In an attempt to bolster liquidity in its less frequently traded exchange traded funds, BlackRock (NYSE: BLK) iShares ETF business is participating in BATS and NYSE Arca incentives programs.
The ETF provider is dishing out over $600,000 to encourage greater liquidity under the BATS Global Markets’ Competitive Liquidity Program and NYSE Arca’s ETP Incentive Program, reports Jackie Noblett for Ignites.
Specifically, iShares has placed 18 ETFs on the BATS program, including the iShares MSCI Emerging Markets Horizon ETF (BATS: EMHZ), iShares B – Ca Rated Corporate Bond ETF (BATS: QLTC), iShares Baa – Ba Rated Corporate Bond Fund (BATS: QLTB), iShares Emerging Markets Corporate Bond ETF (BATS: CEMB), iShares Emerging Markets High Yield Bond ETF (BATS: EMHY), iShares Global ex USD High Yield Corporate Bond ETF (BATS: HYXU), iShares Global High Yield Corporate Bond ETF (BATS: GHYG), iShares Liquidity Income ETF (BATS: ICSH). iShares Morningstar Multi-Asset Income Index ETF (BATS: IYLD), iShares MSCI Australia Small-Cap Index Fund (BATS: EWAS), iShares MSCI Denmark Capped ETF (BATS: EDEN), iShares MSCI Canada Small Cap Index Fund (BATS: EWCS), iShares MSCI Finland Capped ETF (BATS: EFNL), iShares MSCI Germany Small-Cap ETF (BATS: EWGS), iShares MSCI India ET (BATS: INDA), iShares MSCI India Small-Cap ETF (BATS: SMIN), iShares MSCI Norway Capped ETF (BATS: ENOR), iShares MSCI United Kingdom Small-Cap ETF (BATS: EWUS) and iShares Short Maturity Bond ETF (BATS: NEAR).
Additionally, the iShares Interest Rate Hedged High Yield Bond ETF (NYSEArca: HYGH) and the iShares Asia/Pacific Dividend ETF (NYSEArca: DVYA) are the two new additions on the NYSE Arca program. [Two iShares ETFs to Participate NYSE Incentive Program]
ETFs are bought and sold on an exchange and their price fluctuate throughout the trading day. Consequently, an ETF’s price can diverge from their net asset value. Market makers or Authorized Participants help diminish premiums or discounts to the NAV through ETF arbitrage opportunities. However, in a less populated ETF market, market makers are less inclined to step in.
Consequently, the incentives programs bring market makers to provide liquidity and improve buy and offer quotes, potentially assuaging institutional and retail investors with liquidity concerns. The program should tighten the bid-ask spreads on trades and provide quotes for large block orders.
“The payment of a fee is intended to help generate more quotes and trading than might otherwise exist absent this payment,” according to iShares.
Moreover, observers also believe that by participating in an incentives program, market makers could provide additional seed capital, which could also support newer funds.
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.