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.
Execution Decision Tree
When executing an ETF trade, there are many decisions to make in order to ensure that best execution is achieved. Below is a summary of execution strategies.
Buying and Selling an ETF: Getting Best Execution
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.
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 that an ETF will achieve its investment objective. SSGA SPDR ETFS MAY NOT BE AVAILABLE OR SUITABLE FOR YOU. THE VIEWS EXPRESSED/INFORMATION IN THIS SITE DOES NOT CONSTITUTE INVESTMENT ADVICE, FINANCIAL, LEGAL, REGULATORY, ACCOUNTING OR TAX ADVICE. INDEPENDENT ADVICE SHOULD BE SOUGHT IN CASES OF DOUBT. NEITHER THE INFORMATION NOR ANY OPINION CONTAINED ON THIS SITE CONSTITUTES A SOLICITATION OR OFFER TO BUY OR SELL SHARES OF THE FUNDS OR ANY OTHER FINANCIAL INSTRUMENT. Standard & Poor's®, S&P® and SPDR® are registered trademarks of Standard & Poor's Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation's financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
SPDR ETFs may be offered and sold only in those jurisdictions where authorised, in compliance with applicable regulations.
European SPDR ETFs
SSGA SPDR ETFs Europe I Plc and SSGA SPDR ETFs Europe II Plc are investment companies with variable capital constituted as umbrella funds with segregated liability between sub-funds under the laws of Ireland and authorized by the Central Bank of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011.
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 the Prospectus and Key Investor Information Document (KIID) relating to specific SPDR ETFs and read them carefully prior to investing. For further information and the Prospectus/KIID describing the characteristics, costs and risks of SPDR ETFs, download a Prospectus or KIID here, talk to your financial advisor, or obtain it from your local SSGA office.
US SPDR ETFs
The US domiciled SPDR ETFs named on this site are only permitted to be marketed into the relevant EEA jurisdiction pursuant to either Article 42 of AIFMD (as implemented under national laws of such member state); or (ii) can otherwise be lawfully offered or sold (including on the basis of an unsolicited request from a professional/Qualified investor). Some of the US domiciled SPDR ETFs mentioned in this site are alternative investment funds for the purpose of the European Union Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (“AIFMD”). SSGA Funds Management, Inc. and State Street Global Advisors Trust Company are the alternative investment fund managers (“AIFMs”) of these Funds.
Before investing, consider the funds' investment objectives, risks, charges and expenses. To obtain a prospectus which contains this and other information, download a prospectus here, or talk to your financial advisor. Read it carefully before investing.
SPDR® Dow Jones® Industrial Average ETF is listed and registered for sale in the Netherlands