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The Guide to ETFs and
ETF Trading Strategies

Everything from how ETFs became popular to the use of Basket Calculation Engines

Exchange-traded funds (ETFs) seemed to have graced headlines overnight. But what are they and why have ETFs become so popular? ETFs have become an attractive investment due to benefits that affect multiple layers of market participants—offering low fees and transparency to retail investors, while creating tax benefits to fund issuers and liquidity providers. Firms can leverage the funds’ unique structure to power ETF trading strategies that balance supply and demand.

According to Greenwich, 78% name exchange-traded funds as their preferred means of index exposure. There is currently more than $5.4 trillion in AUM in US ETFs and over 2,300 US-listed ETFs. These numbers represent a shift from active investment to an increase in passive investing and retail involvement. This guide explains the shifting trends and how ETFs offer a lower barrier to entry with minimal required investments and easier public access.

Their popularity extends to all levels of market participants and can be attributed to a complex dual market system. The facilitation of fund rebalancing is done by large third-party banks or institutional investors called authorized participants (APs). Exegy’s guide details how APs, issuers, and investors interact with one another through mutually beneficial ETF trading strategies.

The guide to exchange-traded funds is born out of a 4-part blog series (that begins here). The guide explains everything from ETF basics to the complexity of ‘heartbeat trades’ and the incentives of the creation/redemption process for authorized participants as well as the challenges faced in implementing ETF trading strategies.

Exegy’s experts intimately understands ETFs and cater our solutions to this fast-growing product. Amidst complexity, Exegy brings fast-paced simplicity with the Exegy Ticker Plant’s built-in basket calculation engine (BCE) that updates ETF share prices and its underlying assets in nanoseconds—providing your firm with the latest technology to to facilitate ETF trading strategies.

Find out how the exchange-traded fund landscape operates and Exegy’s role in automation by downloading The Guide to Exchange-Traded Funds today.

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