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WallachBeth Capital LLC

WallachBeth Capital LLC. Institutional Execution & Trading Member FINRA/SIPC Best Practice Trading Tips For ETFs. Elementary : Who Trades ETFs?. To properly and effectively trade ETFs, you must first understand the uniquely different “players” involved in the marketplace.

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WallachBeth Capital LLC

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  1. WallachBeth Capital LLC Institutional Execution & Trading Member FINRA/SIPC Best Practice Trading Tips For ETFs

  2. Elementary: Who Trades ETFs? • To properly and effectively trade ETFs, you must first understand the uniquely different “players” involved in the marketplace. • Having a general understanding of their business models and their objectives will make you a stronger and more efficient trader.

  3. The Players

  4. “ADV Doesn’t Matter”… or Does it? Issuers and sponsors will promote their ETFs suggest that ADV does NOT matter When selecting an ETF, the liquidity of the underlying index or components is the best indication of its tradability. Issuers and sponsors are correct when advising that low ADV should not be a deterrent to invest in a particular ETF

  5. How To Use NAV & iNAV To Your Trading Advantage • NAV – the net asset value of the fund • Very similar to NAV of a mutual fund • Calculated end of day (after the close); published well after the close • Often used as a benchmark, but otherwise has no trading value in ETFs • iNAV – intraday net asset value of the fund • Typically calculated every 15 sec. and published on Bloomberg; also available with a slight time delay on other financial systems. • Can be a useful tool in pricing the value of an ETF, discovering premiums and discounts and using limit orders for your ETF trades.

  6. When Is iNAV Useful?

  7. Block Trading Tips • Experience • Whether principal or agency, custodian or wire house, always make sure the broker representing your order flow is fluent in the particular product and ETF trading overall. • Transparency • Make sure your block price and subsequent price improvement (if applicable) is supplied to you immediately after the conclusion of your trade. • Two-sided Quote • Have your broker/market maker provide you with a bid and offer on the ETF you’re attempting to trade*. *This technique is subject to debate within the professional trading community, however, two-sided quotes provide a more accurate reflection of the value of the ETF at trade time. • Liquidity • Use more than one source or request multiple “risk quotes” to ensure you’re getting a fair and accurate representation of the best price available within the context of the prevailing market.

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