NEW YORK: Wild swings in asset prices have thrown a spotlight on liquidity in corners of the $4.4 trillion market for U.S. exchange-traded funds, which have played a key role for investors in Wall Street’s coronavirus-fueled selloff. So far, ETFs – baskets of securities that are traded like stocks – have mostly functioned as intended, allowing investors to trade or hedge against further declines even during market gyrations. But trading in certain bond ETFs has begun to reflect evaporating liquidity in recent weeks. Because some bonds trade less frequently than the ETFs that hold them, the ETFs have at times traded at a markedly different price than the value of their underlying assets. On one hand, the price reflected in the ETF often helps investors gauge the real-time value of underlying assets that trade infrequently or have halted trading, analysts said. But sparse liquidity could force investors to sell at deep discounts if an extended stock market plunge pushed investors to liquidate ETFs to raise cash – a phenomenon that has been seen in everything from gold to Treasury markets during the selloff. “I still believe ETFs will work properly,” said Spencer Mindlin, capital markets industry analyst at Aite Group… Read full this story
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Investors eye cracks in $4.4 trillion US ETF market as virus sell-off rages have 298 words, post on economictimes.indiatimes.com at March 24, 2020. This is cached page on CHUTEU. If you want remove this page, please contact us.