Key takeaways
- Growing ETF volumes and tighter regulations are requiring investors to leverage electronic workflows that are easier to document and scale.
- Active ETFs, which typically feature more complex set-ups than passive ETFs, are further fueling developments in electronification.
- There is growing experimentation around tokenizing ETFs, but the technology has yet to hit the mainstream.
Exchange-traded funds (ETFs) have come a long way since making their debut on the market in 1993. Defined as pooled investment funds that hold a basket of different assets, they were once traded on exchanges via manual, high-touch processes. In recent years, they have undergone rapid electronification as the industry has expanded, transforming how they are priced and managed.
“Fundamentally, an ETF is a wrapper delivering flexibility, diversification, transparency and cost efficiencies, all driven by technology. As such, having them operate in the most technologically advanced environment is key,” said Ciarán Fitzpatrick, global head of ETF Product, Securities Services at J.P. Morgan. Clients agree; in J.P. Morgan’s 10th annual e-trading survey, respondents said they expect ETFs to see the most developments in electronification in 2026 compared with other products.
What’s driving this paradigm shift, and what are the key trends to watch?
The automation of ETF trading is gaining pace
The global ETF market is expanding as investors seek alternatives to traditional mutual funds. Assets under management (AUM) are widely expected to reach $35 trillion by 2030, up from $19.5 trillion in 2025, according to a PwC survey. This growth is necessitating the use of automated systems, which can process trades more efficiently and at lower cost.
“Over the years, the overall number of ETF orders, as well as total volumes traded, has increased significantly. These have contributed to the scale of the market, in turn creating greater benefits around electronifying a large portion of the flow,” said Matthew Legg, global head of Delta One and ETF Sales at J.P. Morgan.
In addition, stringent requirements around trade reporting, liquidity and controls are necessitating the use of electronic workflows that are easier to document and scale. “As markets and regulatory requirements get more complex, the ability to adhere to them can really only be satisfied by a technological platform, as it becomes too challenging to manage that manually,” Legg added.
Increasingly, authorized participants — organizations that have the right to create and redeem ETF shares — are using their own proprietary Order Management Systems (OMSs), which enable them to manage trades in a single, consolidated environment. These systems are typically built on application programming interfaces (APIs), allowing for direct integration with multiple trading venues. This gives users a comprehensive view of the entire trade lifecycle.
“At J.P. Morgan, we receive probably 50% of our primary market flow through APIs. This means authorized participants are jumping onto their own systems and placing their orders, which then feed automatically into our systems,” Fitzpatrick shared. “The velocity of API integration is being greatly enhanced.”
Active ETFs are raising the bar for technology
Another factor driving electronification is the growth of active ETFs — which, according to figures from J.P. Morgan Asset Management, accounted for 83% of new ETF launches in 2025.
Compared with passive ETFs, active ETFs change their holdings more often in response to market opportunities and risks. They may also trade in underlying assets that are harder to price or source, and may have less transparent structures. As such, they typically require richer data, tighter controls and more automated workflows, prompting ETF providers to upgrade their technology suite accordingly.
“Active ETFs are driving a significant amount of investment into our technology,” Fitzpatrick said. “We deliver a lot of daily reporting to market makers, and we’ve had to make significant enhancements over the past two or three years to ensure we can cater for those more complex instruments. We’ve moved away from just using index constituents and into more sophisticated tools.”
For instance, J.P. Morgan is leveraging its trading and analytics platform Athena — which is used by the firm’s trading desks for cross-asset pricing and risk management — to enhance its ETF reporting capabilities. “We’re taking direct live feeds from Athena and plugging them into our Securities Services platforms to produce more granular ETF reporting, which then goes out to market makers,” Fitzpatrick said. “The shift toward active ETFs is really impacting how we develop and what we need to deliver to the street.”
Looking ahead, active ETFs will likely continue raising the bar for technology, fueling innovation across the broader ecosystem. “As new products come out in the active ETFs space, including new underlying assets, new tech capabilities need to be developed. This will keep pushing out the target for what is required for electronification,” Legg added.
“As new products come out in the active ETFs space, including new underlying assets, new tech capabilities need to be developed. This will keep pushing out the target for what is required for electronification.”
Matthew Legg
Global head of Delta One and ETF Sales, J.P. Morgan
Tokenized ETFs: The next big thing?
The industry is experimenting with tokenizing ETFs, which could potentially bring benefits including more streamlined creation and redemption processes, near-instant settlement and 24/7 market access. “My view on tokenization is that it will become part of the ETF ecosystem, but we’re a couple of years away from some good use cases,” Fitzpatrick said.
Currently, tokenization falls into two distinct categories:
- Synthetic tokenized ETFs: This involves creating digital clones of real-world ETFs. These clones mirror the price of the ETF via a derivative contract, without holding the actual asset — which means that their returns may sometimes differ slightly from the ETF, depending on how they are structured.
- Native tokenized ETFs: Here, the ETF’s share is issued directly on the blockchain; the on-chain token then becomes the security of record. This approach, which is still being piloted, could drive down costs by reducing operational friction and eliminating intermediary fees.
“At J.P. Morgan, we’re looking at proof of concepts around tokenizing ETFs through our Kinexys platform, but we have some way to go,” Fitzpatrick said. “We believe tokenization will certainly drive how the market changes, not just for ETFs but across the funds industry as a whole.”
“We believe tokenization will certainly drive how the market changes, not just for ETFs but across the funds industry as a whole.”
Ciarán Fitzpatrick
Global head of ETF Product, Securities Services, J.P. Morgan
All in all, ETFs reflect the broader move toward electronification taking place across financial markets — a trend J.P. Morgan is well-positioned to pursue. “ETFs are forming a part of the new evolution of the financial industry. And I think the fact that we have capabilities in traditional markets, and now in the digitization and tokenization spaces — it’s just one of the advantages we have as a firm,” Fitzpatrick said.
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