Narrow spreads and high trading liquidity . . .
UBS Asset Management works in cooperation with reputable trading houses (Market Makers) to ensure that investors in UBS ETFs are able to trade at fair prices at all times – including large volumes. Constant tradability is one of the major benefits of exchange traded funds. ETF market makers commit themselves to quote binding buy and sell prices during stock exchange hours, thereby ensuring liquidity. In this way, investors in UBS ETFs gain buying and selling flexibility – not only during quiet periods but also in times of high volatility.
. . . through a multi-market maker approach
The multi-market maker approach for UBS ETFs fosters competition among ETF market makers, resulting not only in narrow spreads, i.e. small differentials between bid and ask prices, but also in higher liquidity. UBS Global Asset Management is committed to ensuring a high degree of trading quality for UBS ETFs, offering investors liquidity and price advantages.
Depending on the product and stock exchange, more and more market makers are active in UBS ETFs.
Authorized participants play a key role in the primary market for ETFs. To be active as authorized participants, they must enter into a corresponding participation agreement with the ETF beforehand. These are the only partners authorized to purchase or redeem ETF units directly with the fund.
Authorized participants: Key partners in the primary market . . .
Although authorized participants may also invest in ETF units over the long term, as a rule they act as dealers on the open market, using their ability to exchange creation units with the underlying securities in order to provide liquidity for the ETF units while at the same time ensuring that the intraday market price of the ETF units approximates to the net asset value of the underlying assets.
. . . and in OTC trading
In addition, they also participate in over-the-counter trading (OTC trading). In OTC trading, ETFs are traded directly between the investor and the authorized participant, enabling big-ticket orders to be transacted very efficiently in various currencies at low cost.
No two indices are the same
Because ETFs are based on indices and track their performance, the quality of the underlying indices is critical. For this reason, UBS ETFs only work in cooperation with reputable index providers that ensure that the composition, calculation and management of indices they provide are of high quality, which can only be achieved if transparent and consistent index rules are systematically applied. Moreover, it is the only way to guarantee proper tracking of the market or of the market segment on which the index is based.
High quality through low tracking error
Because UBS ETFs have a low level of index replication tracking error, investors in UBS ETFs benefit to a high degree from the quality of the respective underlying indices.