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Exchange traded funds in volatile markets

Understanding the disconnect between price & net asset value

By Mark Heckert, Chief Product Officer, ICE Data Services

Bond ETF assets have surged since the 2008 financial crisis. Now, they are highlighting challenges within the bond market structure.

Here, we examine characteristics of bond ETFs that help to explain the magnitude of observed gaps between the net asset values (NAVs) and prices of bond ETF shares. We believe that investors in bond ETFs can draw reassurance from a better understanding of the market structure factors influencing these gaps, and that the rise of electronic trading may offer long-term solutions.

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