SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

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Fryxell
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SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Fryxell » Thu Oct 26, 2017 11:39 pm

I was looking at the historical returns of the SLYV and IJS etfs. They both track the S&P Smallcap 600 Value Index. I noticed some discrepancies in their historical returns:

Code: Select all

Year	    IJS	SLYV
2001	   12.6	12.5
2002	  -14.7	-2.7
2003	   39.8	43.0
2004	   23.0	18.1
2005	   5.9	5.8
2006	   19.3	19.7
2007	   -5.7	-4.3
2008	  -29.5 -33.6
2009	   22.7  36.7
2010	   24.4	24.2
2011	  -1.5	-1.5
2012	   18.1	18.0
2013	   39.7	39.7
2014	   7.3	7.3
2015	  -6.8	-6.7
2016	   31.2	31.1
Note the large discrepancies in 2002 and 2009. Were they tracking different indexes back then?

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JoMoney
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Re: SLYV vs IJS

Post by JoMoney » Fri Oct 27, 2017 12:23 am

Yes, SLYV used to be "Dow Jones Wilshire Small Cap Value Index"

Date of change: 12/24/2010
http://www.etf.com/etf-watch-tables/ind ... nopaging=1
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Re: SLYV vs IJS

Post by Fryxell » Fri Oct 27, 2017 3:51 pm

Thanks!

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by international001 » Thu Sep 13, 2018 10:03 am

Even after the change... why IJS seems to have slightly better performance than IJS (that has higher expense ration)

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Theoretical » Thu Sep 13, 2018 10:15 am

international001 wrote:
Thu Sep 13, 2018 10:03 am
Even after the change... why IJS seems to have slightly better performance than IJS (that has higher expense ration)
Say what you will about Blackrock, but they’re incredibly competent at running an index fund and doing securities lending. In fact, their skill is showing up even more since they take about a 25-30% cut of the lending revenue and have a higher ER. That’s not even taking the tax efficiency into account.

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by vineviz » Thu Sep 13, 2018 10:38 am

international001 wrote:
Thu Sep 13, 2018 10:03 am
Even after the change... why IJS seems to have slightly better performance than IJS (that has higher expense ration)
From January 2011 to August 2018, SLYV has marginally outperformed IJS (13.79% CAGR vs 13.76%).

https://www.portfoliovisualizer.com/fun ... F12%2F2018

Over the past 3 or 4 years especially, it looks like State Street has improved its tracking and lowered its costs somewhat prior to previous years.

IJS remains more tax-efficient, though, so I'd still favor IJS or VIOV (Vanguard's S&P600 ETF) in a taxable account. I use SLYV in my IRAs.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Thu Sep 13, 2018 10:50 am

vineviz wrote:
Thu Sep 13, 2018 10:38 am
IJS remains more tax-efficient, though, so I'd still favor IJS or VIOV (Vanguard's S&P600 ETF) in a taxable account.
Average trading volume for VIOV is ~10,000 vs ~175,000 for the other two. If my SCV was all in VIOV I wouldn't be able to sell it without taking a big hit on trading costs on many days.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by vineviz » Thu Sep 13, 2018 11:09 am

Doc wrote:
Thu Sep 13, 2018 10:50 am
vineviz wrote:
Thu Sep 13, 2018 10:38 am
IJS remains more tax-efficient, though, so I'd still favor IJS or VIOV (Vanguard's S&P600 ETF) in a taxable account.
Average trading volume for VIOV is ~10,000 vs ~175,000 for the other two. If my SCV was all in VIOV I wouldn't be able to sell it without taking a big hit on trading costs on many days.
It's a persistent misconception that trading volume is a good proxy for liquidity among index ETFs.
An ETF’s liquidity isn’t primarily determined by its trading volume, but rather, by its underlying holdings. An ETF is at least as liquid as the least liquid security in its portfolio.
https://www.hartfordfunds.com/dam/en/do ... FWP007.pdf
Every ETF has a unique liquidity profile that is based on how easy it is to trade the ETF’s underlying securities, the costs associated with the creation/redemption process and other considerations. Understanding these facets is critical to your ability to execute trades within an acceptable price range.
As we’ve seen, ADV may be the most visible measure of ETF liquidity, but it tells only a small part of the story.
https://www.vanguard.nl/documents/under ... uidity.pdf
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jhfenton » Thu Sep 13, 2018 12:00 pm

vineviz wrote:
Thu Sep 13, 2018 11:09 am
It's a persistent misconception that trading volume is a good proxy for liquidity among index ETFs.
I was going to write this, but now I don't need to.

