Types of Trade Executions
There are several types of executions that a customer can pursue when looking to add or unwind a large exposure in an ETF:
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Using an electronic trading system themselves to trade the ETF using limits or market orders.
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Calling a block liquidity provider and asking for a risk market.
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Calling a liquidity aggregator and asking for a market.
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Using an algorithm on either the basket or the ETF.
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An NAV-based execution.
As I discuss each type, it will become apparent to you that each method can be appropriate for certain situations. They will differ regarding when execution occurs and who takes on varying degrees of risk. A block liquidity provider who makes a risk market is taking on the full risk of hedging a position, ...
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