BLOGS. February 1, 2024
Active ETFs – From Scores to Market Liquidity Stress Tests
Initially focused on core equity market indices’ performance replication, exchange-traded funds (ETFs) now span across investment strategies and asset classes. In the US alone, more than 400 new ETFs were launched in 2023 (see Figure 1). With an average of 77 ETF launches per quarter over the last 5 years, investors can choose among an ever-expanding fund offering. Praised for their low transaction costs and transparency, ETFs also provide high liquidity levels. It means ETF shares can, in general, be traded on an intra-day basis, with narrow bid-offer spreads. For financial regulators, the question of sustained liquidity is of prime importance as most ETF shares reach both institutional and retail investors.
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