Industry Updates

PIMCO ETF hits NYSE trading floor

Human/digital hybrid used in bond ETF aims to trim volatility

Heather Bell

a large group of people at a convention

PIMCO, which manages $31bn in ETFs, has gone back to the future with an ETF that trades on the floor of the New York Stock Exchange (NYSE).

The PIMCO Active Bond ETF (BOND), which began trading last week on the NYSE, is the exchange’s first ETF in 15 years and the first actively-managed ETF ever to enter the open outcry arena.

Floor trading on the NYSE – the original buying and selling method when the exchange opened in 1792 – has largely been replaced by electronic trading over the past few decades. PIMCO, with $1.69trn assets under management (AUM), is using a digital and human hybrid system, that it says will enhance liquidity, reduce volatility and trading costs and improve price determination.

“We are simply seeking to add human intervention to the mix,” a PIMCO spokesperson told ETF Stream's sister publication “We are not limiting the application of technology and digital support to the fund.”

The human presence, known as the designated market maker, boosts oversight for the ETF during the trading day, Crane added. 

Floor traders – synonymous with the shouting, stressed-out deal broker archetype – serve as asset managing custodians in this field, navigating and maintaining critical relationships between investors and equity issuers. 

Actively managed ETFs have witnessed a surge in growth this year due to investors opting for financial-advisor-curated portfolios, mainly due to market turbulence and looming economic uncertainty. According to data, there are 983 actively managed ETFs currently being traded on U.S. markets. 

The $3bn BOND was previously listed on the NYSE’s fully electronic platform, Arca, since its inception in 2012. The ETF is an actively-managed portfolio that seeks to maintain current income and long-term capital appreciation. Citadel Securities' head of designated market-maker floor trading Pete Giacchi serves as the DMM for BOND. 

BOND is the first ETF to list on the NYSE floor since 2007 following a series of rule changes approved by the Securities and Exchange Commission in July that permit a wide range of ETFs to list on the stock exchange.

According to the NYSE, the hybrid model of trading will help issuers reach global investors, especially with ETFs that are actively managed or invest in less actively traded securities.  

Newport Beach-based PIMCO is considering introducing additional ETFs onto the trading floor going forward, Crane said.

This story was originally published

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