On Aug 17, 11:01 am, Beliavsky <beliav...[at]aol.com> wrote:
- quote -

This is really annoying, esp for folks who cannot be at a
computer screen during trading hours. If you want to look
at a more modest pathological case, look at a 10 day
chart minute-by-minute price/volume of PWC Aug 10 am in
http://eresearch.fidelity.com/eresea...ml?symbols=PWC
(overlay sp500)

I put in a sell the night before and did dread getting hit with
opening mkt volatility, but didn't expect it that bad. It does
not seem like that freefall with insane volume was something
that tracked the underlying (conservative sp500like) holdings,
unless it was some freakish case,

I just wanted a market price (couldn't be constrained by
limit) for any but the first and last volatile hour, but couldn't
program it that way. Mutual funds are even worse for those
setting up trades before market openings, because you are
locked into the last (more distant) hour of volatility. I had
better luck with a slow brokerage who delayed a trade
til mid morning than this fast brokerage who forced me
into this time window of misery (SEC speed mandate?).

"Beliavsky" <beliavsky[at]aol.com> wrote in message
news:1187384484.914218.234610[at]r29g2000hsg.googlegroups.com...
- quote -

I knew that ETFs disclosed what their managers wanted to buy/sell for the
portfolio (via the portfolio composition file - PCF) on a daily basis, and
that the Indicative Intra-day Value (IIV) file gave essentially the
NAV/share every 15 seconds. But I didn't know that ETFs disclosed the
exact constituents. What's the mechanism, is it disclosed daily or in real
time, and is there any way that mere mortals (not authorized participants)
can get the exact constituents of an ETF without waiting for the quarterly
filing?

(See, e.g. Vanguard SAI for its Bond Index Funds, p. B31, "Disclosure of
Portfolio Holdings In Accordance with SEC Exemptive Orders,
http://www.secinfo.com/dSeJx.un.htm#84thPage. It points out that "the daily
... PCFs [] identify a basket of specified securities which MAY overlap with
the actual or expected portfolo holdings of the Vanguard ... ETF Funds."
Emphasis added. It goes on to describe the IIV, though not by name, and
says that even this can be off by a few basis points!)

- quote -

This seems to say that mortals should not be trading ETFs because they don't
have access to IIVs. Do you mean that "investing" is okay for ETFs, but not
"trading", or that we shouldn't be playing with ETFs at all, or ...? Maybe
I'm just echoing Mark Bole's observations here.

Mark Freeland
BnetOnewsX[at]sbcglobal.net

Beliavsky wrote:

[...]
- quote -

Well, to be honest I made one small investment in an ETF precisely so I
could learn more about them, this has certainly been a learning experience.

Suppose I had innocently gone into E*Trade, saw the 20-minute delayed
price looking "normal", and put in a market order. Is it possible I
could have gotten caught with an immediate 25% loss (or gain, if I was
selling) based on buying within the 20-minute anomalous price window, or
would the delay in opening the AMEX have protected me from this?

It sounds like you're saying I should NOT trade ETF's the same way I
would an ordinary individual stock (I'm not talking about investment
implications, just the mechanics of trading). If so, I guess that's
lesson number one.

-Mark Bole

On Aug 17, 2:32 pm, Tad Borek <bore...[at]pacbell.net> wrote:
- quote -

I used to work for a firm that made markets in ETFs (and many other
stocks and derivatives). ETFs diclose their exact consituents, and our
traders had spreadsheets showing in real time what the ETFs were
worth. The traders will make reasonably tight markets for ETFs if (and
only if) they know what its fair value is. The NYSE and Nasdaq stock
markets operated normally today, and almost all important U.S. stocks
trade there (as opposed to the AMEX). Given that, I see no reason why
the AMEX markets should not have opened at the normal time today. I
just called an AMEX specialist (former colleague), and he told me that
the AMEX opened late because of operational difficulties (it was also
an option expiration day, but those have been occurring monthly for
decades.)

So the problem is so much with ETFs in general or Vanguard but with
the AMEX. In general, people should not trade ETFs without knowing
what the NAV is, to avoid buying at a big premium. If they cannot do
that they should invest in open-end funds.

Tad Borek wrote:
- quote -

OK here is the answer from Vanguard. It think this is important because
if your ETF pricing breaks down it threatens the credibility of the ETF.

There were maybe 3-4 trades that happened at those crazy-high prices.
But the trades happened in the premarket, by people trading off Amex,
because Amex didn't open until 10:40 today. Who knows why they did that
in the premarket, it could have been a mistake, but it wasn't a normal
trade on the exchange.

Go to the Amex site and it has a (grammatically awkward) notice 8/17/07:
"In the interest of investor protection, so orders which were queued in
our system were not disadvantaged by not receiving an execution that
they were entitled to, the Amex had to have a delayed opening. Equities
and ETFs opened at 10:40am. Options opened at 12:35pm."

I am so sick of reading all the BS about "bargain hunters stepping in"
as if it's an explanation for why the market moves on a given day. This
is a rare hint of what might actually be happening. If the exchange
can't open because of order imbalances it suggests ETF and option
traders may be responsible for the high volatility in the underlying
securities.

Plenty of big investors trade ETFs for a lot of different reasons but
this is one piece of evidence that suggests volatility may be
liquidity/market driven rather than "fundamentally" driven. Meaning,
something to do with the trading process itself rather than the earnings
expectations of the underlying companies.

Just one piece, not conclusive! Or maybe bargain-hunters stepped in.

-Tad

makbo2[at]gmail.com wrote:
- quote -

Surprised is right!

The volume was very low and it looks like the Russell 2000 spiked only
about 2% as of that moment. My guess is it was an entry error by
somebody who (obviously) became the best quote on the bid side.

Another possibility would be market orders where the market maker was
asleep at the switch, but that would be bad, to say the least. If it
were my order and it wasn't an entry error I'd call Vanguard and ask why
their ETF's price stability broke down momentarily. And they'd better
have a good answer because ETFs rely on the specialist/market makers to
assure stable price discovery. If we can't rely on that...well it's a
reason not to use a specific ETF, there are plenty of small-cap ETFs out
there.

Actually I'm going to contact Vanguard, I use VTI and it concerns me.

These things happen though, remember the trainee in Japan who nearly
took down Mizuho?
http://www.financialnews-us.com/?pag...tid=2447370453

-Tad

I was quite surprised to see the following behavior this morning for
the following exchange traded fund: VANGUARD INDEX FDS SMALL CP ETF
(VB: AMEX).

Note the "day's range" -- it appears that for a brief 10 or 20 minute
period shortly after today's market opening, the price of this ETF
soared more than 25%, then dropped back down near its "normal" price.

Open 71.23
Previous Close 68.20
Day's Range 69.78 - 90.50

There were also two spikes in trading volume, one buy, one sell, which
fits.

Is there something I should know that explains this type of behavior?
If someone were to check the 52-week high/low values for this fund in
the near future, is there any way to easily determine that the "high"
was a twenty-minute anomaly, and not a normal valuation?

Yes, I know the Fed's interest rate announcement had an immediate
impact on the market, but 25+%???

-Mark Bole