Many investors and advisors tend to assume that a block desk is best used when looking to execute a large trade.
When it comes to making these large trades, using a block desk can make a great deal of sense. Block desks can leverage their experience and connections to execute each step of a trading order.
That said, advisors don’t need to wait for a large trade to take advantage of a block desk. In fact, smaller-sized orders may be able to tap into new perks simply by employing a block desk.
Recently, an article from American Century Investments examined the perks that a block desk can offer for trades of all sizes. In the article, the American Century team explained how block desks can tap into different liquidity layers for an ETF. These liquidity layers could lead to discounted share prices, which would be valuable for trades of all sizes.
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Navigating the Layers of Liquidity
When deciding whether to buy a fund, advisors and investors tend to look at a ticker’s average daily volume (ADV). However, as the article notes, the ADV is actually just one of many different sources of liquidity for a fund. This is consequently due in part to the open-ended structure of the ETF wrapper itself.
Oftentimes, block desks are actually able to access the different layers of liquidity within an individual ETF. Through collaboration with different market makers, block desks can potentially tap into different liquidity layers to acquire funds at a lower rate. This manipulation of ETF liquidity helps block desks provide advisors and investors with share values that might not seem possible at first glance.
Beyond navigating ETF liquidity, there are other advantages that block desks can bring to the table for advisors and investors. As the article notes, block desks can provide specialized experience and crucial insights to empower trades of all sizes.
“It never hurts to get the block desk’s opinion on an ETF trade,” said Matt Lewis, head of ETF Implementation and Capital Markets at American Century Investments. “The traders have years of experience in high-pressure situations, insight on the depth of interest in an ETF and strong networks of relationships to share with advisors.”
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