Educating investors about exchange traded funds has been an area of focus for most providers. As market makers attempt to boost liquidity in thinly traded areas of the market, it is becoming more important that investors understand how liquidity plays a role in their investments.
“It’s probably the biggest challenge that our business faces in terms of the education work we do to inform investors and advisors about ETFs,” said Bill Belden, head of product development at Guggenheim Investments, in an Ignites.com report. [Investors Favorite Reasons for Using ETFs]
The difference between a “posted quote” or screen liquidity is different from the actual price that an investor would buy or sell at if they worked with a professional trader directly. Capital markets teams are focused on educating investors on this difference, while also assisting in executing large trades and overall client services. [How Tracking Error Can Impact ETF Performance]
The Nasdaq pilot program will be the first spin on a program that aims at boosting trades for smaller, less traded funds, and areas of the market. Sponsors would pay a fee to Nasdaq that would be disbursed to market makers to tighten quote spreads, or post larger quote sizes to strengthen market quality, reports Jackie Noblett for Ignites.
Screen liquidity is intended as a measure of comfort or confidence that investors use for entering or exiting a position, rather than taking the number at face value. [Why ETF Liquidity is More Than Just Trading Volume]