When executing an ETF trade, there are many decisions to make in order to ensure that best execution is achieved. In this section we provide information on how to trade ETFs, choosing the best execution strategy and understanding the various layers of ETF liquidity.
Market Impact Sensitivity
Client receives price for the entire trade at once, and the liquidity provider takes on the risk of managing the resulting position. Liquidity providers can be put in competition for the trade, allowing for a clear measure of best execution. Client generally benchmarks vs. the quoted NBBO
Trade executed by buying or selling the underlying basket of securities and subsequently creating/redeeming ETF shares. The client typically receives a price reflective of executions for the underlying basket of securities plus or minus creation/redemption costs. Client generally benchmarks vs. end of day NAV.
Electronic order types using automated, preprogrammed trading instructions. Orders can be measured relative to execution benchmarks based on volume, time or other
metrics. Can be applied to both trading in the secondary market or trading the basket.
Liquidity is one of the most important features of ETFs, attracting a diverse group of investors to the vehicle. Measuring an ETF’s liquidity isn’t as simple as checking the average daily trading volume (ADV) and bid/ask spread in the secondary market. Looking only at this ‘on-screen liquidity’ misses some of the most important benefits of the ETF structure, such as the ability to create and redeem shares by tapping into the primary market liquidity of the securities within the ETF. We have created a guide to the various layers of ETF liquidity and how to asses both on-screen and primary market liquidity.
SPDR ETF is the exchange traded funds ("ETF") platform of State Street Global Advisors and is comprised of funds that have been authorised by European regulatory authorities as open-ended UCITS investment companies. SPDR ETFs may not be available or suitable for you.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
Changes in exchange rates may have an adverse effect on the value, price or income of an investment. Further, there is no guarantee an ETF will achieve its investment objective.
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Information related to Mexico
This information does not constitute and is not intended to constitute marketing or an offer of securities and accordingly should not be construed as such. The Funds referenced herein have not been, and will not be, registered under the Mexican Securities Market Law (Ley del Mercado de Valores) and may not be publicly offered or sold in the United Mexican States. Disclosure documentation related to any of the aforementioned Funds may not be distributed publicly in Mexico and shares of the Funds may not be traded in Mexico.
You should obtain and read a prospectus and KIID relating to the SPDR ETFs prior to investing. Further information and the prospectus/KIID describing the characteristics, costs and risks of SPDR ETFs are available for residents of countries where SPDR ETFs are authorised for sale on the SPDRs website and from your local SSGA office.