ETF liquidity – everyone wants it, and sure enough, the most common questions clients ask us at ETF Securities are about liquidity. Investors want assurance that ETFs will trade cheaply and smoothly. And know they always sell, even in volatile markets.
In this episode, Kanish Chugh, Head of Distribution at ETF Securities, spoke with Robert Risk, Business Development Manager at Susquehanna. Susquehanna is a private-held securities trading firm – often referred to as a “market maker”, in finance jargon. Market makers work with ETF providers – like us at ETF Securities – and with stock exchanges – like Chi-X and the ASX – to ensure that ETFs trade smoothly throughout the trading day. Market makers like Susquehanna are a critical part of the ETF market. But they are often a background presence, known only to industry insiders. In this video, Robert lifts the lid on market making. He starts by walking us through the history of Susquehanna, which started out as an options trading company in Philadelphia in 1987.
Who is Susquehanna?
Today, Susquehanna trades over 2,000 ETFs in the US and in Europe, and around 200 in Australia. When investors log onto their CommSec or Nabtrade account and look at the prices for ETFs – what is called the “bid and offer spread” – Susquehanna will often be one of the companies providing the pricing and the liquidity. Often unbeknownst to investors, whenever they buy or sell an ETF on their brokerage accounts, they are often transacting with Susquehanna.
How is Susquehanna able to trade so many ETFs at the same time all day long? Robert explains that it is Susquehanna’s investment in technology and people which allows it to calculate the fair value – called the net asset value, or “NAV”, in another piece of jargon – across the multiple ETFs that it trades.