 135 IUSA GR 3582.7 49.3 XETRA 17.77 18.54-4.2 1.56 0.93 68.5 ishares DJ Euro STOXX 50 (DE) 138 SX5EEX GR 3296.3 48.7 XETRA 10.39 10.33 0.6 2.31 2.00 15.6 ishares Corporate Bond 282 IBCX LN 2085.1 16.0 BI 12.75 22.30-42.8 0.07 0.10-24.0 ishares MSCI Brazil 296 IBZL LN 411.7 14.2 LSE 52.46 80.22-34.6 0.26 0.09 184.6 ishares MSCI Emerging Markets 300 IEEM LN 1097.6 14.0 LSE 45.79 115.79-60.5 0.36 0.08 335.9 ishares DJ STOXX 50 314 EUN1 GR 876 12.6 XETRA 15.78 16.65-5.2 0.53 0.25 109.8 ishares MSCI World 317 IWRD LN 1474.4 12.3 LSE 37.99 42.33-10.2 0.79 0.35 126.9 * negative change is a tightening in spread 9
Equity Index ETF Focus Table 5: Average spread and depth Benchmark: DAX Average spread (bps) Average depth (EUR millions) Company Symbol Apr ADV (Euro '000) Apr 09 quarter % Change* Apr 09 quarter % Change ishares Dublin DAXEX GY 73.167 5.838 7.206-19% 1.790 0.967 85% db x-trackers XDAX GY 13.000 6.645 8.570-22% 0.945 0.673 40% Lyxor LYXDAX GY 12.285 8.717 10.359-16% 1.789 1.161 54% ETF Lab ETFDAX GY 3.251 8.661 12.911-33% 1.384 1.110 25% Benchmark: FTSE 100 Company Symbol Apr ADV (Euro '000) Apr 09 Average spread (bps) quarter % Change* Apr 09 Average depth (EUR millions) quarter % Change ishares Dublin ISF LN 63.646 6.419 9.218-30% 0.506 1.272-60% Lyxor L100 LN 2.546 19.652 20.207-3% 0.881 0.862 2% ishares DE UKXEX GY 0.767 46.709 52.674-11% 0.613 0.538 14% db x-trackers XUKX LN 0.635 41.102 42.011-2% 0.085 0.072 18% UBS UBSF100 VX 0.260 51.865 80.303-35% 0.002 0.002-0% Source SF100 GY 0.019 34.388 Not Listed n/a 0.349 Not Listed n/a Benchmark: DJ Euro STOXX 50 Company Symbol Apr ADV (Euro '000) Apr 09 Average spread (bps) quarter % Change* Apr 09 Average depth (EUR millions) quarter % Change Lyxor MSE FP 43.816 7.652 8.567-11% 1.438 0.965 49% ishares DE SX5EEX GY 35.178 10.394 10.330 1% 2.314 2.002 16% ishares Dublin EUN2 GY 15.863 9.526 11.801-19% 1.356 1.146 18% db x-trackers XESX GY 13.047 10.287 10.700-4% 0.919 0.574 60% ETF Lab ETFSX5E GY 3.310 14.131 15.689-10% 1.309 1.048 25% UBS FSEU50 SW 1.671 34.899 52.834-34% 0.234 0.245-4% Easy ETF ETD FP 1.336 12.040 10.986 10% 0.585 0.595-2% Source SDJE50 GY 1.203 14.940 Not Listed n/a 0.606 Not Listed n/a BBVA BBVAE SM 0.956 13.227 22.027-40% 1.248 1.029 21% Comstage CBSX5T GY 0.687 6.107 12.925-53% 1.480 1.286 15% Credit Agricole C50 FP 0.094 8.550 9.395-9% 1.097 0.730 50% * negative change is a tightening in spread 10
Equity Benchmarks ETF Focus Table 5: Average spread and depth Benchmark: World Average spread (bps) Average depth (EUR millions) Company Symbol Apr ADV (Euro '000) Apr 09 quarter % Change* Apr 09 quarter % Change ishares Dublin IWRD LN 6.026 37.989 42.327-10% 0.787 0.347 127% db x-trackers XMWO GY 1.066 24.054 48.656-51% 0.319 0.176 82% Lyxor WLD FP 0.795 44.039 67.987-35% 0.352 0.223 58% Source SMSWLD GY 0.048 41.731 Not Listed n/a 0.185 Not Listed n/a UBS UBSWLD GY 0.046 293.989 295.664-1% 0.169 0.155 9% Benchmark: Emerging Markets Average spread (bps) Average depth (EUR millions) Company Symbol Apr ADV (Euro '000) Apr 09 quarter % Change* Apr 09 quarter % Change ishares Dublin IEEM LN 5.422 45.791 115.794-60% 0.364 0.084 336% db x-trackers XMEM GY 1.700 44.848 58.259-23% 0.170 0.100 70% Lyxor LYXLEM GY 0.811 68.214 84.251-19% 0.415 0.309 34% Credit Suisse XMMEM SW 0.333 141.581 236.830-40% 0.109 0.108 2% Benchmark: MIB Average spread (bps) Average depth (EUR millions) Company Symbol Apr ADV (Euro '000) Apr 09 quarter % Change* Apr 09 quarter % Change Lyxor ETFMIB IM 9.593 14.593 35.020-58% 0.150 0.147 2% ishares Dublin IMIB IM 0.639 18.616 13.181 41% 0.201 0.146 38% db x-trackers XMIB IM 0.516 38.646 41.611-7% 0.096 0.076 27% Benchmark: SMI Average spread (bps) Average depth (EUR millions) Company Symbol Apr ADV (Euro '000) Apr 09 quarter % Change* Apr 09 quarter % Change Credit Suisse XMSMI SW 33.054 12.738 29.760-57% 0.812 0.665 22% ishares Dublin SMIEX GY 2.526 22.591 21.803 4% 0.646 0.357 81% UBS FRESMI SW 2.198 18.086 45.339-60% 0.711 0.431 65% db x-trackers XSMI SW 0.673 42.438 78.277-46% 0.199 0.189 5% * negative change is a tightening in spread 11
