{"id":173815,"date":"2020-08-25T18:23:00","date_gmt":"2020-08-25T22:23:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/trading-lessons\/etf-trading-considerations\/"},"modified":"2023-04-25T20:51:56","modified_gmt":"2023-04-26T00:51:56","slug":"etf-trading-considerations","status":"publish","type":"trading-lessons","link":"https:\/\/www.interactivebrokers.com\/campus\/trading-lessons\/etf-trading-considerations\/","title":{"rendered":"ETF Trading Considerations"},"content":{"rendered":"<h3>International Equities: Trading Hours<\/h3>\n<p>Asset Class Specific Considerations<\/p>\n<h4>International Equity:<br \/>\nAsynchronous Trading Hours<\/h4>\n<ul>\n<li>ETF iNAV typically reflects local market closing prices of underlying constituents adjusted for currency impact.<\/li>\n<li>When markets for underlying securities are closed, the ETF price may deviate from the ETF iNAV calculation as investors react to new information.<\/li>\n<li><b>Availability of hedging instrument<\/b>: The Euro Stoxx 50 Futures contract is a better reference vehicle than ETF iNAV when Europe is closed.<\/li>\n<\/ul>\n<p><img decoding=\"async\" class=\"twothird alignnone wp-image-1822 size-medium lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/01-international-equities.jpg\" alt=\"\" width=\"594\" height=\"540\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 594px; aspect-ratio: 594\/540;\"><\/p>\n<h3>Fixed Income ETFs: Premium\/Discount<\/h3>\n<p><b>Premium or Discount: <\/b>The price of the ETF relative to the Net Asset Value (NAV) of the underlying basket can be a catalyst for the create\/redeem process<\/p>\n<p><b>Premiums or Discount: <\/b>These differences may also represent price discovery periods as the ETF\u2019s continuous pricing offers transparency to stale underlying pricing or differences in market structure (i.e., 3pm versus 4 pm close).<\/p>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-1823 lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/02-fixed-inccome-premium-account-scaled.jpg\" alt=\"\" width=\"960\" height=\"495\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 960px; aspect-ratio: 960\/495;\"><\/p>\n<h3>Fixed Income ETFs: Matrix Pricing<\/h3>\n<p>When quotes are not available, matrix pricing is a commonly used method to price a bond.<\/p>\n<h4>Example: Value Bond B<\/h4>\n<p><img decoding=\"async\" class=\"alignnone size-medium wp-image-1824 lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/03-fixed-income-matrix-pricing-scaled.jpg\" alt=\"\" width=\"960\" height=\"417\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 960px; aspect-ratio: 960\/417;\"><\/p>\n<h3>Fixed Income ETFs: Wrapper Benefits<\/h3>\n<p>As single bond trading has become more constrained, the alternate route of sourcing bond liquidity through ETF trading has grown.<\/p>\n<p><b>Transaction Cost Savings<\/b>: Bid-ask spreads for institutional size ETF trades have historically been significantly lower than indicated spreads for underlying fixed income securities*<\/p>\n<p><b>Centralized Liquidity: <\/b>ETF trading on exchange provides a consolidated venue of observable liquidity.<\/p>\n<p><b>Efficiency: <\/b>The ETF provides implementation flexibility with easier trading relative to buying individual bonds in the OTC market.<\/p>\n<p><img decoding=\"async\" class=\"half alignnone wp-image-1825 size-medium lazyload\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/01\/04-fixed-income-etf-wrapper-benefits.jpg\" alt=\"\" width=\"476\" height=\"540\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 476px; aspect-ratio: 476\/540;\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This lesson will discuss:<br \/>\n\u2022 International Equities: Trading Hours<br \/>\n\u2022 Fixed Income ETFs: Premium\/Discount<br \/>\n\u2022 Fixed Income ETFs: Matrix Pricing<br \/>\n\u2022 Fixed Income ETFs: Wrapper Benefits<\/p>\n","protected":false},"author":1,"featured_media":170551,"parent":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"contributors-categories":[13643],"traders-academy":[13126,13128,13132],"class_list":{"0":"post-173815","1":"trading-lessons","2":"type-trading-lessons","3":"status-publish","4":"has-post-thumbnail","6":"contributors-categories-state-street-global-advisors","7":"traders-academy-intermediate-trading","8":"traders-academy-level","9":"traders-academy-trading-lesson"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Archives | Traders&#039; 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