Yesterday's big selloff exposed a weakness in one of Wall
Street's darling products, Exchange Traded Funds (ETFs), the FT reports, and no
one really saw it coming.
ETFs are a baskets of goods that can be traded like a single
asset. They've become really popular on the Street over the last decade to the
point where you can buy an ETF of almost anything — gold, kinds of companies,
groups of countries (like emerging markets)... the list goes on. And just like everything else, they got
killed yesterday.
The problem wasn't just that ETFs got swept up in the
general panic of the moment. It was that as traders sold off and ETFs got
cheaper, the discount between the price of the ETF and the assets that made it
up widened. Suddenly, everyone wanted to
redeem those underlying assets from banks like Citi and State Street .
Now you can imagine what happened next……..
Read all about it at http://www.businessinsider.com/etfs-hurt-in-bond-selloff-2013-6
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