Trading in ETFs typically accounts for around 30% of the overall volume in equity markets but the percentage spikes in fast-moving, risk-off markets like Friday’s in the wake of the dreadful employment report.
“In times of distress, investors use ETFs for liquidity and the ability to shift quickly,” said Robert Trumbull, head of institutional ETF sales at State Street Global Advisors, in a recent interview at the company’s Boston headquarters.
He estimated ETFs are now approximately one-third of U.S. equity trading volume.
Chris Hempstead, director of ETF execution services at WallachBeth Capital, says he has seen the figure approach 40% on some days during the past few years.
“ETF trading spikes when people think events are highly correlated and macro in nature,” he noted.