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section header ETF fundamentals

subsection header Trading

How do I place an order?

A number of factors can influence how you place ETF orders and when you should call a block desk for assistance.

 

Scenario 1:

You want to execute your trade right away

Whether you want to lock in a current market price, avoid adverse market movements or simply execute your daily trades and move on to other priorities, the key to determining your trading approach is understanding the effect of trading volume.

If the ETF you want to trade has a high average daily volume (ADV) you can execute a simple limit order through your trading site. However, when you want to place an order for an ETF with a low ADV, it may be better to call your block desk. Ask for a market order from your block-desk representative for the number of shares you want to trade, and he or she will provide bid and ask prices for the trade size.

Keep in mind that your block desk has access to an extensive network of liquidity providers that can help place your order and execute your trade, especially in low-volume situations.

Scenario 2:

You want to work an order over time

When your objective is to place an order for the best possible average trade price over a period of time and the ETF in question is trading at a high ADV, your best option is to have the block desk work the ETF order.

When your objective is the same, but the ETF is trading at a low ADV, your block desk can assist with more sophisticated order and execution strategies, including:

  • Time-weighted average pricing (TWAP), which provides an average price of a security over the course of a specified time.
  • Volume-weighted average pricing (VWAP), which provides an average price of a security based on its trading volume across various price points.

TWAP and VWAP orders ensure your trade will be executed not at the lowest or the highest price but at an average of the two during the specified period of time.

 

Be aware of special circumstances

There are occasions when executing a large order for an ETF may have a market impact. Under this circumstance, your block desk can be especially helpful by transacting with multiple brokers and generating a level of trading competition that can result in a favorable trade.

Note: Investors should consult their block desks for available order types, since they may differ from those discussed here.

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Basics

Learn the basics of ETFs, including their history, how they compare to mutual funds, what types are available and more.

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Indexing

Learn about the advantages of indexing, how ETFs are indexed, the differences between excess return and tracking error, and more.

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Strategies

Learn about strategic and tactical uses for ETFs, including asset and sub-asset allocation, portfolio completion, cash equitization and more.

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