Trading Spreads on ETFs Widen

The Wall Street Journal‘s Ian Salisbury reports that the recent volatility in the markets has resulted in a widening of the bid-ask spread for some exchange traded funds (ETFs).

In the article Market Ills, New Rules Pinch ETF Traders, Salisbury explains that:

“While large funds like State Street Corp.’s SPDR S&P 500, which tracks the Standard & Poor’s 500-stock index, appear generally unaffected in the current climate, trading spreads for dozens of ETFs that command less attention or hold stocks or bonds that are themselves less easily tradable have suddenly become something investors need keep an eye on.”

According to Salisbury, a year ago, more than 95% of ETFs had an average quoted spread of less than 0.5% of an ETF’s share price. In August, only 84% met that benchmark. By September, only 61% kept spreads below the o.5% level.

To some extent larger spreads on ETFs simply reflect wider trading spreads across the stock market.

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