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ETFs take centre stage in US market turnover

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Even when the market crashed and a file $1.1 trillion was withheld from US-domiciled mutual funds, buyers poured $609 billion into US-listed ETFs final yr. On June 13, the day earlier than the Federal Reserve rate-setting assembly, ETF buying and selling quantity reached a peak of 39% of inventory market turnover, in line with ICI statistics. Even during times of comparatively low volatility, ETFs have gotten increasingly more vital; in 2022, their market share by no means dropped beneath 21% on any buying and selling day, setting a brand new file that was considerably larger than the ground of 14% that was seen in 2021.

Even with the volatility within the first few months of 2023, ETFs have continued to make up 30% of buying and selling volumes. In distinction to main market exercise, which accounted for 14% of ETF buying and selling final yr, supporters declare that secondary market exercise made up 86% of ETF commerce. It’s because 14% of ETF buying and selling final yr got here from the first market, whereas 86% of commerce got here from the secondary market.

Major market buying and selling in home US inventory ETFs was $5.2 trillion in 2018, a rise from 4.6% in 2021. Based on the ICI, this low proportion indicated that buying and selling had little impact on the underlying shares.

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Nevertheless, the truth that most ETFs are passive, index-tracking funds raises questions concerning the elevated share of buying and selling that they account for. Ninety-four % of US ETFs have been managed passively on the finish of the primary quarter of this yr.

Nevertheless, Antoniewicz disregarded any worries, stating that there are a number of varieties of passive funding. The selecting of an index was an “lively resolution,” she added, including there have been “a variety of various securities, asset courses, and tactical funding positions.”

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