ETF Owners Not Celebrating Flash Crash Anniversary
It was a year ago this week that a flash crash sent ETFs into uncharted territory. Since that time asset managers and market exchanges have worked to make sure one of the most volatile days of market trading ever never happens again. On Monday morning August 24th 2015, concerns about the Chinese economy caused volatility to surge across a number of blue-chip stocks. The Dow Jones industrial average dropped over 1,000 points at one point before closing down 588 points, or 3.57 percent for the day. The S&P 500 finished the day four percent lower. As a result of the unusually high volume, there were an abnormally high 1,278 trading halts. ETFs that typically trade essentially in line with their net asset values (NAV) were negatively impacted as trading in some of their stock holdings was halted. For example, the iShares Core S&P 500 Index ETF (IVV) - Get Report traded at a 22 percent discount to its NAV within the first three minutes of trading. 'It was disorienting for investors when stocks invested in their ETFs were halted,' said Rosenbluth. 'The limited amount of information had people scrambling.' Since then, a broad group of market participants, including the ETF industry that collectively manages $2.4 trillion in assets and is the beneficiary of 30 percent of daily trading volume, has been eager for the exchanges to work together to put in places rules to limit the likelihood of a repeat occurrence, according to Rosenbluth.
