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Fixed income ETFs: Primary market participation and resilience of liquidity during periods of stress

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Listed:
  • Aquilina, Matteo
  • Croxson, Karen
  • Valentini, Gian Giacomo
  • Vass, Lachlan

Abstract

Using a unique transactions dataset, we present initial facts about participation in ETF primary markets and an analysis of the behaviour of liquidity providers in times of stress. We find that ETF primary markets are highly concentrated, particularly for fixed income. However, our preliminary analysis of stress events provides some evidence that alternative liquidity providers ‘step up’ during times of market disruption.

Suggested Citation

  • Aquilina, Matteo & Croxson, Karen & Valentini, Gian Giacomo & Vass, Lachlan, 2020. "Fixed income ETFs: Primary market participation and resilience of liquidity during periods of stress," Economics Letters, Elsevier, vol. 193(C).
    • Handle: RePEc:eee:ecolet:v:193:y:2020:i:c:s0165176520301725
    DOI: 10.1016/j.econlet.2020.109249
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    References listed on IDEAS

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    1. Vladyslav Sushko & Grant Turner, 2018. "The implications of passive investing for securities markets," BIS Quarterly Review, Bank for International Settlements, March.
    2. Pan, Kevin & Zeng, Yao, 2017. "ETF arbitrage under liquidity mismatch," ESRB Working Paper Series 59, European Systemic Risk Board.
    3. Itzhak Ben‐David & Francesco Franzoni & Rabih Moussawi, 2018. "Do ETFs Increase Volatility?," Journal of Finance, American Finance Association, vol. 73(6), pages 2471-2535, December.
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    Cited by:

    1. Aquilina, Matteo & Croxson, Karen & Valentini, Gian Giacomo & Sun, Zhuowei, 2023. "Authorised participants as shock absorbers in fixed-income ETFs," Finance Research Letters, Elsevier, vol. 55(PA).

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    More about this item

    Keywords

    ETFs; Authorized participants; Primary markets; Liquidity; Financial stability;
    All these keywords.

    JEL classification:

    • G - Financial Economics
    • G2 - Financial Economics - - Financial Institutions and Services

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