ETF Trading Surges to Record as Bulls and Bears Play Tug-of-War

(Bloomberg) -- The stock market’s dramatic turns are fueling record trading in ETFs, the highly liquid investment vehicles that traders are using to keep pace with surging volatility.

As the Nasdaq Composite Index tumbled as much as 4.9% Monday then rallied back to a late day gain, four of the five largest exchange-traded ETFs -- which go by the tickers IVV, VTI, VOO and QQQ -- saw a record value of shares traded. The largest ETF by market value -- the SPDR S&P 500 ETF Trust (SPY) -- saw its second highest.

That jump in activity lifted the entire U.S. ETF market’s dollar value of shares traded -- often known as dollar turnover -- to a record high, with more than $478 billion trading on Monday, according to data compiled by Bloomberg Intelligence. That surpassed the previous record $404 billion from Feb. 28, 2020. 

The high volumes persisted on Tuesday, with over $100 billion of ETFs traded by 11 a.m. in New York, according to Bloomberg Intelligence

Read More: Factors, Energy Leading ETF Performance Amid Record Trading

ETFs are an easy way for large institutional traders to adjust their portfolios on days when markets move wildly, said Eric Balchunas, a Bloomberg Intelligence ETF analyst.

“When the going gets tough, ETF’s get going,” he said. “They’re sort of the first thing a lot of bigger institutions in particular look to trade to alter their portfolio positions.”

The high level of turnover is also partly the result of the record amount of cash poured into the funds during last year’s rally, some of which is now being pulled back as stock prices retreat.

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