I suspect you could buy or sell 50,000-100,000 shares ($7.3 MM - $14.6 MM) of VIOV in a day without significant transaction costs. Both the liquidity of the underlying securities and the liquidity in IJS and SYLV help keep VIOV close to NAV.

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by international001 » Thu Sep 13, 2018 12:32 pm

From morningstar, VIOV spread is even lower!

Anyway, for buy and hold inverstors is not a huge issue

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by international001 » Thu Sep 13, 2018 12:36 pm

vineviz wrote:
Thu Sep 13, 2018 10:38 am
international001 wrote:
Thu Sep 13, 2018 10:03 am
Even after the change... why IJS seems to have slightly better performance than IJS (that has higher expense ration)
From January 2011 to August 2018, SLYV has marginally outperformed IJS (13.79% CAGR vs 13.76%).

https://www.portfoliovisualizer.com/fun ... F12%2F2018

Over the past 3 or 4 years especially, it looks like State Street has improved its tracking and lowered its costs somewhat prior to previous years.

IJS remains more tax-efficient, though, so I'd still favor IJS or VIOV (Vanguard's S&P600 ETF) in a taxable account. I use SLYV in my IRAs.
(of course, only tax-sheltered)

It seems SLYV has a slight higher return and slight higher volatility.

Everything else being equal, shouldn't we expect to see SLYV return +0.1% (what you save on costs) and same volatility?

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Thu Sep 13, 2018 2:17 pm

jhfenton wrote:
Thu Sep 13, 2018 12:00 pm
I suspect you could buy or sell 50,000-100,000 shares ($7.3 MM - $14.6 MM) of VIOV in a day without significant transaction costs. Both the liquidity of the underlying securities and the liquidity in IJS and SYLV help keep VIOV close to NAV.
A few weeks ago there was a post here that said something like the poster placed a sell order for 400 shares and it took several minutes to sell the first 300 and the last didn't sell at all. At the time I looked at the price charts and for like 5 to 10 minutes at a time the chart staight lined. At the same time the IJS price showed the usual spikey data.

I don't know the details here but I have good options that show more "normal" behavior.

The assets under management are also low compared to it's alternatives.

:|
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jhfenton » Thu Sep 13, 2018 2:41 pm

Doc wrote:
Thu Sep 13, 2018 2:17 pm
jhfenton wrote:
Thu Sep 13, 2018 12:00 pm
I suspect you could buy or sell 50,000-100,000 shares ($7.3 MM - $14.6 MM) of VIOV in a day without significant transaction costs. Both the liquidity of the underlying securities and the liquidity in IJS and SYLV help keep VIOV close to NAV.
A few weeks ago there was a post here that said something like the poster placed a sell order for 400 shares and it took several minutes to sell the first 300 and the last didn't sell at all. At the time I looked at the price charts and for like 5 to 10 minutes at a time the chart staight lined. At the same time the IJS price showed the usual spikey data.

I don't know the details here but I have good options that show more "normal" behavior.

The assets under management are also low compared to it's alternatives.

:|
VIOV definitely trades lightly on typical days. I use IJS on my portfolio watchlist on my iPad instead of VIOV to watch S&P 600 SCV without dealing with stale prices.

The point is that there is more available liquidity than you see. Not only does VIOV have only $403 MM in assets, most of that is probably managed by advisors for clients, so trading is light. But the underlying S&P 600 securities trade more, and if you want to buy thousands of shares of VIOV the market maker can make them very efficiently.

That's not to say that I wouldn't pick IJS if I were picking one of the S&P 600 SCV ETFs for the first time, but when I started my position in VIOV in taxable, I wanted to be able to make regular monthly purchases commission-free. So I'm going to continue to add to it worry-free.

I would guess that it was a limit order that didn't execute fully. There is no way that a 400 share market order would not execute within a few seconds.

