ETF---Financial instruments known
as exchange traded funds, or exchange traded products. These instruments are derivatives
of derivatives of stocks, bonds, and other underlying assets in a particular
sector such as energy, financials, sovereign bonds, corporate bonds, etc... They
trade, according to legend, globally through-out the day, HFT algorithms they are, as
opposed to some funds which trade only once a day, such as mutual funds (as of
2012). Thanks for help from Google and Investopedia. Here in June, 2015, these
instruments are being blamed for “illiquidity” in the sovereign bond and
corporate bond markets, vacuum cleaner-like, in other words. It is highly
ironic because these instruments and their ilk (ETNS, ECTs, ETVs) were supposed
to insure liquidity,
at least in the arguments over HFT with the regulators and the Congress.
Supposedly these “synthetic” investments do not match with the prices of the
underlying assets, something called “ETF tracking error”. It is possible the Taper
Tantrum and the Flash Crashes are the outcome of these “fly ninies”. Perhaps
the real total amount of the underlying assets such as stocks and bonds, etc.
need a re-add on a daily basis: quantity and price are highly related. Having
run a computer system where large amounts of trading is common at certain times
of year, it would certainly make sense to me, so as to reduce a build-up of
miscounts out in cyberspace over time. Legend has it here in June of 2015 that the
SEC has nailed thirty six
of the entities (algorithms) trading the municipal bonds after self discovered fraud
was confirmed while in the process of preparing required government reports. Things
didn’t add up right