Methodology Introduction Spreads Source Bloomberg Type Full bid/ask spread Period 8:00am - 4:30pm London time - all trading days for relevant month Measurement Basis points - average for relevant month Related equation =Bid/(((Bid + Ask)/2)-Bid) Methodology Minute by minute data where both bid and ask price exist for that minute Average Daily Volumes (ADVs) Source Bloomberg Measurement Volume of trades vs Traded Price for every minute for all trading days, averaged by hour for trading days Currency Base Top ten highlights AUM Source Bloomberg Indices Source Measurement Currency Bloomberg Previous month's closing index level v most recent end month EUR Average Daily Volumes (ADVs) Source Measurement Currency Bloomberg Equity turnover in base currency for every trading day from all exchanges + OTC printed volumes available translated into Euro EUR 12
ETF Focus Spreads Source Type Period Measurement Related equation Methodology Depth Source Type Measurement Methodology Bloomberg Full bid/ask spread 8:00am - 4:30pm London time - all trading days for relevant month Basis points - average for relevant month =Bid/(((Bid + Ask)/2)-Bid) Minute by minute data where both bid and ask price exist for that minute Bloomberg Depth associated with Best Bid or Offer EUR Ten minute snapshots for > 75% of trading month 13
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Contact us For more information on all ishares ETFs, please visit our website on www.ishares.com. Alternatively, please call us on: From the UK: 0845 357 7000 From France 0800 940 299 From Switzerland: 0800 33 66 88 From Netherlands: 0800 0233 466 From Luxembourg: +31 20 798 00 73 From Germany: +49 (0) 89 42729 5858 Regulatory Information Barclays Global Investors Limited ('BGIL'), which is authorised and regulated by the Financial Services Authority ('FSA'), has issued this document for access by Professional Clients in Germany, Italy, Switzerland, the Netherlands and the UK only and no other person should rely upon the information contained within it. ishares plc, ishares II plc and ishares III plc (together 'the Companies') are open-ended investment companies with variable capital having segregated liability between their funds organised under the laws of Ireland and authorised by the Financial Regulator. The German domiciled funds are "undertakings for collective investment in conformity with the directives" within the meaning of the German Law on the investments. These funds are managed by Barclays Global Investors (Deutschland) AG which authorised and regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. For investors in Germany The sales prospectus, complete and simplified, as well as the annual and semi-annual reports are available free of charge from Dresdner Bank AG, Jürgen-Ponto-Platz 1, 60301 Frankfurt. In respect of the Irish-domiciled funds, the Companies intend to fulfil the prerequisites for treatment of their sub-funds as so-called "transparent funds" pursuant to 2 and 4 of the German Investment Tax Act (Investmentsteuergesetz InvStG). However, it cannot be guaranteed that the requirements will be met. The Companies reserve the right to give up the "transparent status" and to not undertake the necessary publications. For investors in Italy Any application for shares in the funds is on the terms of the prospectus, complete and simplified, for the Companies. The Shares of certain sub-funds in the Companies have been admitted to listing in Italy and are currently listed on the Mercato Telematico Fondi of Borsa Italiana S.p.A. The list of the sub-funds listed in Italy, the Prospectus, complete and simplified, of the Companies, the Documento di quotazione of the ishares funds, the latest annual and semi annual report of the Companies are published (i) on the Companies' internet website at the address www.ishares.com (ii) on the Irish Stock Exchange internet website at the address www.ise.ie and (iii) on Borsa Italiana S.p.A's website at the address www.borsaitalia.it. These documents are available for the public in Italian version with certification that such documents are a faithful translation of the original documents. Investors are entitled to receive free of charge, even at home, a copy of the above documents, upon written request forwarded to the Companies. Read the Prospectus, complete and simplified, before investing. For comprehensive information on the expenses charged to a fund and fees applicable to investors, see the Documento di quotazione and the Prospectus, complete and simplified. For investors in Switzerland This document