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Thu Sep 13, 2018 4:05 pm

jhfenton wrote:
Thu Sep 13, 2018 2:41 pm
But the underlying S&P 600 securities trade more, and if you want to buy thousands of shares of VIOV the market maker can make them very efficiently.
How do I know that?
jhfenton wrote:
Thu Sep 13, 2018 2:41 pm
I would guess that it was a limit order that didn't execute fully. There is no way that a 400 share market order would not execute within a few seconds
You may be right on this incident. But if I am not seeing any trades at all for five to ten minutes why should I expect my market order for 400 to trade immediately? And if it does at what price?

The point I have is why worry about it. Just use IJS.

VIOV is not necessarily better just because its name starts with "Van".
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by MotoTrojan » Thu Sep 13, 2018 4:38 pm

Doc wrote:
Thu Sep 13, 2018 4:05 pm
jhfenton wrote:
Thu Sep 13, 2018 2:41 pm
But the underlying S&P 600 securities trade more, and if you want to buy thousands of shares of VIOV the market maker can make them very efficiently.
How do I know that?
jhfenton wrote:
Thu Sep 13, 2018 2:41 pm
I would guess that it was a limit order that didn't execute fully. There is no way that a 400 share market order would not execute within a few seconds
You may be right on this incident. But if I am not seeing any trades at all for five to ten minutes why should I expect my market order for 400 to trade immediately? And if it does at what price?

The point I have is why worry about it. Just use IJS.

VIOV is not necessarily better just because its name starts with "Van".
You aren't seeing any trades because there aren't any, that doesn't mean people are trying. I don't think you understand jhfenton's point.

I use VIOV in both my Roth and taxable. Have considered moving to IJS in taxable with VG's new commission free trades but I try to buy it in Roth anyway. Switching to SLYV in Roth may have its merits though...

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Thu Sep 13, 2018 4:47 pm

MotoTrojan wrote:
Thu Sep 13, 2018 4:38 pm
You aren't seeing any trades because there aren't any, that doesn't mean people are trying. I don't think you understand jhfenton's point.
He might be right but I don't see the evidence. Maybe it's there. But why guess when I can see better trade execution with IJS.
MotoTrojan wrote:
Thu Sep 13, 2018 4:38 pm
Have considered moving to IJS in taxable with VG's new commission free trades but I try to buy it in Roth anyway.
So it cost me $2 in June to buy $16k of SCV. I should have used VIOV in order to same that $2 ??????

How does the phrase go? Penny wise pound foolish.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by MotoTrojan » Thu Sep 13, 2018 5:03 pm

Doc wrote:
Thu Sep 13, 2018 4:47 pm
MotoTrojan wrote:
Thu Sep 13, 2018 4:38 pm
You aren't seeing any trades because there aren't any, that doesn't mean people are trying. I don't think you understand jhfenton's point.
He might be right but I don't see the evidence. Maybe it's there. But why guess when I can see better trade execution with IJS.
MotoTrojan wrote:
Thu Sep 13, 2018 4:38 pm
Have considered moving to IJS in taxable with VG's new commission free trades but I try to buy it in Roth anyway.
So it cost me $2 in June to buy $16k of SCV. I should have used VIOV in order to same that $2 ??????

How does the phrase go? Penny wise pound foolish.
Nope, but maybe the $8/year that IJS is costing that buy over VIOV will make more of a difference :mrgreen: .

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jhfenton » Thu Sep 13, 2018 6:35 pm

Doc wrote:
Thu Sep 13, 2018 4:47 pm
So it cost me $2 in June to buy $16k of SCV. I should have used VIOV in order to same that $2 ??????

How does the phrase go? Penny wise pound foolish.
I had $2 commissions too, but $2 was a much bigger chunk of my monthly purchases (~$500 give or take). And I was splitting the monthly taxable contributions. Sometimes I bought VWO (Vanguard Emerging Markets) or put some in VOHIX (Vanguard Ohio Long-Term Tax Exempt), depending on where my allocation needed it.

Now I have DFSTX (DFA US Small Cap I) in my 401(k), so I'm putting some money in that and have less room for additional SC(V) in our individual accounts.

You made a perfectly rational decision to buy IJS, and I would stick with it.

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Thu Sep 13, 2018 6:42 pm

jhfenton wrote:
Thu Sep 13, 2018 6:35 pm
I had $2 commissions too, but $2 was a much bigger chunk of my monthly purchases (~$500 give or take).
Aha! I would never buy odd lots of an ETF. Our $500 per month goes into Vg ultra short where it builds up into enough to make that $2 transaction fee worth while.

