A bull run 

ETFs are inundating the bond markets right now – to the tune of $32.5 billion in July alone, according to BlackRock’s monthly ETP survey. It was a significant uptick from June’s $3.2 billion, driven primarily by a surge of interest in corporate bond ETFs, which saw inflows of $13.8 billion in July, reversing the $9.9 billion outflows seen the previous month, with investment grade credit taking the lion’s share. 

“ETFs have become a significant market mover, and their influence on market prices has become much more noticeable over the last 12-18 months,” agreed Michael McGill, senior portfolio manager for emerging markets at Aviva Investors, speaking to The TRADE. “They’ve definitely become a much bigger player, especially in emerging markets hard currency.” 

“ETFs have become a significant market mover, and their influence on market prices has become much more noticeable over the last 12-18 months.”

European ETFs also saw a jump in July, attracting the highest monthly inflows in two years, with $2.2 billion in new blood flowing in. Much of this growth is down to changing market sentiment, as investors shift their focus to fixed income amid expectations of a significant growth slowdown and as rising interest rates pump up yields.  

“We prefer investment grade (IG) credit over equities on a tactical horizon as we see a new market regime with higher volatility taking shape,” said BlackRock in an August research note. “We believe IG credit can weather a significant growth slowdown whereas equities don’t look priced for this risk.”  

Yields are certainly on the rise, while prices are falling, meaning that opportunities abound. And investors are not just buying to hold – trading activity is also on the up, with 13 June seeing daily notional volume traded in bond ETFs hit an all-time high of $58 billion.  

But what impact is this ETF activity having on the underlying market? It depends who you talk to.  

The argument for 

“Proponents of an expanded utilisation of bond ETFs argue that fixed income ETFs not only provide an additive source of fixed income liquidity and exposure but also a novel means of price discovery for the underlying cash bonds,” explained Colby Jenkins, strategic advisor at advisory firm Aite Novarica. “As such, they are seen as a panacea for the inefficiencies of the fixed income markets.” 

“ETFs not only provide an additive source of liquidity and exposure but also a novel means of price discovery for the underlying cash bonds.”

Some take it even further, suggesting that bond ETFs are increasingly necessary shock absorbers to support wider market dislocations, and could help institutional fixed income traders navigate volatile market conditions, especially when the underlying cash bond markets run dry.  

But others believe that the influx into ETFs is sucking up secondary market liquidity for the underlying cash bonds – contributing to the problem, not the solution.  

The case against 

“We’ve had some really huge ETF flows over the past month, and that rise in passive flow is exacerbating some of the other problems in terms of liquidity,” noted a source who wished to remain anonymous. 

“The rise in passive flow is exacerbating some of the other problems in terms of liquidity.”

The issue is that ETF flows are, by and large, indiscriminate in the way that they execute. Whereas an active manager will usually have either a trader in-house, or use an outsourced service to access the market, passive portfolio managers tend to be more systematic, and use electronic platforms a lot more – even when the liquidity or the size of the trade doesn’t necessarily merit using a platform.  

What can then happen is that in times of very low liquidity, these platforms make automatic offer or bid requests in high multiples, and when they get filled in some orders but not in others, they just keep asking over and over, which can push the market in either direction.  

“They can also trade at a price that is not necessarily close to where the bonds are being quoted, which can then reprice the market to the wrong levels,” the anonymous source added.  

“It can create a lot of problems for the dealer community, who are taking what risks they can, because they end up short or long and then find themselves priced out of their position instantly, making a loss. In emerging markets especially, we’ve had some large ETF inflows that have been driving the market, and pushing it into dislocation, and that’s a frustration.” 

Another concern is that should the flows reverse, selling pressure within the secondary ETF space could spill over into the underlying cash bond market, placing undue selling pressure on an already highly illiquid market.  

But “that may not always be the case,” said Jenkins. “For the most highly traded FI ETFs, previous examples of significant market dislocation for the underlying bonds to date have provided evidence that liquidity in the secondary market for bond ETFs surge with little drawn down effect on the underlying market via the primary create/redeem mechanism.”

The opportunity up-side 

From a buy-side perspective, the biggest fear is the uncertainty – because no one really understands how long ETF flows will last.

