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ETF Liquidity

Liquidity is always an important consideration when selecting investments. With a share, its average daily trading volume and market capitalisation that reflect the natural liquidity of buyers and sellers coming together on an exchange. However, this is not the case with ETFs.

Like all open-ended exchange traded funds, iShares ETFs offer two different sources of liquidity:

1. Traditional liquidity, as measured by secondary market trading volume
    on the ASX.

2. Liquidity provided by the creation/redemption process, which reflects
    the liquidity of the individual positions within the iShares ETF.
    Essentially an ETF is as liquid as its underlying holdings.
That's why the true liquidity of an iShares ETF can far exceed what its volume or market capitalisation might suggest.

The iShares Multi-dealer model
Additionally, iShares helps to increase the liquidity of our funds through the multi-dealer model. The multi-dealer model promotes competition between market makers to ensure that those with the tightest bid/offer spreads receive the greatest trading flows. This helps to deliver greater liquidity and tighter spreads.

To discover more about liquidity, please consult the resources menu to the right.
Tools for liquidity
Pricing Tool

More on this topic
The True Liquidity of iShares ETFs
Entire Index in One Share
Podcast: Pricing and Liquidity