The ETF Handbook by David J. Abner

Author:David J. Abner [Abner, David J.]
Format: epub
ISBN: 9781119193913
Publisher: John Wiley & Sons, Inc.
Published: 2016-08-22T00:00:00+00:00

Get a sense of how much of an impact in the market your trade might create as compared to other trades of similar or larger size in the past. You can work with the capital markets desk at ETF issuers or your brokerage firm to get a transaction cost analysis (TCA) study done on your anticipated trade to determine best methods for executing and expected impact on the markets.

Understand when you need to utilize risk capital from traders versus when you can have them trade the basket on your behalf. Having trading desks and liquidity providers utilize the creation and redemption feature (and other functionality) of the ETFs is very important in the efficient execution of ETF order flow. Customers can take advantage of this unique ability to grow and reduce shares outstanding. They benefit from it once they understand how it works. Although ETF providers have made tremendous efforts to get this information to their client base, the rapid adoption by new users means that the education process must be advanced. Many issuers have been building up their sales forces on the educational side to teach clients best practices on execution for their ETF order flow. This saves clients money and enables them to move further along the curve of available products. Utilizing ETFs that may be showing less average daily trading volumes but offering different exposures is changing the way that investors manage their portfolios.

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