“On the real money side, portfolio managers can usually get a sense of how investors are thinking and feeling toward the asset class, and whether there are inflows or outflows coming,” explained McGill. “But on the ETF side that is a lot trickier and can be different from day to day because no one knows how they’ll behave, or how long the flow will last.” 

 “You can try to figure out when the robots are buying and selling, and use them as a liquidity provider.”

For McGill, the solution to help manage portfolios more efficiently during volatile markets is to better understand ETFs themselves.  

“Take look at the technicals, the net asset values (NAV), the richness, the cheapness… and then you can try to figure out when the robots are buying and selling, and use them as a liquidity provider,” he recommended.   

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They, among other index tracking investment vehicles, have become popular in this increasingly passive era, as the market continues to question whether active investment can outperform passive strategies that, in some cases, cost investors half as much in fees.

Similar to a mutual fund in that they typically track an index, ETFs differ from other passive instruments as they allow a basket of stocks to be traded in one transaction on an exchange. Unlike mutual funds, ETFs also offer intra-day access to liquidity. This can minimise risk and transaction costs, while allowing traders to gain price discovery with low information leakage.

In Europe alone over the last eight years, ETFs have grown at an annualised rate of 20% in terms of assets under management (AUM) with over $1 trillion of notional now held in European listed ETFs.

Chief among the reasons behind the steady uptake in ETFs is the continuous compression of margins in the asset management industry as investors increasingly expect more for their money and favour cheaper products.

Jason Xavier, head of EMEA ETF capital markets at asset manager and ETF issuer, Franklin Templeton, says the global pandemic is another reason that the market’s uptake in ETFs has accelerated.

“If you look at the volatility we saw last March at the outset of the COVID-19 pandemic, the subsequent successful operation of ETFs and the ETF ecosystem in allowing investors to source liquidity and reallocate capital intra-day was, for some, the final success hurdle needed to validate the ETF wrapper,” he explains.

Pushing boundaries

As the market has continued on its trajectory towards cheaper investment strategies in a riskier pandemic-driven environment, a new type of active ETF has been born. At face value, active ETFs tick all the boxes by offering risk averse investors who are looking to cut costs access to a version of active investment.

According to Howie Li, head of ETFs at asset manager and ETF issuer Legal & General Investment Management, active ETFs fall into two categories. These include thematic ETFs which are based on underlying stocks that have been selected through research, and discretionary active ETFs that have a fund manager making buying and selling decisions.

“Certainly, in the last three or four years the boundaries continue to be pushed as to what should be defined as an ETF and what is classified as an active strategy,” says Li.

“What we have done is active design, we select stocks that are specific to the cyber security universe, or robotic universe, because these are all opportunities that are not traditionally defined. We built these investment strategies in a way that is very similar from a client’s point of view to the active experience.”

This form of thematic ETF stock picking derives from the market’s journey away from how investors think about asset allocation. Previously, asset allocation for ETFs was based on regional indexes, however, as the market has become increasingly globalised this method has become sub-optimal.

Wholly active ETFs that have a fund manager responsible for buying and selling have also seen an astronomical spike in interest. However, the interest is predominantly limited to the US. Founder, CEO and chief investment officer at ARK Investment, Cathie Wood, for example, has taken the market by a storm recently with 152.2% returns on her actively managed ETF funds in 2020.

According to a recent report by FactSet, 2020 was the first year that there were more active ETFs launched in the US than passive ETFs that track an index, with actively managed ETF funds bringing in a total of $56.1 billion over the period.

On 26 March, Guinness Atkinson Asset Management became the first investment firm to convert two mutual funds with assets of $21 million to actively managed ETFs. US investment bank Citi also confirmed plans to work with Dimensional Fund Advisors to switch six mutual funds, with total assets of $20 billion, to the active ETF wrapper in 2021.

Despite the active portion of the market only making up 3% of the $8 trillion total value of the ETF industry, these moves could represent turning tides as the mutual fund market and its lack of intra-day liquidity becomes more and more outdated.

Final hurdle

The US market is undeniably leaps and bounds ahead of Europe in its uptake of more actively managed ETFs. This is largely due to the Security and Exchanges Commission’s (SEC) recent relaxation of its regulation in 2019 that allowed for more discretion in ETFs.

The SEC recently introduced new regulations that allow for discretion when disclosing which stocks are within an ETF wrapper, meaning ETFs no longer have to make public their holdings on a daily basis.

