Limit orders generally aren’t necessary, although are still encouraged, for very liquid ETFs, like the SPDR® S&P 500® ETF [SPY], where there are millions of shares offered at each price point with very narrow bid/ask spreads.2 However, limit orders can be a useful execution tool in less actively traded securities and, again, can help to reduce adverse price impact in times of market stress.
We appreciate that the heightened volatility witnessed across markets earlier this week was not optimal. And, while it was not limited to ETFs, we believe there is room for improvement. As one of the industry’s largest ETF providers, we are committed to collaborating with the industry, including exchanges, issuers and other market participants to deliver a higher level of service to ETF investors in all market environments. Our progress on this front is certainly something that we’ll update you on in future blog posts.
SSGA has a long-standing commitment to market quality in our ETFs and deep relationships within the trading community. Our SPDR Capital Markets team is in regular communication with market makers, exchanges and liquidity providers in an effort to monitor the liquidity of our products for the benefit of our clients and investors. Should you have any questions on these events, or ETF trading in general, please call us at 866.787.2257.
1Bloomberg, SSGA, as of 8/27/2015
2SSGA, as of 8/27/2015
This article was written by Jim, Executive Vice President of State Street Global Advisors and the Global Head of SPDR ETFs and Head of Intermediary Distribution in the United States.