Dead ETF Walking
They are still listed. There have not been any press releases announcing closure. Trading volume has gone to zero. In some cases, the market maker has abandoned his post. These are the living dead of the ETF world – products abandoned by their sponsors, shunned by the public, or both.
It is not unusual for a relatively new ETF to go all day without any trades. In fact, 49 ETFs registered zero volume for Thursday, March 5, 2009. In case you are wondering, there are 843 ETFs and ETNs listed in the U.S., so nearly 6% of them had no trades that day. One product last traded on February 20. Five products have yet to trade in the month of March:
- PowerShares DB Base Metals Long ETN (BDG)
- SPDR S&P International Consumer Discretionary (IPD)
- E-TRACS CMCI Short Platinum Excess Return ETN (PTD)
- PowerShares FTSE Nasdaq Small Cap (PQSC)
- Claymore U.S. Capital Markets Bond ETF (UBD)
What happens when ETFs go day after day after day without any trades? For some, it seems as though the sponsor is in denial – hoping that once the market turns, investors will discover their ETF and money will come flooding in. Eventually, the sponsor will be forced to take notice.
For others, the sponsor has already written them off and told the market makers to go home. For these, it appears to be a matter of timing – the sponsors are likely considering the closure of multiple funds, and we should expect the press release soon.
They are the dead ETFs walking – still alive and listed, but destined for closure and liquidation.
Background: The phrase “dead man walking” was introduced one hundred years ago by Thomas Hardy in the poem The Dead Man Walking.
Disclosure: No positions in the mentioned securities.