How to trade ETFs

ETFs offer a simple, low cost way to gain exposure to financial markets in today’s increasingly complex trading environment. The iShares Canada Capital Markets team can help investors buy and sell exchange traded funds more effectively to meet their goals.

Understanding liquidity

Many investors will know that the liquidity of an individual stock is based solely on its average daily volume. But that’s not the case with ETFs. They provide the potential benefit of multiple layers of liquidity.

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Secondary Marketaverage daily volume

An ETF’s average daily volume (on screen liquidity is not the extent of its liquidity).

ETF Market Depthmarket maker indications of liquidity

Liquidity can also be sourced in the secondary market by execution strategies, such as limit orders.

Primary Market creation/redemption liquidity

New shares of the ETF can be created by designated institutional investors accessing the underlying securities market.

Increasing levels of liquidity
For illustrative purposes only. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.

3 Ideas when trading ETFs

The use of ETFs and trading volumes continue to grow in Canada. ETFs are as simple to access as other investment vehicles listed on the Toronto Stock Exchange (TSX) or Aequitas NEO Exchange (NEO). However, it is important to be mindful that ETFs are a unique investment tool and should follow a few best practices for trade execution.

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1. Timing of the trade

Consider placing trades between 9:40am to 3:40pm EST. The open and close periods of the trading day can potentially be volatile. Investors should also consider market news and events that may cause volatile pricing throughout the day.

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2. Size of the trade

The size of the trade will determine the execution strategy and market impact costs. Be sure to measure the relative size of the trade with respect to the ETF’s secondary market liquidity and to the underlying security liquidity.

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3. Trading strategy

Taking into consideration the timing, size and underlying liquidity of a trade can help to set an effective execution strategy. As with trading most securities, limit orders offer investors the chance to set a target execution price. Market orders on the other hand do not offer a limit price feature, which may lead to a price execution that is different from expectations.

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4. Support

BlackRock has a dedicated iShares Capital Markets Team based in Toronto to help with questions related to trading iShares products.

Improving trade execution

We offer a range of services to help investors potentially enhance the liquidity of their trades, reduce costs, and/or save time.

Pre-trade analytics: The iShares Pre-Trade Analytics Platform estimates an efficient way to trade an ETF based on multiple sources of liquidity.

  • Includes coverage of 3000+ exchange traded funds globally and their underlying securities.
  • The first and only fixed income ETF pre-trade tool, covering 42 corporate credit iShares ETFs.
  • Intraday intrinsic value pricing for underlying bond and international equity exposures.
  • Cost estimate comparisons of equity index futures vs. ETFs.
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Custom creations: A portfolio of individual bonds can be difficult to manage. iShares inventory screener (aka IRIS) can evaluate your bond inventory and provide potential solutions to convert all or part of it into new units of iShares ETFs.

Our Service

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1. Send us your bond inventory

2. We evaluate your inventory

3. We provide potential iShares ETF solutions

E-mail us your CUSIPS and par amounts to either of the e-mail addresses below

We evaluate bond attributes and will determine which bonds may be appropriate for the iShares ETF

After reviewing your inventory we will discuss potential solutions with you

For more information, please contact the Global Markets Team at GroupiSharesCanadaCapitalMarkets@blackrock.com