Financial advisors can take better control over exchange traded fund order executions if they understand how the investment vehicle works and utilize broker-dealer trading services as a way to help minimize indirect costs.
ETF Trends’ Tom Lydon sat down with Ed Rosenberg, Director and Head of ETF Capital Markets & Analytics at Northern Trust’s FlexShares, to discuss liquidity in ETFs and best practices when it comes to trading.
Typically, investors and advisors will have a target market in mind, research a group of ETFs and invest in a specific fund that fits bill.
“But when you go to execute it, you just put the trade in and see what happens,” Rosenberg said. “In reality, by doing that well, it can help you with your returns in the long run. It is a cost you can help reduce.”
However, most traders have a misconceived notion about volume in ETFs. What really matters is true liquidity, or the liquidity in underlying component holdings.
“People are going to say, ‘oh, it only works if the ETF has a low on-screen volume or perceivable trading volume.’ It’s not the case.” Rosenberg said. “It really doesn’t matter if the ETF trades a million shares a day or a thousand shares a day.”
Watch the video below to see the full interview with Ed Rosenberg.
To view past video interviews, visit our videos section.