is directed at 'qualified investors' only, as defined by Clause 10 (3) of the Swiss Act on Collective Investment Schemes ('CISA') and Clause 6 of the Swiss Ordinance on Collective Investment Schemes ('CISO'). Certain of the funds are not registered with the Federal Banking Commission which acts as supervisory authority in investment fund matters. In respect of these funds, the shares or units of these funds may not be offered or distributed in or from Switzerland unless they are placed without 'public solicitation' as such term is defined under the practice of the Federal Banking Commission from time to time. With respect to those funds that are registered, the Federal Banking Commission has authorised Barclays Bank (Suisse) SA, 8-10 rue d Italie, case postale 3941, 1211 Genève 3, to act as Swiss Representative and Paying Agent of the Companies. The prospectus, complete and simplified, the Articles of Incorporation, the latest and any previous annual and semiannual reports of the Companies as well as a list of purchases and sales undertaken on behalf of the Companies are available free of charge from the Swiss representative. Before investing please read the prospectus, complete and simplified, copies of which can be obtained from the Swiss representative. For investors in the Netherlands The Companies have been notified to the Authority Financial Markets in the Netherlands in order to market their shares for sale to the public in the Netherlands and the Companies are, accordingly, investment institutions (beleggingsinstellingen) according to Section 1:1 Dutch Financial Markets Supervision Act of Investment Institutions. The Companies will consequently, in respect of such notification, be subject to the Netherlands Act on the Supervision of Investment Institutions, regulations enacted pursuant thereto and the supervision thereunder of the Authority Financial Markets. The Companies have been admitted to listing on the stock exchange of Euronext Amsterdam N.V. and are, consequently, subject to the regulations of Euronext Amsterdam N.V. Copies of all documents (the main/umbrella Prospectus, complete and simplified, the Supplement[s], the latest and any previous annual and semi-annual reports of the Companies and the Memorandum and Articles of Association of the Companies) will be available in the Netherlands, free of charge, from the offices of the representative in the Netherlands, Barclays Global Investors Limited, WTC Tower D, 6th Floor, Strawinskylaan 667,1077 XX Amsterdam, the Netherlands or by calling the Dutch representative s information request line on 0800 0233 466. For investors in the UK This document is directed at 'Professional Clients' only within the meaning of the rules of the FSA. Certain of the funds mentioned in this document are not registered for public distribution in the UK. In respect of these funds, this document is intended for information purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy the funds described within and no steps may be taken which would constitute or result in a public offering of the funds in the UK. This document is strictly confidential and may not be distributed without authorisation from BGIL. With respect to the funds that are registered for public distribution in the UK, most of the protections provided by the UK regulatory system do not apply to the operation of the Companies, and compensation will not be available under the UK Financial Services Compensation Scheme on its default. The Companies are recognised schemes for the purposes of the Financial Services and Markets Act 2000. Important information is contained in the relevant prospectus, the simplified prospectus and other documents, copies of which can be obtained by calling 0845 357 7000, from your broker or financial adviser, by writing to Barclays Global Investors Limited, ishares Business Development, Murray House, 1 Royal Mint Court, London EC3N 4HH or by writing to the Manager of the Companies: Barclays Global Investors Ireland Limited, New Century House, International Financial Services Centre, Mayor Street Lower, Dublin 1, Ireland. Restricted Investors This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof, where the Companies are not authorised or registered for distribution and where no prospectus for the Companies has been filed with any