With one of the foundation pillars of ETFs being transparency, prior to this change in regulation they were not favoured by active fund managers. Many view their stock picking abilities as intellectual property and therefore do not wish to disclose the information.

“There are active ETFs in Europe of course, but they’re still required to disclose their portfolio holdings on a daily basis. It limits the number of products that these issuers are looking to launch because they’re not necessarily comfortable with having that openness and transparency around their active trading strategies,” says Steve Palmer, global head of ETF products at HSBC Securities Services.

“If we got to a position where the wrapper allowed for a similar structure to what the US is comfortable with through the SEC’s positioning of these active products, then I can certainly see that being a trigger point for the European market to start using the ETF wrapper for active products.”

Regulation remains the final hurdle between the European market and the wave of actively managed ETFs that has swept across the US.

“The European market predominantly still expects ETFs to be transparent, but investors are on a journey to understand and see what more ETFs can do as it moves towards the active end,” adds Legal & General Investment Management’s Li.

Diluted liquidity

Whether actively managed ETFs can outperform passive rules-based ETFs and vice versa remains up for debate. However, one clear impact of the rise in active ETFs is the greater variety of choice that investors have.

Li explains that as more active strategies come to market, asset managers that previously did not issue ETFs because they lacked the index capabilities could now do so, meaning the ETF market will continue to grow.

“If more active strategies are launched in an ETF wrapper, it means there is greater potential for investors who prefer active management to look to the ETF market for solutions. This can lead to more volume, which means more possible business for institutional traders,” adds Li.

“Suddenly the mutual fund has been listed on a stock exchange and it’s using the same infrastructure as trading Vodafone. As more of this market builds, there is more available business for traders to try to capture.”

Active ETFs do, however, bring with them an additional layer of risk that passive ETFs do not. For one, there is the additional risk in the judgement of a fund manager to pick and choose when to buy and sell.

“If you go for discretionary management, you are trusting the skill and judgement of that portfolio manager or investment team. If you look back at history, some managers can get it right and some don’t – being consistent through all market cycles has been a challenge,” says Li.

It could also prove difficult to convince market makers of the merits of active ETFs taking centre stage in Europe. Market makers create individual buying and selling markets between issuers and investors, operating on small margins made from each transaction.

It is because of these small margins that they prefer as much transparency as possible. If they know the exact value of an ETF it allows them to trade it more easily.

“Market makers, such as ourselves, need to fully understand the constituents of the basket they are pricing. While this is straightforward in passive ETFs, the constituents of an actively managed ETF are variable, which adds complexity and sometimes lower transparency. As a market marker, our trading desk can only price such instrument when its fully up to speed with what is in it,” says Ron Heydenrijk, European head of sales and external relations at Flow Traders.

“Actively managed ETFs are typically more difficult to hedge, because the further you go away from the general benchmarks the less derivative products you can use to hedge.”

Elsewhere, the fragmented nature of the European market could be slowing the progress of active ETFs, as its various currencies, geographies, settlement depositories and exchanges mean that a significant portion of ETF trades are not conducted on exchange.

“We see a good percentage of [ETF] trades done via multi-lateral trading facilities (MTF) as well as on-exchange, with approximately a 70/30 split between MTFs versus on-exchange activity in Europe,” says Franklin Templeton’s Xavier.

The natural fragmentation of the European market has diluted the liquidity available on exchange and subsequently forced ETF traders to find liquidity off-exchange in the form of request for quote (RFQ) platforms.

“Relative to the US, there is lower on-screen liquidity in Europe. There is, however, significant off-screen liquidity through RFQ platforms, which put market makers in competition with each other, offering institutional investors an efficient way to trade large blocks at attractive spreads,” adds Heydenrijk.

Consolidated tape

Along with diluted on-exchange liquidity, the lack of a consolidated tape in Europe means ETF traders cannot see the volumes taking place off-exchange, in effect blinding them.

“In Europe and the UK, only ETF trades that are traded on-exchange are published and it pretty much ignores 90% of the transactions in Europe, which is pretty crucial. A consolidated tape is essentially going to show both on-exchange and off-exchange, how many deals are happening,” says Li.

“If you want to understand the true liquidity of an ETF and understand how much volume is going through it – investors currently do not have full visibility. They know in the US but they do not know in Europe. The consolidated tape is something that everybody wants.”

