ETF Market Is Swimming in Liquidity at the End of the Day

While often times more volatile than the rest of a trading day, the last minutes of the opened markets have attracted an increasing number of exchange traded fund traders seeking to capitalize on the elevated activity and greater market liquidity.

A shift towards ETFs and other index-based investment vehicles have raised the importance of the last half-hour of the U.S. trading day, or from 3:30 to 4:00pm, when these passive vehicles typically conducting most of their activity to accurately portray their benchmarks, reports Robin Wigglesworth for the Financial Times.

“This dynamic is a pretty big story,” Bob Minicus, head of global equity trading at Fidelity, told Financial Times. “We view the close as an opportunity. As more volumes migrate towards the close, we will follow it.”

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The elevated actions have attracted traditional active managers to execute more of their trades during this period of the day as they benefit from the greater market liquidity.

“It’s become a self-fulfilling prophecy. The liquidity feeds on itself,” Todd Lopez, head of electronic trading for the Americas at UBS, told FT. “The concentration around the close is likely to accelerate as more people try to minimize their market impact.”