If you’re an advisor concerned about liquidity in low-volume ETFs, you can look for liquidity providers to facilitate ETF trades by providing a market for even the most thinly traded fund. For instance, alternative liquidity providers like Street One Financial, Wallach Beth, KCG, Susquehanna and Wolverine have ETF trading desks to help large investors.
The providers are opening up new worlds for advisors and investors, making it possible for individuals to invest in ETFs that they once feared would be illiquid and diversify into other areas of the market. The services of liquidity providers give advisors better access to price discovery and execution, without making a large impact on market prices.
In addition to best execution, third-party liquidity providers can help to educate their institutional clients on the unique aspects of new ETFs that come to market. These new relationships can sometimes make the difference between a successful launch and a not so successful launch.
For more information on liquidity and trading ETFs, asset managers can visit the ETF Bootcamp site to register for the conference.