While there is no concrete correlation between the number of active ETF launches and a consolidated tape, in offering participants more transparency on the volumes taking place on and off-exchange this could encourage more active strategy-based ETFs to take hold in Europe.

The European Commission recently pushed for the establishment of a consolidated tape in the European primary and secondary bond markets in its upcoming MiFID II review following pressure from market participants. Any concrete action on this is yet to be seen.

Ultimately active ETFs have a way to go before they are welcomed with open arms in Europe in the same way that they have been in the US. However, evidence has shown that they are on the rise and the line between active and passive is continuously moving.

As the face of the ETF continues to evolve, investors will have the opportunity to dip their toes into various pools, picking and choosing tailored investment vehicles that contain a flavour of both active and passive strategies.

“It is a question of how you want to access an active manager’s ideas. If you can use an ETF to perhaps do that, that might be the preferred choice for clients and end-investors,” concludes HSBC’s Palmer.

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ICE has rolled out a FIX API (application programming interface) to allow authorised participants to connect to the ETF Hub platform to manage create/redeem orders in an automated way. The multi-order functionality will also enable authorised participants to submit multiple transactions as one order for greater efficiency and to reduce potential human error.

“These new enhancements provide our customers much greater levels of standardisation and efficiency both in the way that they connect with ICE ETF Hub and process creation and redemption orders,” said Peter Borstelmann, head of ICE ETF Hub. “We are working closely with our customers to continue delivering key functionality to improve the ETF primary market trading workflow, which has been a critical part of our mission from the start.”

ICE ETF Hub was launched last year and designed in consultation with issuers, authorised participants, market makers and custodians to offer a more standardised and automated process for assembling and placing creation and redemption baskets. The open architecture, primary market platform aims to standardise and simplify ETF creation and redemption.

It currently supports US-listed domestic equity and fixed income ETFs, but ICE plans to expand this later in the year to support US-listed international equity ETFs. It will also provide connectivity to ICE Bonds trading protocols, including click-to-trade and request for quote.

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Wematch said in a statement that the matching protocol dedicated to ETFs aims to address the evolving complexities of the European ETF market, whereby one ISIN can be associated with multiple Sedols (stock exchange daily official list) and can be custodied in more than one location. 

Market participants will be provided with granular data once a match is identified to ease the decision-making process before confirmation of a trade. It also looks to optimise workflow and minimise settlement costs and risks, Wematch added.

The FinTech has backing from major institutions including JP Morgan and Societe Generale, both of which participated in a funding round for the company in September. Wematch’s dealer-to-dealer platform offers clients web technologies to improve the matching and negotiation trading process.

Its technology and platform is currently used by more than 40 banks and 750 traders to cross assets. revolutionise traditionally voice-traded markets. JP Morgan, Societe Generale, as well as other major institutions such as HSBC and RBC, went live with Wematch when it expanded its dealer-to-dealer platform to include euro interest rate swaps in July.

More recently, Wematch named industry veteran Jack Jefferey as its new chairman. Jefferey had previously worked as chief executive of fixed income platform, MTS, and spot FX broking platform, EBS. Jeffery also spent 11 years with Citigroup in senior roles, including global head of FX options and European head of FX.

Wematch was also nominated in the FinTech of the year category for The TRADE’s most recent Leaders in Trading awards ceremony in November. 

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Goldman Sachs Asset Management has launched three smart beta ETFs to access the Swiss market, with Flow Traders acting as the market maker and providing liquidity.

The ETFs aim to provide retail and institutional investors with opportunities to diversify portfolios with US, Chinese and emerging market underlying assets.

“Our clients are demanding more choice in their portfolios and we are excited to complement our existing fund range with ETFs that we believe can help simplify portfolio construction and contribute to superior risk-adjusted returns,” said Pascal Mischler, head of Goldman Sachs Asset Management’s client business in Switzerland. “The funds will be relevant to both retail and institutional clients. This is a significant addition to our Swiss product offering and we are tremendously excited to enter the fast-growing European ETF market.”

SIX added that with its products on the Swiss Stock Exchange, investors gain a factor-based investment approach to emerging market equities, including high-capitalisation US equities and government bonds issued in mainland China.

In the third quarter this year, SIX saw trading turnover for ETFs reach CHF 40.5 billion, with a record CHF 28.9 billion turnover in equity developed markets, higher than the total exchange’s total ETF turnover in the second quarter. SIX also saw a new record in May this year with 1,500 ETFs listed on the exchange, making it one of the top three ETF venues in Europe.

