Liquidity Fears Stalk the $4 Trillion ETF Market. Here's One Fix
- U.S. bans paying market-makers directly but Europe allows it
- Risks can arise if traders step away during turmoil: Moody’s
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Market mayhem this month has re-ignited fears about how the $4 trillion U.S. ETF industry will react in a liquidity crunch. Europe may have an answer for averting disaster.
The nightmare scenario: volatility prompts market-makers to withdraw when they’re needed most, blowing out transaction costs and freezing trading. It’s an outcome that’s been raised by the likes of Moody’s Investors Service Inc. and T. Rowe Price Group Inc. this year as late-cycle swings convulse markets.