ETF $Billion Club – March 2009
March 1, 2009 by Ron Rowland
Filed under Commentary, ETFs
As trading gets underway for March 2009, there are 843 exchange-traded products (756 ETFs, 87 ETNs) listed in the U.S. With so many choices there are bound to be many with severe liquidity issues. A surprising number have days with zero volume and outrageous bid/ask spreads – ETFs on Deathwatch. However, there is a small group of ETFs that rise above the crowd – ETFs that trade more than $1 billion per day – members of the ETF $Billion Club.
If liquidity is high on your list of priorities, then knowledge of the Average Daily Value Traded (ADVT) is essential. ADVT, which is volume multiplied by price (sometimes referred to as $ Volume), is a preferred method of gauging liquidity since price differences between ETFs can distort volume-only measurements. High liquidity means you don’t have to worry about whether someone will take the other side of your trade.
The table below lists the 17 current members of the ETF $Billion Club, those with an ADVT in excess of $1 billion during the latest month (February, 2009).
The ETF $Billion Club – March 2009
| Rank | Ticker | Name | Avg Daily Value Traded (ADVT) |
|---|---|---|---|
| 1 | SPY | SPDR S&P 500 | $30,767,683,584 |
| 2 | QQQQ | PowerShares QQQ | $5,251,502,080 |
| 3 | SKF | ProShares UltraShort Financials | $4,627,046,400 |
| 4 | SDS | ProShares UltraShort S&P500 | $4,580,779,008 |
| 5 | IWM | iShares Russell 2000 | $3,093,236,480 |
| 6 | DIA | DIAMONDS Trust | $2,625,997,824 |
| 7 | GLD | SPDR Gold Trust | $2,470,299,648 |
| 8 | XLF | SPDR Select Sector Financial | $2,082,540,544 |
| 9 | SSO | ProShares Ultra S&P500 | $1,905,811,200 |
| 10 | XLE | SPDR Select Sector Energy | $1,795,240,832 |
| 11 | EEM | iShares MSCI Emerging Markets | $1,746,615,296 |
| 12 | SRS | ProShares UltraShort Real Estate | $1,577,850,496 |
| 13 | QID | ProShares UltraShort QQQ | $1,458,607,744 |
| 14 | IYR | iShares DJ US Real Estate | $1,244,349,184 |
| 15 | EFA | iShares MSCI EAFE | $1,222,589,568 |
| 16 | FAZ | Direxion Financial Bear 3x Shares | $1,221,666,944 |
| 17 | USO | United States Oil Fund | $1,034,414,528 |
Disclosure: long GLD
How can I check out the volume for TBT?
Thank you very much,
Chris Baldwin
You can get volume information from most free quote services. Yahoo Finance shows today’s volume for TBT at 4.85 million shares. It closed today ay $47.01, so its Value Traded (VT) today was apprx. $228 million.
what does liquidity mean here and why is it important?
Terry,
The simplest way to think about “liquidity” is how easy is it to get out of a position in a timely manner at a fair price. Given that definition, whether or not a given security is liquid enough for your needs will depend on whether you are a day trader or an investor that builds a position over many days or weeks. The size (quantity of shares) of your trade is also factor.
It’s importance again depends on your objective. If you want to be able to place all your trades as “market orders” instead of using “limit orders” then liquidity becomes a large factor.
Other articles that may help:
http://investwithanedge.com/etf-liquidity-tiers-march-2009
http://investwithanedge.com/credit-suisse-to-delist-but-not-liquidate-three-etns
http://en.wikipedia.org/wiki/Liquidity