Fewer ETFs Are Traded on Exchanges

Fewer ETFs Are Traded on Exchanges

Trading outside major exchanges is becoming more popular in the U.S., recent research shows.

Managing Editor
Reviewed by: Ron Day
Edited by: Ron Day

Exchange-traded funds are increasingly not traded on exchanges at all, according to a recent report. 

The volume of ETF and other ETPs, or exchange-traded products, being traded outside of major exchanges like the New York Stock Exchange and the Nasdaq had risen to nearly 45% at the end of last year, from just more than 30% when the year began, according to research from New York-based research firm Alphacution

Why more trades moved off-exchange—during a period when stocks fell their most since the 2008 Great Recession—was not immediately clear, according to a comment in the report from Alphacution Research Director Paul Rowady. Still, he suggested that so-called proprietary firms, those that buy and sell for their own gain and not for a client’s, are handling more trades. 

“Our initial guess would be that certain authorized participants, retail wholesalers, and institutional wholesalers all seem to come from the same short list of sophisticated prop firms,” Rowady wrote. 

Large trading firms like Citadel Securities and Virtu Financial are also grabbing U.S. market share, with Citadel saying 22% of U.S. equity market volume is executed over its platform. 

According to Alphacution’s research, on-exchange trading over the past eight years peaked at just over 70% in the fall of 2018. It began a steady decline in January of last year, so that now about 55% of trades are handled by big exchanges. 

The growth of so-called request-for-quote platforms like Tradeweb has helped move trading volume away from exchanges, Deborah Fuhr, managing partner and founder of London-based ETFGI, told ETF.com. 

“Increasingly in the U.S., investors are using RFQ platforms like Tradeweb,” she said in an interview. “For many people, RFQ platforms have been appealing, and they have made it easier for large institutions. It’s signaling how investors are embracing technology to get better prices.” 

Such trading platforms are used much more frequently in Europe, where about 70% of the continent’s ETF trades are carried out via RFQ platforms or other over-the-counter venues, Fuhr said. 


Contact Ron Day at  [email protected] 

Ron Day is Managing Editor at etf.com. He joined the company in October 2022 and previously served as editor and deputy managing editor.

Ron covered business and financial news at Bloomberg News for 20 years, working on the breaking news, technology, commodities, headlines and First Word teams. He was previously senior editor at ESG news outlet Karma Impact and filled the same role at Boundless Impact. He also covered a variety of beats at New Jersey daily papers including the Daily Record in Parsippany, the North Jersey Herald & News and the Asbury Park Press. Ron's freelance work has been published in AARP.com, Investopedia.com and BigThink.com.

Ron is an advocate and fan of literacy. He hopes to one day master his Telecaster, rather than the other way around. His wonderful family includes a 10-lb. malti-poo named Emmy.