Broker/Advisor Use Only – Not For Use With the Public Broker/Advisor Use Only – Not For Use With the Public The Facts and Fallacies of ETF Investing: Addressing ETF Liquidity & Volume Stan Ueland ETF Portfolio Manager
The Facts and Fallacies of ETF Investing: Addressing ETF Liquidity & Volume
Feb 04, 2016
The Facts and Fallacies of ETF Investing: Addressing ETF Liquidity & Volume. Stan Ueland ETF Portfolio Manager. Example of ETF Pricing. This example is for illustrative purposes and does not represent any actual investment or fund. Example of ETF Pricing. 00. - PowerPoint PPT Presentation
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Broker/Advisor Use Only – Not For Use With the PublicBroker/Advisor Use Only – Not For Use With the Public
The Facts and Fallacies of ETF Investing:Addressing ETF Liquidity & Volume
Stan UelandETF Portfolio Manager
Broker/Advisor Use Only – Not For Use With the Public
TICKER SHARES PRICE MV of 1 CUAFFX 7,987 $6.34 $50,638ALXN 1,542 $47.99 $74,001AMGN 1,156 $54.33 $62,805AMLN 5,107 $12.24 $62,510BIIB 1,441 $44.16 $63,635CELG 1,257 $52.62 $66,143CEPH 1,304 $53.59 $69,881CRA 10,634 $6.20 $65,931GENZ 1,268 $51.70 $65,556GILD 1,536 $43.43 $66,708HGSI 3,552 $19.43 $69,015ILMN 1,626 $41.02 $66,699ITMN 4,919 $12.32 $60,602LIFE 1,458 $47.05 $68,599MIL 989 $69.42 $68,656MYGN 2,624 $25.06 $65,757NKTR 7,381 $8.57 $63,255OSIP 2,223 $32.00 $71,136SQNM 19,593 $3.28 $64,265VRTX 2,036 $32.11 $65,376
Total: $1,311,168Per share: $26.22
FT NYSE Arca Biotechnology Index Fund (FBT) Basket Shares
This example is for illustrative purposes and does not represent any actual investment or fund.
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This example is for illustrative purposes only.
The intraday NAV for an ETF is typically calculated and published by a third party under a separate symbol every 15 seconds throughout the trading day over the Consolidated Tape based on the current value of the securities specified for creation and redemption plus any estimated cash amounts associated with the creation unit, all on a per-ETF share basis. The intraday NAV is designed to give investors a sense of the relationship between a basket of securities that are representative of those held in the ETF’s portfolio and the share price of the ETF on an intraday basis.
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Liquidity of the underlying holdings is a significant factor in the liquidity of an ETF.
Liquidity of underlying: Shares trade $7.5b per day
$10m / $7.5b
= 0.13% of ADV
Liquidity of underlying: Shares trade $7.5b per day
$10m / $7.5b
= 0.13% of ADV
Buy $10m in FNX (First Trust Mid Cap AlphaDEX ETF)
Trader’s perspective:“Stock trades $467k per day”
$10m / $467k
= 2,140% of ADV
Trader’s perspective:“Stock trades $467k per day”
$10m / $467k
= 2,140% of ADV
This example is for illustrative purposes only. ADV statistics as of 1/7/2010.
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Market MakerAP
ETF SponsorETF
This example is for illustrative purposes only.
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8,300 = Average Daily Volume
145,000 = Total Volume for the Day
92,800 = Size of a Single Trade
$4.6m (28%) = Growth in the Fund for the Day
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ETF Liquidity – Case in Point (FDM & BICK)
• 1.8m share trade (17k = 30 day ADV)• Microcaps• Smallest but most compelling
FDM First Trust Dow Jones Select MicroCap Index Fund
BICK First Trust BICK Index Fund
• 3.8m shares trade (21k = 30 day ADV)• $114m - growth in a single day
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Market MakerAP
ETF SponsorETF
This example is for illustrative purposes only.
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Traditional Mutual Fund Example
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ETF SponsorETF
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17.6
17.7
17.8
17.9
18
18.1
18.2
18.3
8:30 9:00 9:30 10:00 10:30 11:00
FXG-IV FXG trades
17.6
17.7
17.8
17.9
18
18.1
18.2
18.3
8:30 9:00 9:30 10:00 10:30 11:00
FXG-IV FXG trades
15
15.2
15.4
15.6
15.8
16
16.2
16.4
8:30 9:00 9:30 10:00 10:30 11:00
FXD-IV FXD trades
15
15.2
15.4
15.6
15.8
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16.2
16.4
8:30 9:00 9:30 10:00 10:30 11:00
FXD-IV FXD tradesTicker: FXGMarket Cap 26,131,65330 day ADV 14,2818:30-11 Volume 110,385% of 30 day ADV 773%Trades at Bid 71,098Trades at Mid 15,380Trades at Ask 23,907Shares Redeemed 100,000
Ticker: FXGMarket Cap 26,131,65330 day ADV 14,2818:30-11 Volume 110,385% of 30 day ADV 773%Trades at Bid 71,098Trades at Mid 15,380Trades at Ask 23,907Shares Redeemed 100,000
Despite a meaningful selloff, both small and large ETFs trade up tight to their Indicative Value.
Ticker: FXDMarket Cap 150,330,070 30 day ADV 173,251 8:30-11 Volume 1,148,268 % of 30 day ADV 663%Trades at Bid 527,654Trades at Mid 358,425Trades at Ask 262,189Shares Redeemed 300,000
Ticker: FXDMarket Cap 150,330,070 30 day ADV 173,251 8:30-11 Volume 1,148,268 % of 30 day ADV 663%Trades at Bid 527,654Trades at Mid 358,425Trades at Ask 262,189Shares Redeemed 300,000
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FDD – 10/21/08— ½ fund— High Volatility
Returning clients
…
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Thoughts on Trading ETFs
Tips— Open/Close— Limits— iNAV— INTL funds— Stops Stop Limits Alerts— Implementation
Engage Us— Assistance— Access— Trading Desks
‘It’s an ETF’
This example is for illustrative purposes and does not represent any actual investment or fund
Example of Daily Fund Pricing
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