3 ms·
Great explanation! Thanks! >> So to answer your questions, in a flash crash scenario as an ETF owner you'll experience more lag in both cases So the lag is du
by NTDF9 10y ago
Great explanation! Thanks!
>> So to answer your questions, in a flash crash scenario as an ETF owner you'll experience more lag in both cases
So the lag is due to inability to quickly buy/sell the percentages that were allocated for different stocks to build a share, right?
And if I understand correctly, this means if people keep their emergency funds in ETFs, in a crisis, they probably won't be able to access those funds quickly enough to get it at list price (because the price will move because of the lag).
- krit_dms 10y agoAuthorized participants (APs) exist for all ETFs. their purpose is to make sure that the ETF mirrors the underlying assets, and to provide liquidity. Consider a ETF that consists of a single stock. IF the stock drops, the AP will lower its Bid/offer spread, and force the ETF down to the same level as the stock. But as this is a reaction to the stock falling, there is going to be a lag between the stock falling, and the ETF falling. This doesn't mean that you can sell the ETF at a higher price, necessarily.
- wbl 10y agoA lag of milliseconds. Arbitrage is largely automated for this.