Secondly, Kauffman claims that ETFs trades fail 10 times the rate of individual stocks, but “ETFs settle much more efficiently than single stocks when you look at it as a proportion of total volume,” comments Leland Clemons, a director in the capital-markets group at iShares.
Lastly, the report contends that growing ETFs could run out of money if they buy underlying securities during a “short squeeze,” which would trigger widespread panic; however, investors buy and sell on the secondary market and not from the ETF. Market makers are the ones who need to buy and sell securities.
The last line of Zweig’s article really says it all: though there’s certainly a need for more education, ETFs don’t pose systemic risk. So, are we done beating a dead horse? There are bigger things going on right now.
For more information on exchange traded funds, visit our ETF 101 category.
Max Chen contributed to this article.