ETF Volumes Increase During Volatility
HY ETF Trading Behavior
High Yield ETF Trading
High-yield volume vs. primary market activity for high-yield ETFs.
- During periods of high volatility, high-yield ETF primary market activity is only a small percentage of total high-yield spot bond trading
- High Yield ETFs Have Become a Remarkable Trading Tool
- Secondary market volume adds to overall high yield market liquidity profile
Case Study: August 24, 2015
What happened
Concerns about global growth caused a sharp sell-off in emerging markets and spread to US markets. This resulted in pre-market volatility, an atypical market opening process, and SPY’s largest notional trading session.
Case study: February 2018
What happened
A technically driven reversal of the historically long S&P 500 derivatives position contributed to stock market volatility on February 5-6, resulting in the second and third largest notional trading sessions in history.
Case Study: Q4 2018
SPY maintains consistent spreads during market sell-off.
What happened
Market volatility spiked in the fourth quarter of 2018 as concerns over slowing global growth, tightening monetary policy and escalating trade wars sparked a sharp sell-off in the market. During this time period, SPY spreads remained at constant levels.
An ETF Liquidity Comparison: In the fourth quarter of 2018, the iShares Core S&P 500 ETF (IVV) saw spreads widen with higher volatility. Meanwhile, SPY maintained consistent spreads, allowing investors to pivot in either direction with the same trading costs.
