Question #7
Reading: Reading 35 Exchange-Traded Funds - Mechanics and Applications
PDF File: Reading 35 Exchange-Traded Funds - Mechanics and Applications.pdf
Page: 2
Status: Correct
Correct Answer: A
Question
Bob Nelson, analyst for Sigma securities, is evaluating EUXL, a leveraged ETF on European stocks. While the ETF is listed on multiple exchanges, it primarily trades on OTC markets. Nelson would most accurately assume that:
Answer Choices:
A. OTC quotes tend to be more “live” compared to exchange quotes
Explanation
European markets are fragmented across many exchanges and countries and a majority of
ETF trades occur in the OTC markets, without "live" bid and offer prices. The added
complexity in settlement may widen the quoted bid-ask spreads.