securities commission or regulatory authority. The Companies may not be acquired or owned by, or acquired with the assets of, an ERISA Plan. Risk Warnings Shares in the Companies may or may not be suitable for all investors. Barclays Global Investors Limited does not guarantee the performance of the shares or funds. The price of the investments (which may trade in limited markets) may go up or down and the investor may not get back the amount invested. Your income is not fixed and may fluctuate. Past performance is not a reliable indicator of future results. The value of the investment involving exposure to foreign currencies can be affected by exchange rate movements. We remind you that the levels and bases of, and reliefs from, taxation can change. Affiliated companies of Barclays Global Investors Limited may make markets in the securities mentioned in this document. Further, Barclays Global Investors Limited and/or its affiliated companies and/or their employees from time to time may hold shares or holdings in the underlying shares of, or options on, any security included in this document and may as principal or agent buy or sell securities. Index Disclaimers DAX is a registered trademark of Deutsche Börse AG 'Dow Jones', 'STOXX', 'Dow Jones EURO STOXX 50 Index' and 'Dow Jones STOXX 50 Index' are proprietary and copyrighted material and trade marks and/or service marks of Dow Jones & Company, Inc. and/or STOXX Limited and have been licensed for use for certain purposes by Barclays Global Investors Limited and ishares II plc. ishares DJ Euro STOXX 50 and ishares DJ STOXX 50 are not sponsored, endorsed, sold or promoted by Dow Jones or STOXX, and neither Dow Jones nor STOXX makes any representation regarding the advisability of investing in such funds. 'Dow Jones' and 'STOXX' are trademarks and/or service marks of Dow Jones & Company, Inc. and/or STOXX Limited and have been licensed for use for certain purposes by Barclays Global Investors (Deutschland) AG. Barclays Global Investors (Deutschland) AG's ishares DJ EURO STOXX 50 (DE) based on the Dow Jones EURO STOXX 50 is not sponsored, endorsed, sold or promoted by Dow Jones or STOXX, and neither Dow Jones nor STOXX makes any representations regarding the advisability of trading in such product. 'FTSE ' is a trade mark jointly owned by the London Stock Exchange plc and the Financial Times Limited (the 'FT') and is used by FTSE International Limited ('FTSE') under licence. The FTSE 100 Index is calculated by or on behalf of FTSE International Limited ('FTSE'). None of the Exchange, the FT nor FTSE sponsors, endorses or promotes ishares FTSE 100 nor is in any way connected to the fund or accepts any liability in relation to its issue, operation and trading. All copyright and database rights within the index values and constituent list vest in FTSE. Barclays Global Investors has obtained full licence from FTSE to use such copyright and database rights in the creation of this product. Markit iboxx is a registered trade mark of International Index Company Limited ('IIC') and has been licensed for use by Barclays Global Investors Limited. IIC does not approve, endorse or recommend Barclays Global Investors Limited or ishares plc. This product is not sponsored, endorsed or sold by IIC and IIC makes no representation regarding the suitability of investing in this product. ishares funds are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or any index on which such funds are based. The Prospectus contains a more detailed description of the limited relationship that MSCI has with Barclays Global Investors and any related funds. 'Standard & Poor s ', 'S&P ', 'S&P 500' are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Barclays Global Investors, N.A. ishares S&P 500 is not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation regarding the advisability of investing in this product. 'ishares' is a registered trademark of Barclays Global Investors, N.A. All other trademarks, servicemarks or registered trademarks are the property of their respective owners. 2009 Barclays Global Investors Limited. Registered Company No. 00796793. All rights reserved. Calls may be monitored or recorded. 50% Recycled post-consumer content. 50% Content from responsibly managed forests. www.ishares.com ISHARES <GO> SS-TETP-I-SNUGI-JUN09-EN