ETF liquidity – even more than meets the eye (Credit Suisse)

August 2013

KEYWORDS: ETF, Exchange-Traded Funds, Liquidity, trading volume, exchange traded products, Equity markets, futures, beta, Macro, hedging, exchange speed, REITs, Emerging Markets, bonds


Victor Lin

  • Credit Suisse


Exchange traded funds represent a set of one of the most liquid products in the world thanks to how cheaply and efficiently they trade.  In the U.S., ETPs have recently traded slightly over $60bn on average per day.

Due to high on-screen volumes and extremely tight spreads, traders often think of trading ETPs like a single stock.  In fact, several popular ETPs trade a sizeable amount relative to their underlying because of this efficiency.

However, it is easy to forget that ETPs are linked to underlying baskets by the creation/redemption mechanism.  As a result, they can almost always tap into even more liquidity available in the underlying.

In this report, these themes are reinforced as we look at the most recent ETF spreads and volumes – both standalone and relative to their underlying.

Related Research and Data