Are Index funds liquid?

wmb194

Millyonare said:

Liquidity depends on the fund or ETF itself + the platform one trades on. It needs a liquid fund / ETF + a liquid platform. Both parts must be liquid, not just the fund or ETF.

But you're buying and selling ETFs via a stockbroker. How does the choice of stockbroker affect liquidity? Or am I misunderstanding what you mean by, "platform"?

Millyonare

wmb194 said:

Millyonare said:

Liquidity depends on the fund or ETF itself + the platform one trades on. It needs a liquid fund / ETF + a liquid platform. Both parts must be liquid, not just the fund or ETF.

But you're buying and selling ETFs via a stockbroker. How does the choice of stockbroker affect liquidity? Or am I misunderstanding what you mean by, "platform"?

It depends on what market-makers the trading platforms use.

If a platform uses many big market-makers with deep pockets, the buy-sell process will appear liquid... If a platform uses a handful of small market-makers, the buy-sell process will appear illiquid.

Some brokers struggle to fill £100 of retail orders. Others have no trouble with £100k.

DavidT67

UCITS ETFs have an assurance of liquidity from the provider.

https://www.justetf.com/uk/news/etf/legal-structure-of-etfs-ucits.html

But as Millyonare said, picking a large established broker who uses major market makers is key, if you have significant trades.

wmb194

Millyonare said:

wmb194 said:

Millyonare said:

Liquidity depends on the fund or ETF itself + the platform one trades on. It needs a liquid fund / ETF + a liquid platform. Both parts must be liquid, not just the fund or ETF.

But you're buying and selling ETFs via a stockbroker. How does the choice of stockbroker affect liquidity? Or am I misunderstanding what you mean by, "platform"?

It depends on what market-makers the trading platforms use.

If a platform uses many big market-makers with deep pockets, the buy-sell process will appear liquid... If a platform uses a handful of small market-makers, the buy-sell process will appear illiquid.

Some brokers struggle to fill £100 of retail orders. Others have no trouble with £100k.

In my experience based on obtaining quotes from multiple brokers before making the trade with e.g., Freetrade they all use the same ones as the prices don't vary. A trivial amount like £100 shouldn't be a problem. As David says, the market in ETFs is made a bit differently from shares in normal companies anyway.