Nov. 30 (Bloomberg) -- Britain may exempt exchange-traded funds registered outside the country from stamp taxes, a move that may boost London's role in trading one of the world's fastest- growing securities.

Chancellor of the Exchequer Gordon Brown may announce the change next week when he makes his 10th autumn statement on the economy. The so-called stamp duty on overseas funds works against London's ability to develop a market for trading so-called ETFs, investment companies have said.

ETFs, designed by financial-services companies to track stock, bond or commodity indexes, now have more than $500 billion in assets, up from $5.26 billion 10 years ago. They may have $2 trillion in assets within five years, according to Morgan Stanley. Hedge funds use ETFs to move in and out markets, and they've also caught on with non-professional investors.

``We will look actively at all issues put to us in recent months,'' including taxes on non-resident ETFs, Treasury Minister Ed Balls said in a speech in London late last night.

Balls met yesterday with investment companies in London's financial district, including Mark Garvin, chief operating officer of JPMorgan Chase Bank; Martin Gilbert, chief executive of Aberdeen Asset Management; and Richard Gnodde, co-chief executive in Europe for Goldman Sachs International.

Barclays Global Investors, the asset-management unit of the U.K.'s third-largest bank, is the world's largest manager of ETFs, selling more than 150 of its iShares securities globally. The unit contributed 364 million pounds ($912 million), or 9.5 percent of Barclays Plc's total pretax profit in the first half.

London Lags Behind

The London Stock Exchange lists 35 ETFs for trading. That's fewer than the 153 ETFs and 31 exchange-traded commodities now listed on Deutsche Boerse in Frankfurt. The ETF market in Europe trades about 500 million euros ($657 million) each day.

``We welcome more recognition for exchange-traded funds as an asset class in their own right,'' said Barclays Global Investors spokeswoman Esther Nass-Fetzmann in an interview from London today. ``It means more choice for U.K. investors.''

Like index-tracking mutual funds, ETFs are often designed to mimic the performance of a basket of equities such as the Standard & Poor's 500. Unlike mutual funds, ETF prices change continually because they are bought and sold throughout the day like stocks. They also tend to have lower fees than mutual funds.

To contact the reporters on this story: Gonzalo Vina in London at gvina@bloomberg.net.

Last Updated: November 30, 2006 09:42 EST