Let's see $2 per month is worth 6 Starbucks a year? :D
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by whodidntante » Thu Sep 13, 2018 7:15 pm

vineviz wrote:
Thu Sep 13, 2018 10:38 am
IJS remains more tax-efficient, though, so I'd still favor IJS or VIOV (Vanguard's S&P600 ETF) in a taxable account. I use SLYV in my IRAs.
I'm curious why State Street doesn't get tax efficiency right, especially because it seems pretty simple to do. Do they mainly care about institutional investors?

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jhfenton » Thu Sep 13, 2018 9:10 pm

Doc wrote:
Thu Sep 13, 2018 6:42 pm
jhfenton wrote:
Thu Sep 13, 2018 6:35 pm
I had $2 commissions too, but $2 was a much bigger chunk of my monthly purchases (~$500 give or take).
Aha! I would never buy odd lots of an ETF. Our $500 per month goes into Vg ultra short where it builds up into enough to make that $2 transaction fee worth while.

Let's see $2 per month is worth 6 Starbucks a year? :D
I don’t drink coffee, so Starbucks gets none of my money. :beer

Most of our trades are odd lots, and they’re all odd lots in taxable. Our taxable account is only 1.x% of our portfolio. The rest is 20+ years of double Roth IRA contributions and 401(k) contributions. Maxing out everything including an HSA still takes most of our savings. What’s left over is not buying even lots of anything. Besides, I see no reason to only invest in VIOV in $14,600 chunks and VWO in $4,100 chunks.

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jalbert » Thu Sep 13, 2018 10:08 pm

VIOV is the ETF share class of a fund that also includes an institutional mutual fund share class. Vanguard can invest some of the cash position in additional securities and mint new ETF shares easily, so low supply of shares on the market should not be an issue.

If there were low demand to buy ETF shares, leading to a steep discount to NAV, Vanguard could use cash to be invested in the mutual fund class to buy ETF shares on the secondary market in lieu of investing the cash in index securities and re-assign the underlying securities from the ETF share class to the mutual fund share class, arbitraging away the discount to NAV.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Fri Sep 14, 2018 6:48 am

jalbert wrote:
Thu Sep 13, 2018 10:08 pm
VIOV is the ETF share class of a fund that also includes an institutional mutual fund share class. Vanguard can invest some of the cash position in additional securities and mint new ETF shares easily, so low supply of shares on the market should not be an issue.

If there were low demand to buy ETF shares, leading to a steep discount to NAV, Vanguard could use cash to be invested in the mutual fund class to buy ETF shares on the secondary market in lieu of investing the cash in index securities and re-assign the underlying securities from the ETF share class to the mutual fund share class, arbitraging away the discount to NAV.
Huh?

I thought ETF shares were created by "authorized participants" trading shares of the underlying stocks for ETF shares. Maybe Vanguard can legally do that for it's own account and then sell those shares to it's own customers but that sounds like a conflict of interest. And it does absolutely nothing if you are buying your ETF at Schwab.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jalbert » Fri Sep 14, 2018 4:57 pm

What you describe is an option you have if you hold the mutual fund share class and want to convert to ETF shares, but most newly minted ETF shares of Vanguard funds are created by Vanguard and sold in bulk to institutional investors and market makers. That is the normal way ETF shares get created across all ETF providers.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Fri Sep 14, 2018 6:45 pm

jalbert wrote:
Fri Sep 14, 2018 4:57 pm
What you describe is an option you have if you hold the mutual fund share class and want to convert to ETF shares, but most newly minted ETF shares of Vanguard funds are created by Vanguard and sold in bulk to institutional investors and market makers. That is the normal way ETF shares get created across all ETF providers.
I am at a loss here.

1) Only Vg has mutual ETFs that are share classes of a mutual fund.

2) Forgetting that are you addressing starting a new ETF or making an existing ETF bigger. If the latter why would the institution buyer buy from Vg and not on the open market unless Vg's price was lower. And if it is lower is Vg not somehow manipulating the market.

So for how long is VIOV considered "newly minted"? It's been around since ~2010.

I don't like VIOV because of the much lower volume then it's identical alternatives. I should ignore that just because it's name begins with Van.

