Deutsche Börse has today launched a new crucial indicator for ETF investors known as iXLM (intraday Xetra liquidity measure), which displays the changes in an ETF’s trading costs during the trading session each day.
The new indicator will allow investors to pinpoint period when the costs of trading an ETF were at their lowest so that they can use this information when making future trading decisions. This indicator works with all ETFs that are traded on the Xetra platform.
The head of ETF products at Deutsche Börse, Stephan Kraus explained that:
Implicit trading costs amount to a significant part of the total trading costs. By taking the iXLM into account, investors can save on average up to 30 percent of these costs in ETF trading, depending on the time of day.
ETF trading costs usually accrue in two forms, which are the explicit costs and the implicit costs. The explicit costs typically arise from the processing of trading orders by stock exchanges and banks, which the investor is directly charged in the form of commissions and fees. Implicit costs usually arise from the ETF’s liquidity at the time of trading.
He added that:
The implicit costs depend on the situation in the order book and are not reported directly. Investors can assess these costs only to a limited extent.
In the past, Xetra users have used the Xetra Liquidity Measure (XLM) to calculate the liquidity of all ETFs and shares traded on the Xetra platform. However, the XLM used to calculate these costs as a monthly mean figure, which was applied to each trading session.
But the XLM varies considerably over the day. The new iXLM reflects these fluctuations for ETFs in 30-minute intervals,” Kraus concluded.