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Fixed income ETFs: primary market participation and resilience of liquidity during periods of stress. (English) Zbl 1451.91180

Summary: 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.

MSC:

91G15 Financial markets
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References:

[1] Antoniewicz; Rochelle; Heinrichs, Jane, The Role and Activities of Authorized Participants of Exchange-Traded Funds (2015), Investment Company Institute, https://www.ici.org/pdf/ppr_15_aps_etfs.pdf
[2] Ben-David, Itzhak; Franzoni, Francesco A.; Moussawi, Rabih, Do ETFs increase volatility?, J. Financ., 73, 6 (2018)
[3] Marshall, Ben R.; Nguyen, Nhut H.; Visaltanachoti, Nuttawat, ETF liquidity (2015), https://www.nzfc.ac.nz/archives/2016/papers/updated/50.pdf
[4] Pan, Kevin; Zeng, Yao, ETF Arbitrage under Liquidity MismatchESRB Working Paper Series 59 (2017), European Systemic Risk Board
[5] Sushko, Vladyslav; Turner, Grant, The implications of passive investing for securities markets, BIS Quart. Rev. (2018), https://www.bis.org/publ/qtrpdf/r_qt1803j.htm
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