News | 05.10.19
Liquidity Questions Plague Exchange-Traded Funds
The exchange-traded fund (ETF) industry has yet to be tested by a prolonged bout of market turbulence, according to a new report from Moody's Investors Service. The relatively placid era for stocks since the financial crisis has seen big banks retreat from their role in facilitating ETF trading, with high-speed trading firms taking their place, Moody's said. At the same time, ETF investors have become accustomed to being able to buy and sell their funds with ease. But investors may be in for a shock during the next sustained market rout. Turmoil in the underlying market will spread to ETFs, Moody’s noted, making them harder and more expensive to trade. This is especially true for ETFs that own infrequently traded securities like corporate bonds and loans.
Read the full article on Wall Street Journal