One Month Down and a Good Start

One Month Down and a Good Start

Michael Cafiero – Vice President ETF Trading – Knight Capital Americas, L.P.

The trend continues into February as investors continue to show greater conviction in their allocations leading to broad based ETFs seeing  flows move out and head into sector based, single country, and specialty ETFs. In fact volumes were down in for the month of January for top tier ETFs which gave way to increased flows in the rest of the ETF Landscape. This signals that investors understand how liquidity is sourced in ETFs resulting in giving them more options when scouring ETFs despite seeing limited market depth.

Knight ETF Trading: 

Flows: For the month of January 2012, Knight led all ETF Securities Brokers with an advertised trade volume of 14.8% while trading in 2,418 unique ETFs. (Autex Block Data 2-1-12)

US Equity ETFs: SPY (SPDR S&P 500 ETF Trust) saw two sided flows while VTI (Vanguard US Total Stock Market) saw outflows albeit with very heavy trading volume. QQQ(Powerhsares QQQ Nasdaq 100) continues to be favored by the buy side as its index continues to shine in 2011. IWM (iShares Russell 2000) continues to see inflows as well.

Fixed Income ETFs: High yield ETF flows headline fixed income flows seen in heavy buy side flows of JNK(SPDR Barclays Capital HY Bond),HYG (iShares iBoxx H/Y Corp), and VYM(Vanguard High DVD Yield ETF). Other ETFs which have seen volume on the rise in the high yield space include, HYMB (SPDR Nuveen S&P High Yield Muni), UJB(ProShares Ultra High Yield), and HYLD(Peritus High Yield ETF). In the corporate bond arena buy side flows continue to move into SCPB (SPDR Barclays Capital Short) and LQD(iShares iBoxx INV GR CORP BD). Rounding out fixed income flows mortgage backed bonds gained inflows as seen in MBB (iShares Barclays MBS Bond Fund).

International ETFs: VWO(Vanguard MSCI Emerging Market) has seen its fund continue to swell with heavy buy side flows moving into its emerging market exposure as well as flows into DEM(Wisdomtree Emg Mkts Eq Income).  EPP(iShares MSCI Pacific Ex JPN) led regional inflows while flows were relatively flat in EFA(iShares MSCI EAFE Index Fund). Country specific inflows were led by EWZ (iShares MSCI Brazil), and EWG (iShares MSCI Germany Index). Outflows were seen in EWY (iShares MSCI South Korea Ind), and EWA (iShares MSCI Australia Index).

Commodity/Currency ETFs: Steady gold buyers headed into GLD (SPDR Gold Trust), UGL (Pro Shares Ultra Gold), and DGL (Powershares DB Gold Fund). Energy Flows were highlighted by UCO (Porshre Ult DJ –UBS Crude Oil) and USO (United States Oil Fund LP) with a positive imbalance to the buy side. FXY (Currencyshares Japanese Yen) led currency outflows with buyers heading into FXA(Currencyshares Australian Do).

Sector ETFs: Sector flows saw a rotation out of XLV (Health Care Select Sector), XLU (Utilities Select Sector SPDR) and XLP (Consumer Staples SPDR). Flows headed into XLB (Materials Select Sector SPDR), VAW (Vanguard Materials ETF), XLY (Consumer Discretionary Selt), and XLI (Industrial Select Sect SPDR). 

Specialty ETFs: SPLV (Powerhsares S&P 500 Low Vola) continues to see major inflows as it did in 2011. Plenty of investors are seeking yield as inflows continue to pour into VIG (Vanguard Dividend Apprec ETF), SDY (SPDR S&P Dividend ETF) and DVY (iShares DJ Select Dividend). Anticipated volatility has been signaled from buy side flows heading into TVIX (Velocity Shares 2x Vix Sh-TRM) and VXX (iPath S&P 500 Vix S/T FU ETN).

You may reach Michael directly at mcafiero@knight.com

This communication has been prepared by the trading, market making and/or the sales personnel (“Trader”) of Knight Capital Americas, L.P. (“KCA”), a subsidiary of Knight Capital Group, Inc. (“Knight”). The information contained herein may be the personal perspective of the Knight Trader and/or commentary compiled from public sources. The information from public sources is believed to be reliable but Knight does not guarantee or represent its accuracy or completeness. The opinions and views expressed by the individual trader do not represent the opinions and views of Knight, its affiliates, officers or other personnel. No responsibility and no express or limited liability is assumed jointly or individually for any losses or damages arising out of errors, omissions, delays in the receipt of the information, or any actions taken in reliance upon the information. The information contained herein does not provide investment advice and is not a sufficient basis for an investment decision. No information contained herein should be construed as a solicitation or an offer to buy or sell any security or product. Indications of interest, opinions or views expressed by the trader are not firm orders or quotes and may not be current. No responsibility is assumed to maintain and/or update the information. KCA most likely makes a market in the securities mentioned in this document and its personnel, including those involved in the preparation or issuance of the material may take a position or action which may be inconsistent with the opinions and views expressed therein. Questions regarding the information presented herein or a request for a copy of this document should be referred to your Knight Representative.

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