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Is there some sort of gaming going on?

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sydboy007

sydboy007

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I've been looking to get more of my SMSF into non AUD assets as I feel there's better growth options elsewhere.

WDIV is an ETF that invest globally with an eye on yield, and looks to be offering over 5% which is decent for an international share fund.

I'm noticing once trading for the day starts there's always market depth where:

you get 1 buyer at 10K amounts - at the moment 16.80 / 16.70 / 16.66 then some small purchases below that

Then there is a seller at 10K amounts - at the moment 16.74 / 16.75 / 16.76

I have an investment in IHD - different ETF provider and it exhibits a similar pattern

Only at 5K, 50K, 40K of shares on the buy and sell sides

Is this something the provider of the ETF is doing??
 
sydboy007 said:
I've been looking to get more of my SMSF into non AUD assets as I feel there's better growth options elsewhere.

WDIV is an ETF that invest globally with an eye on yield, and looks to be offering over 5% which is decent for an international share fund.

I'm noticing once trading for the day starts there's always market depth where:

you get 1 buyer at 10K amounts - at the moment 16.80 / 16.70 / 16.66 then some small purchases below that

Then there is a seller at 10K amounts - at the moment 16.74 / 16.75 / 16.76

I have an investment in IHD - different ETF provider and it exhibits a similar pattern

Only at 5K, 50K, 40K of shares on the buy and sell sides

Is this something the provider of the ETF is doing??
Click to expand...

Apart from the fact that these prices overlap, this looks like market making activity. ETF providers generally appoint someone to make markets to ensure that prices do not drift materially from NAV.
 
DeepState said:
Apart from the fact that these prices overlap, this looks like market making activity. ETF providers generally appoint someone to make markets to ensure that prices do not drift materially from NAV.
Click to expand...

I was thinking it might be something like that. Will have to read the prospectus again, So much info it starts to get jumped up in the brain box, but I though some of the ETF providers make a point to say they don't do any form of market making activity.
 
sydboy007 said:
I was thinking it might be something like that. Will have to read the prospectus again, So much info it starts to get jumped up in the brain box, but I though some of the ETF providers make a point to say they don't do any form of market making activity.
Click to expand...

I guess if they don't do market making activity the ETF becomes like closed trust. There's probably no law against it given there are closed trusts around. ETF market makers will create and redeem ETF units as demanded from larger investors to allay market impact concerns. You don't even need to be particularly large to avail yourself of this service. But all this churning creates tax events for you that you didn't necessarily initiate. So it's not the most tax efficient way to go. But it is simple.
 
There's market makers on the bid and ask to ensure there is some liquidity available, as this has historically been a major gripe of ETF users.

I know in the case of iShares there are rebates and financial incentives provided to market makers as long as spreads are kept within a certain range for a certain % of the month. Basically, tight spreads means trading costs get rebated to the market makers, but if spreads blow out then the rebates disappear.

New parcels can be created on request for as little as $500,000 if I recall correctly? So applying directly for new units can be done, however there's always plenty of liquidity from the market makers on both sides of the trade for purchases up to a couple of hundred thousand when I have traded it for clients.

Spreads could be tighter, but if used as a long term tool not for short-term exposure, it shouldn't be too big an issue.
 
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