During a period of heightened volatility, SPDR ETFs served as an effective price discovery tool that enabled investors to assess the valuation and liquidity of the overall market.
ETF spreads widen along with underlying constituents
Along with elevated trading volumes, bid-ask spreads increased globally across all asset classes and financial instruments amid challenging market conditions and liquidity constraints. ETFs around the globe experienced an increase in bid-ask spreads during March 2020 before reverting back toward their previous levels in April and May 2020.
In the US, increased volatility and liquidity constraints across underlying securities led to a temporary deterioration of traditional market quality metrics in ETFs.
US-listed ETFs saw average bid-ask spreads increase from 0.37% in 2019 to 1.09% in March 2020.
SPDR ETFs saw their average bid-ask spreads increase from 0.14% in 2019 to 0.37% in March 2020.