In April 2007, Lyxor AM (Hong Kong) listed six ETFs in Hong Kong Exchange (HKEX). I am particularly interested in Lyxor ETF MSCI World (Symbol: 2812, ER: 0.45%). This ETF covers the global equity market of developed countries (US, Europe, Canada, Japan and Pacific (Australia, Hong Kong, New Zealand and Singapore)), which accounts for 90% of global equity market capitalization.
To understand their trading characteristics, such as bid/ask spread, premium/discount spread and volume, I recorded their price, volume and NAV over 23 days from May to June 2007. Below is the result from the observed period.
Lyxor ETF MSCI World (WLD)
WLD Trading Information Table (click to enlarge)
WLD Premium/Discount Chart (click to enlarge)
Bid/ask spread
- 2 cents or 0.16% most of the time
Average volume
- about 5200 shares
Premium/discount
- # of Days between -0.25% & +0.25% = 9
- % of Days between -0.25% & +0.25% = 39%
- # of Days between -0.5% & +0.5% = 17
- % of Days between -0.5% & +0.5% = 74%
From the above trading characteristics, this ETF has narrow and consistent bid/ask spread but low volume. Most of the time it is traded at premium, with 39% of days traded between -0.25% & +0.25%.
Another characteristic that I have observed is the market maker usually puts a 30000-share buy order at 1 cent below the current indicative NAV (which is available from the ETF website) and puts a 30000-share sell order at 1 cents above the current indicative NAV. If you are able to buy at the market maker’s buy price, you will be likely to buy at 1-cent discount to the NAV.
Note: When calculating premium/discount and the closing price is zero, the mid point between bid price and ask price is used as the closing price.
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