How investors can trade UCITS ETFs efficiently

For investors outside of the European Union (EU), their ETF world is larger than they thought. That is because not only can they access the US ETF market but the European UCITS ETF market is also an option for them.

So, if you are based outside of Europe, what should you know about the UCITS ETF market and how does it differ to the US ETF market? 

Regulation across these markets differ and can have an impact

European ETFs are built under the Undertakings for Collective Investment in Transferable Securities Exchange-Traded Funds (UCITS) framework. It is globally recognised for its high standard of regulation. For non-European investors seeking efficient, diversified exposure to international markets, UCITS ETFs offer a compelling and scalable solution. These funds are known for robust investor protection, cross-border flexibility, and structural transparency.

The US ETF market is regulated by the Securities and Exchange Commission (SEC) – a key difference of the two are the rules on leverage and securities lending which are more flexible for US ETFs than they are for the UCITS market.

From a trading perspective the differences continue: In the US, the SEC implemented a set of rules known as the Regulation National Market (RNM) system to define how all listed US stocks are traded to boost market efficiency and transparency.  The US market also benefits from consolidated tape - an electronic system that collects and reports real-time data of stocks that are traded on an exchange.  The UCITS market does not have the equivalent of either the RNM or consolidated tape, however the latter is forthcoming.

On the other hand, the European ETF landscape has matured under successive iterations of the MiFID (Markets in Financial Instruments Directive) framework. For non-European investors, these changes are designed to make ETF trading in Europe more transparent, trustworthy, and accessible

How these ecosystems vary

Just like Europe is made up of many countries, the European UCITS structure has multiple stock exchanges with different multilateral trading facilities. The majority of the trading happens through over-the-counter or request for quote (RFQ) platforms. These platforms allow institutional investors to execute large trades with tighter spreads and reduced market impact, often improving pricing versus visible on-screen quotes.

In comparison, the US is centralised around a few major stock exchanges with about 70% of ETF trading occurring on lit exchanges (stock exchanges that show various bids and offers in different stocks).

This all gives the European UCITS system a different feel to the US market; because there are many stock exchanges in Europe, the same ETF could potentially be listed across several different venues. This is in stark comparison to US ETFs which have a 1:1 listing ratio.

Assessing liquidity

Within the European UCITs system, the visibility of liquidity will be diluted due to the multiple exchanges system making it less transparent than the US system.

This is a recognised challenge and one of the European exchanges, Euronext ETF, plan to pool liquidity across their Paris and Amsterdam platforms in September 2025.  This should be a positive step towards improved liquidity visibility and reduced cross-listing in the European market.¹

Liquidity is a critical consideration for ETFs investors . The AXA IM ETF Capital Markets team can provide anytime liquidity analysis as well as price and spreads estimation for any type of trade sizes.

Offering investors choice

UCITS ETFs list in multiple currencies (EUR, USD, MXN GBP, CHF) compared to the US where ETFs trade exclusively in USD. UCITS also offer a range of share classes —accumulating or distributing income, hedged or unhedged. This should all help investors align effectively income tax preferences and currency approaches. 

Quick look at the markets

Source: AXA IM, Bloomberg, BIG XYT, TradeWeb, Financial Times, EY, PwC as of 30 May 2025. For illustrative purposes and subject to change.

How these differences drive investor participation

Non-US investors cannot access U.S.-domiciled ETFs through EU brokers unless the ETF issuer provides a KID — which they usually don’t. In order to avoid this restriction, an investor can be considered a professional investor. But this comes with certain criteria, including having a portfolio exceeding $500,000. Under UCITS regulation, there is no such minimum equivalent (although funds may fix levels themselves) for investors.

A key participation difference is the tax treatment for foreign investors. While UCITS may charge slightly more compared to their US counterparts, there are tax advantages that should not be discounted. For non-US investors, distributions from a US ETF will be subject to 30% withholding tax. For some, it may be possible to claim this back however it is an onerous and long process. The end result is still the need to declare the total income on their tax return.

On the other hand, distributions from UCITS ETFs domiciled in Ireland (as opposed to Luxembourg) are not subject to any withholding tax at source meaning that investors just need to declare this income on their tax return within their home jurisdiction.

How to trade across different time zones

UCITS ETFs are globally accessible because they are listed on multiple international exchanges and supported by global liquidity providers. This makes real-time execution across regions feasible and efficient. The international network of Authorised Participants (AP), which provides price support across different time zones, enables investors to find prices on any UCITS ETF after European markets close.

For investors looking to make their first foray into the world of UCITS ETFS, it is worth knowing what to look out for – both in terms of best practice as well as the pitfalls. Here we have outlined some of those key steps to think about:

Source: AXA IM as of 30 May 2025. This does not constitute as investment advice

The ETF Capital Markets team is here for you, we can assess any type of trade with you and help you optimise your execution.

Please contact us! etfcapitalmarkets@axa-im.com