“That SIX is now one of the top ETF listing destinations in Europe and a global leader in its own right is testament to the exchange’s innovation, commitment and expertise,” Christian Reuss, head of sales for securities and exchanges at SIX Group, said at the time. “The 1,500 listed ETFs at SIX mark another milestone in the almost 20-year success story of this segment. We would like to express our sincere thanks to our clients – product providers, market makers and investors.”

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Known as the ICE ETF Hub, the platform was designed in consultation with issuers, authorised participants, market makers and custodians to offer a more standardised and automated process for assembling and placing creation and redemption baskets.

The hub is now live for domestic equities, with support for fixed income expected to go live in the fourth quarter this year. ICE will also add access to ICE Data Services pricing, reference data and analytics, as well as connections to ICE BondPoint and TMC Bonds for execution protocols.

“Even with the increase in assets and trading volumes over the last ten years, faster growth has been inhibited due to the lack of standardisation in the primary market,” said Ben Jackson, president of ICE. “Applying innovative technology solutions that improve market efficiency has long been our hallmark and we look forward to working with our partners to bring this platform forward.”

According to research from BlackRock, there is room for major growth in ETFs with the instruments currently representing around 9% of the US equity market and under 2% of the US bond market. Globally, ETFs have increased to more than $5.7 trillion of assets under management as of 30 September this year.

“BlackRock has long been an advocate for establishing standard and accessible processes for the ETF ecosystem,” added Samara Cohen, co-head of iShares markets and investments at BlackRock. “As the growth of the ETF industry accelerates, it is essential for the infrastructure powering the market to scale rapidly. The ETF Hub brings new efficiencies to the market and creates an open environment where participants can interact effectively to offer greater choice for our clients.”

Last month, the US securities regulator voted to adopt new rules to speed up the time it takes to bring ETF products to market in response to calls to modernise the existing regulatory framework for ETFs. ICE welcomed the move, particularly the use of custom baskets, adding that the rules will offer significant benefits to the entire ETF ecosystem.

“With ETFs being an important aspect of our franchise strategy, we are always looking for ways to introduce efficiency into our operating model,” Christopher Berthe, JP Morgan’s co-head of cash trading, commented on the launch. “ETF Hub helps position us to achieve this through their standardized workflows and increased efficiency.”

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The Securities and Exchange Commission (SEC) said in a statement that the new rules have been designed to modernise the current regulation of ETFs, with a consistent framework to drive competition in the $3.3 trillion market.

As part of the overhaul, ETFs will now be able to operate under the Investment Company Act of 1940, removing the often time-consuming and costly need to gain ‘exemptive relief’ from the regulator before launching new products. It also permits ETFs to use custom baskets under the ‘creation/redemption’ process, which the SEC said will significantly level the playing field for new entrants in the market.

“Since ETFs were first developed over 27 years ago, they have provided investors with a number of benefits, including access to a wide array of investment strategies, in many cases at a low cost,” SEC chairman, Jay Clayton, commented. “As the ETF industry continues to grow in size and importance, particularly to Main Street investors, it is important to have a consistent, transparent, and efficient regulatory framework that eliminates regulatory hurdles while maintaining appropriate investor protections.”

In response to the SEC’s decision to adopt the new framework for ETFs, US exchange operator ICE welcomed the move, particularly the use of custom baskets, adding that the rules will offer significant benefits to the entire ETF ecosystem.

“We applaud the SEC on the adoption of the ETF rule, which is designed to significantly expand participation and help issuers provide greater choice for investors as they look to diversify portfolios and manage risk,” said Ben Jackson, president of ICE. “By allowing all participants to use custom baskets for the creation and redemption process, this rule gives all issuers the flexibility they require, offering significant benefits for both ETF investors and the ETF ecosystem as a whole.”

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Allocations in exchange-traded funds (ETFs) by institutional firms grew by 50% in Europe last year, according to research from Greenwich Associates.

A survey of 127 institutional investors found that ETFs now account for 15% of total assets among that group, despite increased market volatility throughout Europe over the last year.

“Our data suggests that last year’s robust growth in ETF investments by European institutions occurred not in spite of the turbulent conditions, but because of them,” commented report author and managing director at Greenwich Associates, Andrew McCollum.

