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Peter Brady

3:12

Why do some low volume ETFs consistently trade at a premium?

Dave Nadig

3:13

So, when an ETF has really low volumes -- like 100 or 1000 shares a day, or even going days without trading -- you need to be very careful about what data you are comparing.

In many cases, what you may be looking at is, say, an NAV struck at 4PM today, but a trade that happened at 2PM.

In those intervening 2 hours, the market could have moved a lot, and you can see a "Phantom" premium or discount.

3:14

Separetely, its also possible that a truely low volume ETF might just be getting priced badly, because it never trades enough for an Authorized Participant to step in and do a creation or a redemption.

In that case, if people still want to buy it, the trades will happen over "fair" value. If they want to sell it, it will happen below "fair" value.

3:15

You need enough volume to trigger at least the prospect of creations/redemptions for the price to trade near NAV

So sometimes it can be a bit of a chicken/egg problem with tiny, low volume ETFs.

Which is why you need to be careful there.

Anonymous

3:15

Seriously, we are now quoting management fees in hundredths of basis points?

Dave Nadig

3:15

OK this one makes me laugh.

3:16

You HAVE to be talking about BAR, which is Graniteshares Gold ETF.

it just cut it's prices a few days ago:

https://www.etf.com/sections/daily-etf-watch/etfs-change-indexes-expen...

The ACTUAL new expense ratio is 17.49 basis points or 0.1748%

3:17

typo

Which is obviously ridiculous and silly

you KNOW the "49" there is because everyone will do what we did, and round it down to 17

but they "keep" the half a basis point.

3:18

I agree. It's ridiculous. A lot of systems aren't even set up to PROCESS the fractional basis points correctly

Bloomberg will only round to the third decimal

so it reports it as .175

and so on.

Total silliness.

Jack

3:18

Hi Dave. Should I worry if the ETF I choose is not linked to MSCI or FTSE, but to some much smaller index provider? Is there additional risk by going with a smaller index firm (other than index methodology)?

Dave Nadig

3:19

Great question. In general, its not a BIG DEAL when you don't know the index provider off the top of your head. Its generally only a big deal for institutions who may need to track a certain bogie, or perhaps use a certain portfolio analytics tool like MSCI's Barra models.

3:20

That said, big index companies invest a TON in things like having great corporate actions teams. Smaller index providers often have to outsource that.

Does that matter if you're tracking, say, 50 tech stocks, or 100 marijuana companies from canada? Probably not.

Does it matter if you're trackign emerging market local currency debt, or CHina A Shares? Maybe.

3:21

but sometimes the little guy may have an edge. For example, I wouldn't suggest that Kraneshares is inherently inferior to MSCI when it comes to understanding the CHina A share market.

Krane's building an entire business there, they might actually be MORE tuned in.

So I think it's pretty common sense.

Colleen Ainsley