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)
- 2 cents or 0.16% most of the time
- about 5200 shares
- # 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.