I don't get the point.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jalbert » Sat Sep 15, 2018 12:13 am

ETF providers create new shares of ETFs all the time, which is what minting new shares means. This doesn’t just happen when the ETF is launched.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Sat Sep 15, 2018 7:41 am

jalbert wrote:
Sat Sep 15, 2018 12:13 am
ETF providers create new shares of ETFs all the time, which is what minting new shares means. This doesn’t just happen when the ETF is launched.
But they do it with baskets of stocks provided by outside investors. If they did it with their own basket they would be competing with those outside investors both in buying the basket and in selling the new ETFS. That shouts conflict of interest to me.

As a general concept is the broker/sponsor permitted to be a market maker. They do this with bonds sometimes but the bid sheets show "from our own inventory".

Can you show some authoritative source for your idea.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jalbert » Sat Sep 15, 2018 2:52 pm

But they do it with baskets of stocks provided by outside investors. If they did it with their own basket they would be competing with those outside investors both in buying the basket and in selling the new ETFS. That shouts conflict of interest to me.
I don’t know if Vanguard does this. They would not do it in competition with the market, but as a means of supplying liquidity if there were no demand.

As long as the underlying stocks remain liquid, there are going to be arbitragers exploiting any gap in ETF market price and NAV, adding liquidity to the ETF, whether or not Vanguard is one of the participants doing the arbitrage for Vanguard ETFs.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by vineviz » Sat Sep 15, 2018 3:27 pm

jalbert wrote:
Sat Sep 15, 2018 2:52 pm

As long as the underlying stocks remain liquid, there are going to be arbitragers exploiting any gap in ETF market price and NAV, adding liquidity to the ETF, whether or not Vanguard is one of the participants doing the arbitrage for Vanguard ETFs.
Exactly.

In fact, I’d say that the low average daily volume of VIOV is itself evidence that VIOV is as liquid as IJS.

If VIOV was persistently trading away from NAV, you’d see millions in arbitrage trades: Short VIOV and long IJS, or vice versa.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Sat Sep 15, 2018 5:12 pm

vineviz wrote:
Sat Sep 15, 2018 3:27 pm
In fact, I’d say that the low average daily volume of VIOV is itself evidence that VIOV is as liquid as IJS.
I need you to elaborate on this idea. I don't follow it.
vineviz wrote:
Sat Sep 15, 2018 3:27 pm
If VIOV was persistently trading away from NAV, you’d see millions in arbitrage trades: Short VIOV and long IJS, or vice versa.
There is nobody out there to borrow the short position from. There is no volume.

And there are less than three million shares out there in total. It's hard to short millions.
Outstanding shares
2,750,000 as of 08/30/2018
https://advisors.vanguard.com/web/c1/fa ... ducts/VIOV

I'll try to remember to look at level two quotes when the market opens to get some more actual data.

If I held my SCV in VIOV and decided to sell my relatively small position tomorrow I would move the market all by myself. :(
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Sat Sep 15, 2018 5:19 pm

Look at the sales chart for the lase few days:

Image

Those little red dots are the VIOV trades.

Go to Yahoo finance and chart VIOV by itself. There is ten, twenty, thirty minutes between trades.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jhfenton » Sat Sep 15, 2018 6:21 pm

Doc wrote:
Sat Sep 15, 2018 5:19 pm
Look at the sales chart for the lase few days:

Image

Those little red dots are the VIOV trades.

Go to Yahoo finance and chart VIOV by itself. There is ten, twenty, thirty minutes between trades.
No one disputes that. We're saying that that doesn't tell you how much hidden liquidity there is. There's a reason that VIOV has essentially the same average spread as IJS (9 bp vs 8 bp). If you need to buy or sell $1,000,000 of VIOV in a day, Vanguard's market makers will make sure that you can do it without moving the price away from NAV.

According to ETF.com, the creation unit cost for VIOV is 1 bp. A creation unit is 25,000 shares, currently worth about $3.67 MM. A market maker can easily create or destroy shares and make a profit within the 9 bp median spread. That is what they are there to do.

And the only reason the spread is 9 bp is because there are relatively high costs in assembling the basket of small-cap stocks. Take a look at an ETF like VONE (Vanguard Russell 1000 ETF). It has $981 MM in assets, but only trades $2.36 MM or about 17,700 shares per day. But because it holds large-cap and mid-cap stocks, its average spread is only 2 bp. The stocks are so liquid that a market maker can make money inside a 2 bp spread.

