Rounding the Final Turn
Michael Cafiero – Vice President ETF Trading – Knight Capital Americas, L.P.
A violent rise in volatility pegged from the Euro Zone concerns and how far it can push the worlds GDP numbers down have been apparent in the activity which we are seeing. Tepid volume highlighted last week’s flows as money managers have seemingly approached November being quite cautious.
Knight ETF Trading: Of course the vast offerings of the ETF landscape have allowed for many to take advantage of the market volatility to help make or break their 2011 numbers as we near the year end. Month to date Knight leads all ETF Securities Brokers with 19.33% of advertised ETF trades while trading 1309 different ETF products. (Autex Block Data: 11-14-11)
Flows:
US Equity ETFs: Perhaps some are cashing in their gains from October as we have seen a negative imbalance from the buy side as selling has been seen in SPY (SPDR S&P 500 ETF Trust) and RSP (Rydex S&P Equal Weight ETF). In fact this is also seen by the selling of SSO(ProShares Ultra S&P 500) and buying in SDS (Proshares Short S&P). Positive flows have been seen in DIA (SPDR DJIA Trust) as well as QQQ (Powershares QQQ Nasdaq 100).
Fixed Income ETFs: Overall fixed income flows were in the positive across the board as seen in BND (Vanguard Total Bond Market), LQD(iShares Iboxx INV GR Corp BD) and HYG(iShares Iboxx H/Y Corp Bond) Modest inflation concerns are apparent by an increase in flows into both TIP (iShares Barclays TIPS Bond) and STPZ (Pimco 1-5 Year US TIPS IN FD).
International ETFs: Emerging markets have seen continued flows as seen in EEM (iShares MSCI Emerging Mkt IN) and VWO (Vanguard MSCI Emerging Market). Single country ETFs have been led by selling in EWH(iShares MSCI Hong Kong Index), EWG (iShares MSCI Germany Index) and EWZ (iShares MSCI Brazil) while flows have been positive into EWJ (iShares MSCI Japan Index FD)
Commodity ETFs: Gold remains favored by the buy side yet again as seen in a positive imbalance of GLD(SPDR Gold Trust) while silver had slightly lost some of its luster as seen in sellers of SLV(iShares Silver Trust) and buyers in ZSL (ProShares Ultrashort Silver)
Sector ETFs: Sellers in XLB (Materials Select Sector SPDR) and XLU(Utilities Select Sector SPDR) lead outflows while buyers have rotated into XOP (SPDR S&P Oil &Gas Exp & PR), XLE (Utilities Select Sector SPDR), and XLP (Consumer Staples SPDR).
Alternative/Specialty ETFs: Investors looking for both quality and yield in the equity space have continued to push assets into both DVY (iShares DJ Select Dividend), and HDV (iShares High Dividend Equity Fund). Some light selling in the US real estate space is seen in selling of IYR (iShares DJ US Real Estate). With the increase in volatility we are still seeing two sided flows running through VXX (iPath S&P 500 VIX S/T FU ETN) as well as TVIX (Velocityshares 2X VIX SH-TRM)
From what we can gather there is no question that ETFs will see in increase in volume not just from tax loss selling but from managers looking to make 2011 a good year rather than a disappointing one as we head into the final stretch.
You may reach Michael directly at mcafiero@knight.com
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