TIL more than 50% of create/redeem activity in ETF primary markets comes from four banks. ETFs are an inherently good thing, but let's not kid ourselves about who we're trusting to make the system work...pic.twitter.com/uschUyeIsN
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My tone comes from reading papers like this: https://poseidon01.ssrn.com/delivery.php?ID=262102004111027068003117018029089106116003041088086064113092070094031120110117017006000106044041050001050120121065069071070095000040001010006119018102020114127102103088073005083098025076080096070085004089087126084113118119071077112093108000022024024111&EXT=pdf&INDEX=TRUE … and articles like this: https://www.advisorperspectives.com/articles/2020/03/16/fixed-income-etfs-are-trapped-in-bond-markets-liquidity-crunch … The innovations that rely on "selective liquidity" are likely to teeter during a crisis, leaving the Fed as the only backstop.
doesn't fact that create/redeem is an NSCC-intermediated process give you some comfort, given DTCC's capital controls, transparency, regulatory status, etc? less concentration is better than more, but this ain't the CDS mkt pre-GFC. well-capitalized & regulated CCPs involved.
For equities 100%. When liquidity of the ETF generally matches liquidity of the underlying, there's much less to worry about. Fixed income ETFs are where things get murkier
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