As I've said, at this point there is no reason for you to pick VIOV over IJS. We're just making a theoretical argument about ETF liquidity. There are funds, like Vanguard's new factor ETFs, for which there is no equivalent.

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Sat Sep 15, 2018 7:24 pm

jhfenton wrote:
Sat Sep 15, 2018 6:21 pm
Vanguard's market makers will make sure that you can do it without moving the price away from NAV.
Just what is a Vanguard market maker? Are they a subsidery of Vanguard Marketing? Is a broker allowed to influence the market? It has always been my understanding that a broker is a neutral agent. But you are suggesting that Vanguard is allowed to buy and sell in the market in order to make its own ETFS more attractive. Alternatively the marker makers are some outside group that can make gobs of money by arbitration of a security that trade a few hundred shares every ten minutes. Remind me not to invest in that organization.

Your idea is hard to contemplate.

Now if you are going to buy 10 or 20 shares every month and hold them till the cows come in this product might fit your needs. But equities outperform FI in the long run and at some point you are going to sell them to rebalance. As your portfolio grows new contributions aren't going to keep up? What then?
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jalbert » Sat Sep 15, 2018 7:47 pm

In fact, I’d say that the low average daily volume of VIOV is itself evidence that VIOV is as liquid as IJS.
That is a bit of a stretch. You can see the spikes (i.e. in either direction) of premium or discount to NAV in graphs under the Tradability tab for the ETFs on ETF.com:

VIOV graph

IJS graph

In both cases, sharp upticks and downticks were resolved quickly but there were alot more of them for VIOV and the baseline range for IJS is lower in magnitude.

But if you are a long-term investor, this is in the noise in both cases.
Last edited by jalbert on Sat Sep 15, 2018 7:59 pm, edited 1 time in total.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by triceratop » Sat Sep 15, 2018 7:48 pm

Useful information: ETF Basics: The Creation and Redemption Process and Why It Matters

A key thing to understand is that volume is not synonymous with liquidity.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Sun Sep 16, 2018 9:40 am

jalbert wrote:
Sat Sep 15, 2018 7:47 pm
In both cases, sharp upticks and downticks were resolved quickly but there were alot more of them for VIOV and the baseline range for IJS is lower in magnitude.

But if you are a long-term investor, this is in the noise in both cases.
You are (almost) right in defining this as noise. But I don't usually look at NAV/Price spread except when I an considering a completely new position and if such a spike occurred when I was adding to or reducing an existing position I probably would never notice.

My concern is with the bid/ask spread. And low volume would intend to increase that spread. If you are only trading a few hundred shares you might not care because you often only look at the top bid ask spread which might be very narrow. If you are trading more than the amount in that top pair you are likely to see much bigger spreads as you move lower in the stack. In the case of VIOV a limit bid may not help because it might never be filled at all.

The question is why bother with VIOV when there are good alternatives that doesn't have the same potential problem.

Jalbert, thanks for providing the links.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by vineviz » Sun Sep 16, 2018 3:40 pm

Doc wrote:
Sun Sep 16, 2018 9:40 am
The question is why bother with VIOV when there are good alternatives that doesn't have the same potential problem.
The answer is that this “problem” is imaginary, not real.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by triceratop » Sun Sep 16, 2018 4:03 pm

Doc wrote:
Sun Sep 16, 2018 9:40 am
My concern is with the bid/ask spread. And low volume would intend to increase that spread.
I think the problem is that you have not justified why this is the case. It appears to be a tenuous case, since VIOV has spreads very cloes to IJS despite substantially lower volume. Why? This is the thesis that others are disagreeing with you on, and they at least have data/explanations for why intuition might not fully describe what is going on with an ETF like this.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Sun Sep 16, 2018 4:39 pm

triceratop wrote:
Sun Sep 16, 2018 4:03 pm
t appears to be a tenuous case, since VIOV has spreads very cloes to IJS despite substantially lower volume. Why?
Maybe but nobody has addressed the spreads yet because nobody has looked at the market depth once you get past the top of list. The market is closed. We don't know right now.

Several weeks ago somebody posted that they could only sell something like 300 VIOV shares of a 400 share order and that 300 took some time to execute.

