In the past 12 months investors traded $18.2 trillion worth of ETF shares, according to data from the New York Stock Exchange and Bloomberg, a senior ETF analyst for Bloomberg, Eric Balchunas, reports.
The amount is three times what is was 10 years ago and is now more than the U.S. gross domestic product (GDP), which is worth around $17.4 trillion.
When it comes to assets, U.S. ETFs only have US$2.1 trillion, therefore the turnover in these products is huge, roughly 870% a year.
According to Eric Balchunas:
The increase in volume over the years can be attributed to both repeat customers as well as new participants who like anonymously darting in and out of everything from small-cap stocks to high-yield bonds to oil futures in an instrument that trades like a stock. Like a snowball rolling downhill, as an ETF sees volume increase it tends to attracts more, and bigger, investors, which in turn increase the volume.
All this manic trading is led by the insanely active SPDR S&P 500 ETF (SPY), which makes up a third of the total, or $6 trillion. That breaks down to about $24 billion a day, which is four times more than any other security on the planet and more than the next nine most traded equities combined. With $177 billion in assets, SPY’s yearly turnover equates to a mind-boggling 3,400 percent.
Beyond SPY, ETFs account for three of the top four most active equities, with the iShares Russell 2000 ETF (IWM) and the Powershares QQQ Trust (QQQ) trading over $3 billion a day each. Beyond equities, another big-time contributor to the trading volume is the iShares 20+ Year Treasury Bond ETF (TLT), which trades $1.1 billion a day, or more than what Citigroup stock trades. TLT’s massive volume shows just how thirsty investors are to trade bonds like stocks. (Individual bonds traditionally trade over the counter, and investors’ use of ETFs to dip in and out of less liquid fixed-income assets has prompted quite a bit of controversy in recent years.)
So what does all this trading do for markets? Besides generating additional profits on Wall Street, Eric Balchunas wonders whether retail investors can resist the temptation to trade and sit tight in their positions, benefiting from tighter bid/ask spreads, Caroline Cakebread from Benefits Canada notes.
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