Trading More Than the Average Daily Volume

The market at the time was 25.25 (bid) – 25.29 (ask) and the client was able to sell the entire block—all 277,375 shares—in one piece on the bid at 25.25. The client traded substantially more shares than the average daily volume for the previous two months. If the underlying securities are accessible and liquid, then that liquidity can easily translate to instantaneous ETF liquidity.

This exemplifies the power of the ETF structure, since the client was able to trade almost 400% of the average daily volume (ADV) in one trade. When we structure and launch our ETFs, we keep close watch on liquidity in the underlying markets that can directly affect the liquidity available in the ETF. The strength of the ETF structure is that it makes average daily volume essentially irrelevant, as long as investors have access to liquidity providers or traders that can transfer the liquidity in the underlying markets into the ETF.

Important Risks Related to this Article

 

There are risks associated with investing, including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. This Fund focuses its investments in China, thereby increasing the impact of events and developments associated with the region, which can adversely affect performance. Investments in emerging or frontier markets are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments.

Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. Derivative investments can be volatile, and these investments may be less liquid than other securities, and more sensitive to the effects of varied economic conditions. As this Fund can have a high concentration in some issuers, the Fund can be adversely impacted by changes affecting those issuers. Unlike typical exchange-traded funds, there are no indexes that the Fund attempts to track or replicate. Thus, the ability of the Fund to achieve its objectives will depend on the effectiveness of the portfolio manager. Due to the investment strategy of this Fund, it may make higher capital gain distributions than other ETFs. Please read the Fund’s prospectus for specific details regarding the Fund’s risk profile.