On Friday, April 19, an investor purchased 1,019,169 shares of the Roundhill Magnificent Seven ETF (Nasdaq: MAGS) at $37.25 for a total trade size of approximately $38 million. The trade occurred as a single print, inside the on-screen bid and ask quotations.
As you can see in the chart below, the large block trade printed without any discernible price impact on the ETF.
Source: Bloomberg as of 4/19/2024.
This trade represents a key feature of the ETF wrapper – liquidity. While liquidity for single stocks can best be measured on traditional metrics such as trailing Average Daily Volume (“ADV”) and bid-ask spreads, ETFs are different. Ultimately, ETF liquidity is a function of the liquidity of the ETF’s underlying assets, and consequently, the ability for a market maker to hedge their exposures.
In the case of MAGS, which targets equal-weight exposure to the Magnificent Seven stocks, the underlying liquidity is, unsurprisingly, very high. The Magnificent Seven have traded combined dollar volume of more than $95 billion on average over the last twenty sessions. Of the seven, Alphabet has been the “least liquid,” averaging roughly $3.9 billion traded per day in its GOOGL line (note: there is an additional $2.9 billion in trades taking place in the GOOG line each day).
According to Bloomberg’s ETF Liquidity function, this data suggests that MAGS can accommodate a single trade of ~7.6 million shares, or ~$280 million, without surpassing a 1% of ADV threshold in any of its underlying holdings – see below. This means that investors can be comfortable transacting in the Fund in very large size without adverse price impact, provided that they utilize limit orders or work with a market maker directly to facilitate.
Source: Bloomberg as of 4/19/2024.
Ultimately, this underlying liquidity allowed for a large block trade to take place in MAGS, equal to roughly 20% of the Fund’s net assets ex-ante, to take place without a hitch.
Source: Bloomberg as of 4/19/2024.
For more information on MAGS, including a full list of holdings, please visit: https://www.roundhillinvestments.com/etf/mags/
Investors should consider the investment objectives, risk, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about Roundhill ETFs please call 1-855-561-5728 or visit the website at www.roundhillinvestments.com/etf/. Read the prospectus or summary prospectus carefully before investing.
The Fund expects to have concentrated (i.e., invest more than 25% of its net assets) investment exposure in one or more of the Technology Industries at any given time, which may vary over time. Further, the Fund expects to obtain such investment exposure by transacting primarily with a limited number of financial intermediaries conducting business in the same industry or group of related industries. As a result, the Fund is more vulnerable to adverse market, economic, regulatory, political or other developments affecting those industries or groups of related industries than a fund that invests its assets in a more diversified manner. The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.
Roundhill Financial Inc. serves as the investment advisor. The Funds are distributed by Foreside Fund Services, LLC which is not affiliated with Roundhill Financial Inc., U.S. Bank, or any of their affiliates.
