ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. In the Know: Trends in ETF Industry & Efficient Trading
News
Share

In the Know: Trends in ETF Industry & Efficient Trading

Ben HernandezMay 28, 2019
2019-05-28

The number of exchange-traded funds (ETF) continue to grow at a rapid pace. Currently, there are over 2,200 ETFs in the marketplace with year-to-date inflows of over $70 billion.

A majority of ETF business goes through the New York Stock Exchange. In fact, just last year, trading volume in ETFs went from almost 30 percent to 40 percent.

Douglas Yones, Head of Exchange Traded Products at the New York Stock Exchange, is a firsthand witness to the ever-changing ETF market and is keen on where the space is heading in 2019 as well as beyond.

He divulged his thoughts in the latest “In The Know” update below:


Content continues below advertisement

Volatility Driving Volume

The final quarter of 2018 was a low point for U.S. equities–the Dow Jones Industrial Average fell 5.6 percent, while the S&P 500 was down 6.2 percent and the Nasdaq Composite declined 4 percent–as volatility rained down on the capital markets. However, this drove volume for ETFs as investor were quick to get in and out of the marketplace.

That volume peaked on Christmas Eve as the markets hit a low point–on a day when volume is typically sedate.

“If we have significant volatility, which we saw in December, that it all works properly so that no one starts questioning things,” said Yones. “And to give you a feel for how much volume came through, on Christmas Eve of last year, so typically a day in the exchanges that are usually our low point of the year, Christmas Eve was the highest volume we did on the floor in the history of the floor.”

“Historically up until 2018, ETFs weren’t even traded on the floor, they were always done electronically. On Christmas Eve, we traded something like 53 million shares of ETFs on the floor of the New York Stock Exchange,” Yones added.

As investors were flocking from U.S. equities into safe-havens like bonds, fixed-income ETFs were the beneficiary of this migration. Whether it was short duration, municipal, broad exposure, or other areas of the bond market, capital inflows were continuing.

“We saw tremendous volume in a lot of these fixed income ETFs,” said Yones. “1,000%, 1,200% of daily volume were going through these ETFs without even creation redemptions in some cases.”

More importantly, volume into these fixed-income ETFs didn’t negatively affect liquidity–a notion floating around the capital markets that ETFs would harm liquidity during heavy buying and selling during a sharp downturn.

In-the-Know-Trends-in-the-ETF-Industry

Working Behind the Scenes

When markets are experiencing heavy doses of buying and selling, it’s the exchange that helps ensure transactions take place efficiently. It’s this “behind the scenes” activity that keeps the ETF marketplace running smoothly via accurate pricing methodologies.

“What we did was we changed the way ETFs price at the end of the day,” said Yones. “So, for 25 and a half, 26 years, the way it worked was, whatever the last trade was, that was the price of your ETF.”

With ETFs growing at a rampant pace, innovation has been a byproduct and companies are finding new ways to accommodate the growth in this space. However, this accelerated growth means that more regulation may be necessary to maintain the ETF industry’s attribute of transparency, such as accurate pricing.

However, ensuring the accuracy presents a constant challenge, but also paves the way for innovation.

“We basically patented this technology, or patent pending, where without getting too deep in the technicals, we take the price it’s worth at the end of the day and we basically blend it with any trades in the last five minutes,” said Yones.

“So, our role is to do things in the plumbing, to be a really good electrician so your house just works perfectly, and that’s our goal,” added Yones.

Forthcoming Industry Trends

ETF assets currently total almost $4,000 billion and have increased by almost 15 percent thus far year-to-date. Is there still room for growth?

Yones seems to think so and the area that will experience the most explosive growth will be in the fixed income space.

“I actually think we double the size of the ETF market and in short order,” said Yones. “There’s a handful of things that are happening. The first and foremost obviously is fixed income. It’s so underserved. There’s a whole host of fixed income index companies that have been crunching away to provide indexes that are different from market cap weighted indexes in the fixed income space.”

Whether its market protection via downside buffers or new strategies for active management, the ETF space is undergoing constant innovation with the rollout of new products.

“We’ve got balanced funds coming out, products that are holding multi-asset categories,” said Yones. “We’ve got people going deep in the energy and infrastructure, pipeline products. Places where historically I needed to go and find a hedge fund or an institutional manager and come up with five million dollars to invest in a pipeline project, now you can get in there in an ETF.”

To watch the entire latest “In the Know” show, click here.

» Popular Pages

  • Tickers
  • Articles

Feb 03

Impressive First ETF Year From Capital Group

Feb 03

3 Long-Term Trends Boost Outlook for These ETFs

Feb 03

Famous Investor Says Bitcoin Has $1 Million Potential

Feb 03

3D Printing ETF PRNT Accesses $500 Billion Opportunity

Feb 03

Parent S&P 500 Beaten by Equal Weight in January

Feb 03

This ETF May Be Propelled by Sustainable Bond Issuance

Feb 02

A Value Manager’s Perspective on an Early Pivot

Feb 02

The Metaverse

Feb 02

ETF of the Week: Invesco S&P 500® Equal Weight ETF

Feb 02

Stepping Into the ETF Business? Think Twice

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

VGT

Vanguard Information...

SMH

VanEck Semiconductor ETF

XLK

Technology Select Sector SPDR...

VTI

Vanguard Total Stock Market...

SOXX

iShares Semiconductor ETF

BLOK

Amplify Transformational Data...

META

Roundhill Ball Metaverse ETF


Content continues below advertisement

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X