ETFs With The Highest & Lowest Trading Spreads

The bid/ask spread is a key component of the total cost of investing in ETFs.

sumit
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Senior ETF Analyst
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Reviewed by: Sumit Roy
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Edited by: Sumit Roy

When it comes to holding an exchange-traded product (ETP), the expense ratio is all-important. When it comes to trading an ETP, another number matters more: the bid/ask spread. 

The spread between the bid (the highest price a buyer is willing to pay) and the ask (the lowest price a seller is willing to accept) is a significant part of an ETP's trading cost. (Trading costs are reflected on ETF.com fund reports.) 

As a general rule, ETPs with significant assets and trading volume tend to have smaller spreads than ETPs with minimal assets and light volume. For example, the $388 billion SPDR S&P 500 ETF Trust (SPY), the largest and most liquid ETP in the world, has an average spread of 0.0032%—essentially zero. That’s great news for investors buying and selling the fund. 

SPY’s tiny spread is certainly not the norm for ETPs. Data compiled by ETF.com shows that the average bid/ask spread for the more than 2,900 ETPs listed on U.S. exchanges is 0.52%. 

How Statistics Are Skewed 
The average is calculated by summing all ETP spreads and then dividing by the number of ETPs on the market. 

A plethora of thinly traded products with little to no assets and large spreads—many of them exchange-traded notes—such as the Elements Spectrum Large Cap US Sector Momentum Index ETN (EEH), the iPath Return On Disability ETN (RODI) and the Credit Suisse S&P MLP Index ETN (MLPO), inflates the average. 

That’s why some people prefer looking at the median ETP spread, which comes from lining up all the spreads from lowest to highest and taking the middle figure: 0.20%. 

Another figure to consider is the asset-weighted average spread, which is calculated by giving more weight to bigger ETPs. It is only 0.03% for U.S.-listed ETPs, much lower than the regular average, since investors have most of their money in large, liquid products. 

Those include the aforementioned SPY, as well as the Invesco QQQ Trust (QQQ), the SPDR Gold Trust (GLD) and theiShares Russell 2000 ETF (IWM), all of which have spreads of less than 0.01%. 

 

ETFs With The Lowest Spreads

Fund Ticker Spread (%)
SPDR S&P 500 ETF TrustSPY 0.0032
Invesco QQQ Trust QQQ 0.0041
SPDR Gold SharesGLD 0.0065
Consumer Discretionary Select Sector SPDR FundXLY 0.0068
iShares Russell 2000 ETFIWM 0.0069
Vanguard S&P 500 ETFVOO0.0070
Health Care Select Sector SPDR FundXLV 0.0076
iShares Core S&P 500 ETFIVV 0.0078
SPDR Dow Jones Industrial Average ETF TrustDIA0.0079
Technology Select Sector SPDR FundXLK 0.0082
iShares TIPS Bond ETFTIP 0.0083
iShares 3-7 Year Treasury Bond ETFIEI 0.0084
iShares 20+ Year Treasury Bond ETFTLT 0.0084
iShares iBoxx $ Investment Grade Corporate Bond ETFLQD 0.0089
iShares Short Treasury Bond ETFSHV0.0091

 

ETFs With The Highest Spreads

Fund Ticker Spread (%)
Elements Spectrum ETNEEH 127.9171
iPath Return on Disability ETNRODI 46.8980
Credit Suisse S&P MLP Index ETNMLPO 19.5292
ETFMG 2x Daily Travel Tech ETFAWYX 8.1028
ETFMG 2X Daily Alternative Harvest ETFMJXL 7.9322
Volt Crypto Industry Revolution and Tech ETFBTCR 7.2334
First Trust Dow Jones International Internet ETFFDNI 5.4963
Cambria Global Tail Risk ETFFAIL 4.6417
Loncar China Biopharma ETFCHNA 4.3350
Simplify Volt Fintech Disruption ETFVFIN 4.2219
VectorShares Min Vol ETFVSPY 4.0141
Virtus Newfleet High Yield Bond ETFBLHY 3.9237
iPath Women in Leadership ETNWIL 3.8689
ELEMENTS Linked to the ICE BofAML Commodity Index eXtra Biofuels Total ReturnFUE 3.4259
FI Enhanced Europe 50 ETNFIEE 3.3010

 

Spreads By Asset Class 

As a group, fixed income ETPs tend to have the lowest spreads. The average bid/ask spread for the group is 0.25%, while the median spread is 0.14%. 

Equity ETFs also tend to have low spreads, with average and median spreads of 0.41% and 0.21%, respectively.  

On the flip side, alternatives ETPs and commodity ETPs are areas where spreads tend to be relatively high—over 0.5% on average—suggesting investors should use caution when buying and selling those types of products. 

Bottom Line 
Spreads are an important factor in determining the total cost of trading an ETP. Investors should be mindful of an ETP's bid/ask spread when buying or selling.  

To find out the average spread for a particular ETP, visit the fund page for the ETP in question at www.etf.com/ticker. 

 

Follow Sumit on Twitter @sumitroy2 

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.