Tag Archives: ETF authorized participants

ETF News, slider, Tech Talk

Bloomberg Couples With State Street: ETF Fixed Income Basket Tool Launch

Leave a comment

MarketsMuse update courtesy of  press release issued by Bloomberg LP

NEW YORK–(Business Wire)–Bloomberg today introduced the Bloomberg Fixed Income ETF Basket Tool in order to further automate the workflow and construction of fixed income exchange traded funds (ETFs). The new offering provides the first comprehensive solution for clients of State Street Global Advisors (SSGA) to automate the process of creating and redeeming baskets of fixed income ETFs.

“Unlike equity ETF products, fixed income ETFs are highly customized. The Bloomberg Fixed Income ETF Basket Tool helps the basketing and negotiating process by introducing efficiencies that have not existed for these products,” said Ben Macdonald, Bloomberg’s Global Head of Product. “Our solution integrates our pre-existing technology and helps SSGA’s authorized participants and market makers to gain access to the liquidity necessary to create and redeem fixed income ETFs.”

“Rapid growth in the fixed income ETF market has provided more liquidity and a cost-efficient alternative to undertaking credit risk,” said Timothy Coyne, Global Head of the ETF Capital Markets Group at State Street Global Advisors. “The Bloomberg Fixed Income ETF Basket Tool provides market participants an efficient and systematic way to access the primary market of ETFs.” Continue reading →

ETF News

The Follies of ETF “Flows”: Understanding the Trading Data

Leave a comment

indexuniverseCourtesy of Dave Nadig

In yesterday’s flows article, I talked about one of the biggest problems with ETF flows data; that is, a lot of times, that data is buggy.

The second problem is thornier. Even if you believe the data, it’s important to understand how it can be misleading.

The Second Problem: Misinterpretation

Even assuming that the flows data was perfect, I frequently see flows stories with headlines like “Investors put $100 million into GLD yesterday,” which give me pause. The reality of why money flows into and out of an ETF is slightly more complex than that.

If you’re an investor—whether you’re a hedge fund or my mother—you get ETFs the same way. You buy them on the open market. Only APs actually “put money” into an ETF. And they only do it when it makes financial sense for them to do so. So while ETFs can go in and out of favor—and experience enormous swings in volume—they’ll only actually grow or shrink in size when the ETF becomes over- or underpriced.

Let’s look at a simple example. Below illustrates the data on the Market Vectors Indonesia ETF, IDX. It’s an annoying fund for a market maker, because to make new shares, they have to go buy a bunch of Indonesian stocks, and that market’s not open during U.S. trading hours. Consequently, they’ll let the fund trade to a bit of a premium or discount before they’ll step in. Continue reading →