At that time I looked at the Level 2 quotes and there was a big difference between IJS and VIOV. The data we have right now is only the actual trades from last week and that shows a big difference in trading activity between the two.

Everybody is saying no difference but I am the only one that has looked and that was some time ago and I don't recall all the details. But I was convinced then that with regard to trading activity IJS was far better than VIOV.

Tomorrow morning when the market opens we will be able to tell more.

It also makes a difference whether you are buying or selling 6 shares or 600 shares. And whether you are going to sell or keep them til the cows come home. That will also make a difference.

If I was 40 years old and was buying $500 a month of SCV in my tax advantaged account I wouldn't give a hoot about the trading depth either.

(In the last year and a half I have bought or sold over 2000 shares of small cap value. Trading depth is important to me.)
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by jalbert » Mon Sep 17, 2018 12:44 am

You are (almost) right in defining this as noise. But I don't usually look at NAV/Price spread except when I an considering a completely new position and if such a spike occurred when I was adding to or reducing an existing position I probably would never notice.
You pay transaction cost (discount/premium to NAV and/or bid-ask spread) twice, once at purchase and once at sale. But the extra 5 bp of ER and 20% of securities lending revenue that flows to iShares/Blackrock is annually for the entire holding period.

Moreover, if you own IJS and are buying more, you can also hold VIOV and the combination of the two has more trading volume than either by itself, increasing flexibility. It does increase complexity, however.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by vineviz » Mon Sep 17, 2018 5:46 am

Doc wrote:
Sun Sep 16, 2018 4:39 pm
triceratop wrote:
Sun Sep 16, 2018 4:03 pm
t appears to be a tenuous case, since VIOV has spreads very cloes to IJS despite substantially lower volume. Why?
Maybe but nobody has addressed the spreads yet because nobody has looked at the market depth once you get past the top of list. The market is closed. We don't know right now.
We HAVE addressed the spreads, and you can see they aren’t wider than the spreads on IJS.

And as we’ve repeatedly pointed out, visible market depth (even with Level 2 quotes) represents only a small fraction of actual liquidity for an ETF like this.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Mon Sep 17, 2018 10:56 am

I looked at the Level II quotes and indeed VIOV has enough market depth for most of us at least today. But there are not as many trades as IJS and the variation of the trades from the indicative value (IV) is greater for VIOV than IJS which is why I assume that there is more of a diversion from the IV with VIOV.

Image

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by vineviz » Mon Sep 17, 2018 11:17 am

Doc wrote:
Mon Sep 17, 2018 10:56 am
I looked at the Level II quotes and indeed VIOV has enough market depth for most of us at least today. But there are not as many trades as IJS and the variation of the trades from the indicative value (IV) is greater for VIOV than IJS which is why I assume that there is more of a diversion from the IV with VIOV.
Thanks for posting the charts.

It's true that VIOV has fewer trades, but the trades it DOES have are executing very close to the IV (as you'd expect for a liquid ETF). Very few trades are happening at more than 6 bps away from IV for VIOV, and it looks to me like the same is true for IJS.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by chisey » Mon Sep 17, 2018 11:26 am

Doc wrote:
Sun Sep 16, 2018 4:39 pm
Several weeks ago somebody posted that they could only sell something like 300 VIOV shares of a 400 share order and that 300 took some time to execute.

At that time I looked at the Level 2 quotes and there was a big difference between IJS and VIOV. The data we have right now is only the actual trades from last week and that shows a big difference in trading activity between the two.

Everybody is saying no difference but I am the only one that has looked and that was some time ago and I don't recall all the details. But I was convinced then that with regard to trading activity IJS was far better than VIOV.
I think you are recalling my experience. I was using limit orders and it was my first foray into ETF transactions, which is why I decided to do it in pieces. The first 3 batches went pretty quickly but, as you recalled, the last 100 shares didn't execute for quite some time. It turned out I was trying to buy using limit orders in a period where the price was escalating, and upping my limit several times didn't catch a willing seller until just before the trading day ended. As it turned out, there were NO transactions of the ETF that entire time, and I speculate that if there had been more sellers I may not have had such trouble.

Now that IJS trades free at Vanguard I have every intention of using it instead of VIOV, but I have not taken the dive to switch over just yet.

