How do I place an ETF order?

There are a number of factors that can influence how you place ETF orders. Whether you want to lock in a current market price, avoid adverse market movements, or simply execute your daily trades and move on to other priorities, the key to determining your trading approach is understanding the effects of trading volume. Here are two common scenarios, along with some practical tips, that will help you place ETF orders quickly and confidently. So let's start with placing a small trade for an ETF that has a high average daily volume, or ADV. In normal market conditions you can execute your trade on-exchange through a simple limit order or a market order. A limit order allows you to set a maximum or minimum price at which you're willing to buy or sell the ETF.

This type of order guarantees a price but does not guarantee execution. A market order on the other hand is an order to buy or sell a security immediately. This type of order guarantees that order will be executed but does not guarantee execution price. A bank’s dealing desk, broker or investment platform may be able to help you with placing your ETF trade.

Now let's take a large trade on an ETF that does not trade that much. One strategy would be to trade your order throughout the day. This can be achieved by breaking your large order into a series of smaller ones. Alternatively, your investment platform or broker should have access to an ETF dealing desk who can help you develop a more sophisticated trading strategy to avoid having unnecessary market impacts.

The dealing desk may decide the best way to execute the trade on your behalf. They may trade off-exchange, which is a common execution method allowing the dealing desk to transact with multiple counterparties, generating a level of trading competition. A dealing desk has access to an extensive network of liquidity providers that can help place your order and execute your trade, especially in low volume situations.