ETFs Hit Record Volume Percentage On Biggest Trading Day In History

September 18, 2008

In the mesmerizing plunge of the markets, ETFs have emerged with a dominant role. 

If you are anything like me, it has been hard for you to take your eyes off of the real-time tickers as markets plunged to 3-year lows ... we MAY yet see 10,000 in the Dow, Matt. And it's been even harder to ignore the huge role ETF trading has taken in overall equity trading.

Monday was the biggest volume trading day in U.S. market history. Tuesday topped that. And per an email from the BGI folks, ETFs on Monday reached an unprecedented, stunning, 40% of total equity trading volume, on the biggest trading day (at that time) in U.S. market history (we'll let iShares keep the promo language in there as thanks for the data):

Given Monday's unprecedented events in the capital markets, we wanted to provide a quick snapshot of how ETFs behaved in the face of severe market volatility. Overall we witnessed ETFs accounting for 40% of all equity dollar volume transactions - a significant rise from the 28% daily average. In fact, volumes of all stocks nearly doubled on Monday, from $258 to $443 billion.

More specifically, ETFs experienced an even greater spike:

Monday Volume vs. August Avg.

All ETFs: $178 Billion vs. $81 Billion

All iShares: $32 Billion vs. $16 Billion

As to be expected, financial ETF volume was nearly 3X the average daily volume of the previous six months, with price return off 8-10% from Friday's market close. Of note was the solid tracking performance of iShares funds across all asset classes, which traded in line with their Indicative Optimized Portfolio Values despite the exaggerated volumes and significant volatility. In fact, spreads remained tight throughout the trading session and in many cases, spreads compressed.

IShares has consistently delivered performance to clients in the markets' most turbulent times and tight performance has been historically evidenced after 9/11, in August 07 and in the Feb/March crisis periods. The transparency iShares funds provides investors allows them to always know which securities and companies they hold so they are never surprised when a period of severe volatility arises.

 

Handicapping the Dow

Matt wins my prize for best blog of the week with his handicapping of the next entrant(s) into the Dow with AIG's almost certain departure. Call me a total index geek, but THAT is my very favorite kind of story. I just love that kind of inside speculation. I forwarded it over to John Prestbo (who is likely working on picking the next Dow constituents) and he's already read it but had of course, no comment at all. Matt's handicapping seemed right on the money to me. In fact, it's harder to imagine Prestbo picking anything else unless he reaches a little further down the cap table. GREAT piece Matt. Fun stuff. And I'm sure you've saved John Prestbo & his people over there some work.

BTW, I have NO idea why Matt calls it the "DJIA." Matt, just for the record, it is "the Dow."

Speaking of the Dow, why is it so HARD to look at anything BUT the Dow when things are going nuts? You can make all the fun you want of that old dollar-weighted relic, but that's where everyone's looking when the rubber hits the road. Here are yesterday's stats from the Dow:

AS OF SEPTEMBER 17, 2008

  • The DJIA, down 449.36 points, or -4.060%, to close at 10609.66.
  • Down three of the last four sessions.
  • At its high, the DJIA reached 11057.31.
  • At its low, the DJIA dipped to 10595.90.
  • Lowest close in almost three years, since November 9, 2005.
  • So far this week, it is down 812.33 points, or 7.1%.
  • If the DJIA were to finish the week now, it would be its biggest weekly point drop since the week ending September 21, 2001, and biggest weekly percentage drop since the week ending July 19, 2002.
  • It has dropped 3554.87 points, or -25.10%, from its record close of 14164.53, hit on October 9, 2007.
  • It has dropped -18.75% from its 2008 close high of 13058.20, hit on May 2.
  • Month-to-date, the DJIA is down -8.09%. In August, it closed up 1.45%.
  • Year-to-date, it is down -20.02%.
  • Down -23% from a year ago.
 

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