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Mon Sep 17, 2018 11:34 am

vineviz wrote:
Mon Sep 17, 2018 11:17 am
It's true that VIOV has fewer trades, but the trades it DOES have are executing very close to the IV (as you'd expect for a liquid ETF).
Thanks, I just notice that the trades themselves are indeed very close to the IV. It is only the time between trades where the lines diverge.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by Doc » Mon Sep 17, 2018 11:37 am

chisey wrote:
Mon Sep 17, 2018 11:26 am
It turned out I was trying to buy using limit orders in a period where the price was escalating, and upping my limit several times didn't catch a willing seller until just before the trading day ended. As it turned out, there were NO transactions of the ETF that entire time, and I speculate that if there had been more sellers I may not have had such trouble.
That's what I got from your experience. Not enough sellers. But most of the responders have shown that the the fund is liquid.

I can't wrap my mind around good liquidity and not enough sellers at the same time.

I give up. I'll just stick with IJS. :?
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by chisey » Mon Sep 17, 2018 11:42 am

Doc wrote:
Mon Sep 17, 2018 11:37 am
chisey wrote:
Mon Sep 17, 2018 11:26 am
It turned out I was trying to buy using limit orders in a period where the price was escalating, and upping my limit several times didn't catch a willing seller until just before the trading day ended. As it turned out, there were NO transactions of the ETF that entire time, and I speculate that if there had been more sellers I may not have had such trouble.
That's what I got from your experience. Not enough sellers. But most of the responders have shown that the the fund is liquid.

I can't wrap my mind around good liquidity and not enough sellers at the same time.

I give up. I'll just stick with IJS. :?
I don't fully understand the details, but two things seem to be true:

1) The lack of sellers can create delays in trade execution, especially for limit orders.

2) When trades do execute, they are pretty faithful to IV.

So at the time of actual trading, you're probably going to get a fair price, close to IV, and the bid-ask is no more of a problem for VIOV than other similar ETFs.

On the other hand, maybe 1) can still be a problem. In my situation the delay may have caused my trade to execute at a higher price than it would have if it could have executed sooner. So, a fair price at the time of execution, but a higher price than it could have been 30 minutes earlier.

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by vineviz » Mon Sep 17, 2018 12:01 pm

chisey wrote:
Mon Sep 17, 2018 11:42 am
I don't fully understand the details, but two things seem to be true:

1) The lack of sellers can create delays in trade execution, especially for limit orders.

2) When trades do execute, they are pretty faithful to IV.

So at the time of actual trading, you're probably going to get a fair price, close to IV, and the bid-ask is no more of a problem for VIOV than other similar ETFs.

On the other hand, maybe 1) can still be a problem. In my situation the delay may have caused my trade to execute at a higher price than it would have if it could have executed sooner. So, a fair price at the time of execution, but a higher price than it could have been 30 minutes earlier.
For an ETF like VIOV, its virtually certain that a market order will be executed immediately and probably at the prevailing bid/ask price.

A limit order is probably going to delay execution, no matter how much trading the ETF does, but that is a function of market movement and not of liquidity.
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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by chisey » Mon Sep 17, 2018 1:02 pm

vineviz wrote:
Mon Sep 17, 2018 12:01 pm
A limit order is probably going to delay execution, no matter how much trading the ETF does, but that is a function of market movement and not of liquidity.
I was scared into using limit orders by some of the things I had read here re: market orders gone bad, especially WRT low volume ETFs. Are you saying I shouldn't be worried about that with VIOV?

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Re: SLYV vs IJS [SPDR vs. iShares S&P 600 Small Cap Value]

Post by triceratop » Mon Sep 17, 2018 1:45 pm

Doc wrote:
Mon Sep 17, 2018 11:34 am
vineviz wrote:
Mon Sep 17, 2018 11:17 am
It's true that VIOV has fewer trades, but the trades it DOES have are executing very close to the IV (as you'd expect for a liquid ETF).
Thanks, I just notice that the trades themselves are indeed very close to the IV. It is only the time between trades where the lines diverge.
Linear interpolation is garbage if there is no actual signal there. :) Do I have to crack out my numerical analysis text and show that the expected error is higher for a given smoothness of the curve if the discretization in time is coarser?

Look, you obviously want to do a scatter plot where the trades are actually happening, and see how closely the scatter lines up against the more active IJS, which is better represented by a line plot.
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