Steps have been taken, although maybe the word "fix" is overoptimistic.The "Flash Crash" in May pointed up the potential very short term volatility in ETFs.
Maybe it will never happen again, and maybe it wouldn't affect any "normal" trader (unless you had a stop-loss order in effect), but it's something to think about.
And the chart posted by samclem is not legit as all trades were busted below a certain price drop.
Regulators ended up cancelling trades in U.S.-listed securities that saw declines of 60% and worse during the five-minute meltdown. About 70% of the busted trades involved ETFs, the Securities and Exchange Commission and the Commodity Futures Trading Commission said in a joint report on the day’s chaos.
“ETFs as a class were affected more than any other category of securities,” according to the report.
The $12 billion iShares Russell 1000 Growth Index Fund. . . , for example, was one of the large ETFs that went haywire. The fund opened at $51.42 but some trades crossed as low as a penny a share in the height of the confusion before the fund closed at $50.11.
The transactions were later broken by the SEC if the decline was 60% or more.
Cancelled trades recently at two large ETFs have raised more questions about their durability.
On Oct. 1, the iBoxx Investment Grade Corporate Bond Fund ... had trades cancelled following a brief, rapid decline. A spokeswoman for BlackRock Inc.... , the ETF’s manager, said the drop was due to an “erroneous trade” and that standard exchange rules were triggered.
NYSE Arca said it would cancel trades in the SPDR S&P 500 ETF when its price plunged about 10% on Oct. 18. The exchange blamed a delay in the closing auction due to an issue with a software release.
The flash-crash was a big advantage for ETFs --- you could buy at a 10% discount that day that you could not do if you wanted a mutual fund.
If you react that way to stock market moves, then maybe you should not own any stocks whether inside a mutual fund, an ETF, or directly.
So what would the deciding criteria be, when capital gains are paid, minimum amounts to buy in, ectinquisitive, almost all the ETFs you would want to use have an equivalent mutual fund share class with the same very low expense ratio. That is, the mutual funds that you would use have expense ratios of 0.05% to 0.25% (not your 1-1.5%). So whether you use low-expense ratio ETFs or low-expense ratio mutual funds, the expense ratio is not the deciding criteria.
inquisitive, almost all the ETFs you would want to use have an equivalent mutual fund share class with the same very low expense ratio. That is, the mutual funds that you would use have expense ratios of 0.05% to 0.25% (not your 1-1.5%). So whether you use low-expense ratio ETFs or low-expense ratio mutual funds, the expense ratio is not the deciding criteria.