The research found that European firms repositioning their portfolios to prepare for expected rate hikes from the European Central Bank, alongside a number of geopolitical risks, focused on ETF investing due to speed of execution, single-trade diversification and liquidity making them versatile tools for portfolio construction.

The growing importance of ESG (environmental, social and governance) factors were also highlighted as a driver of ETF growth, as 44% of survey respondents indicated they are using the products to address and meet their ESG commitments.

“In a year that saw the return of broad market volatility, investors turned to ETFs to capture alpha, manage risk, invest sustainably, and tap liquidity in tighter financial conditions,” says Brett Pybus, head of iShares EMEA Investment and Product Strategy team at BlackRock, the sponsor of the research.

“Looking forward, a revolution in the way portfolios are built in Europe will feed the momentum in ETF adoption we’ve seen in recent years. Investor sensitivity to cost, transformative regulation, the modernization of the fixed-income ecosystem and greater access to data and analysis tools are all setting the stage for future growth.”

Greenwich Associates stated that ETF growth is expected to continue throughout 2019, with nearly 40% of ETF investors surveyed planning to increase their allocations in the next 12 months.

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Tradeweb said that its European ETF marketplace saw record total volume traded in January of €28.2 billion, up 9% from the trading platform’s previous record, set in October last year.

North America and Europe equities were the most traded during the first month of the year, accounting for 37% of the total activity in European-listed ETFs on Tradeweb.

Adriano Pace, head of equities for Europe at Tradeweb, stated that the surge in European ETFs is not surprising given the introduction of transparency requirements for ETFs under MiFID II last year, as well as continued focus on proving best execution.

“A year on from the implementation of MiFID II in Europe, we have witnessed market participants become increasingly comfortable not just with trading ETFs on electronic marketplaces such as Tradeweb, but also with adopting automated workflows to conduct their business,” he said.

MiFID II brought ETFs in scope of certain regulatory requirements when it was introduced in January last year. Reporting requirements under MiFID II have seen greater transparency on the liquidity of ETFs, encouraging market participants to engage with ETFs more.

At the same time, Tradeweb said of the European ETF transactions processed in January, 44.9% were traded via its Automated intelligent Execution functionality (AiEX), which allows traders to trade directly from their order management system (OMS) in an automated fashion. ETFs are increasingly being traded electronically rather than voice traded.

In the US, Tradeweb said total consolidated ETF notional value traded in January this year stood at $3.4 billion, with equities accounting for 48.2% and fixed income accounting for 45.4% of the total volumes.

Fixed income ETF volumes at Tradeweb in the US surged significantly from 29.3% in December to January, which the firm said was driven by expectations of the Federal Reserve’s plan to raise rates at a slower pace.

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BNY Mellon said in a statement that over the past several months it has made several changes to its ETF order taking service, including an integration of Bloomberg’s BSKT negotiation tool for fixed income, and custom order approval for portfolio managers.

The latest update saw a new global standard introduced for clients that are transmitting creation and redemption orders via a proprietary electronic message structure, which supports all order types in all domiciles where BNY Mellon provides ETF services.

“We are excited to advance our suite of order management solutions and better service the rapidly growing ETF industry by offering a global standard for electronic ETF order placement,” said Jeff McCarthy, CEO of exchange traded products at BNY Mellon. “Our infrastructure supports primary market dealing automation and STP through the ability to interact with both liquidity providers and third-party primary market dealer platforms.”

BNY Mellon added that the upgraded ETF order taking capabilities provide benefits in terms of greater speed, mitigated risk by removing manual entry within the bank’s ETF order taking portal, and by providing direct connectivity to liquidity providers and third-party platforms.

Gary Buxton, EMEA ETF COO at Invesco, commented: “BNY Mellon’s enhancements across primary market dealing has enabled Invesco to leverage our proprietary primary market dealing platform across our entire European ETF fund product suite-enabling straight-through-processing across order entry, portfolio manager approval, reconciliation and share issuance.”

Research published earlier this year from Greenwich Associates suggested that buy-side and sell-side trading practices currently used to trade ETFs are limiting growth in the industry. The firm said that many institutional investors, equity broker-dealers and market makers currently deploy the same methods for trading ETFs as for equities, but this often leads to sub-optimal executions.

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