Unbeknownst to too many who traffic in ETFs, the phrases “thinly-traded” and “illiquid” are far from synonymous.
Yes, of the now 1300+ exchange-traded funds, 2/3 of the total ETF trading volume is attributed to the top 25 “go-go names.” But, whether you’re an RIA, a corporate treasurer, a hedge fund manager, or a pension fund administrator, if your investment and/or trading decisions are predicated on what the “screen” displays, you’re not only foregoing investment opportunities that your peers are benefiting from, but you’re likely in the wrong business.
That’s the take-away from a solid white paper produced by a group that would know: Emerging Global Advisors LLC, one of the leading issuers of emerging market ETF products.
It takes more than moxy for a firm that feeds products into the exchange-traded marketplace to observe that trading screens (which aggregate bids and offers scrapped from the assortment of regulated exchanges) are often less than transparent.
To drive this point home, the white paper’s leading shout out: “The Screen Market is Not the Market.”
In a side-bar comment contributed by Chris Hempstead, Head of ETF Trading for institutional broker WallachBeth Capital, “Even if EGA’s paper is elementary reading to those of us who have been in this market for more than 15 minutes, their point i.e. “screens are misleading” is one that couldn’t be more accurate. They provide a good read for many RIAs and hedge fund managers that don’t truly appreciate how the secondary market for ETFs really operates.”
Here’s the full article: