“ETFs helped, not hurt, during this selloff,” Matthew J. Bartolini, Head of SPDR Americas Research for State Street Global Advisors, said in a note.
Looking at US equities-related funds in aggregate, there was $11 billion of gross primary market activity or the absolute value of creations/redemptions on Monday, which reflects the activity where it would necessitate any impact at the stock level, according to State Street data. For instance, there was $340 billion of trading volume on the underlying stocks in the Russell 3000 Index, so US equity ETFs only traded 3.3% of overall trading volume in the underlying market.
“So did ETFs broadly negatively impact the selloff? No. How can something that represents 3% of the market lead to the market falling more than 4% on a single day? ETFs performed their role as a market tool for price discovery, allowing investors to make capital allocation decisions in real time based on the market environment,” Bartolini added.
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