The sheer variety of exchange-traded funds, and their unique liquidity and risk characteristics, have led traders to develop a variety of different execution strategies. Some of them tend to work better than others depending on the ETF and the circumstances of the trade. In this report, we discuss the strengths and weaknesses of the most popular ETF execution strategies, and how traders can use the size of the trade and their execution urgency to guide their decision about which strategy to use.

As assets in credit ETFs have grown, some market participants have asked whether credit ETFs might negatively impact trading in the underlying bonds in a stressed market environment. In this report, we share our views on this topic as an ETF market maker and bond dealer. We argue that while credit ETFs will become more costly to trade in a stressed market, they don’t pose a systemic risk to the credit markets.

In January, the SEC approved the Twelfth Amendment to the Limit Up-Limit Down plan, as well as a handful of separate rule filings that will further harmonize how the exchanges handle a LULD trading pause. The centerpiece of these changes is a new framework for the exchanges’ reopening auction collars. In this piece, we give some context around the Twelfth Amendment and illustrate how the new collars will work.

In this document, we explain the origins of LULD, catalogue some of the important events that have shaped its evolution, and opine on the various proposals to improve it. At the end, we illustrate how LULD works in a two-page cheat sheet.