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Rating:WSJ: ETF Bid-Ask Spreads Rise Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, October 06, 2008

WSJ: ETF Bid-Ask Spreads Rise

by: Neil Anderson, Managing Editor

Market turmoil appears to be pushing up one cost of using ETFs, the bid-ask spread. The Wall Street Journal's Ian Salisbury reports (subscription required) in Monday's Fund Track column that average quoted spreads between the selling prices and the buying prices offered for various exchange-traded funds is on the rise. Salisbury notes that regular mutual funds avoid the bid-ask spread, so perhaps the shift could provide a bit of competitive advantage to traditional funds (particularly index ones) attempting to compete with the low-cost branding of ETFs.

According to Salisbury, more than 95 percent of ETFs had bid-ask spreads under 50 basis points a year ago, but only 61 percent met that criterion in September, and some ETFs had bid-ask spreads of 500 bps or more.

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Salisbury also cites iMoneyNet's Money Fund Report's findings that money market assets increased two days in a row last week, by $33 billion total on Wednesday and Thursday, to $3.356 trillion. iMoneyNet managing editor Connie Bugbee told Salisbury that the increase warrants "cautious optimism." 

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