The ETF industry saw explosive growth in the third quarter, piling up huge assets amid the stock market surge. This resulted in enough liquidity in the ETF world, with most funds trading at extremely high volumes. Volume can be determined by the number of shares traded in a particular period. High trading volume indicates high liquidity, which is a key characteristic of ETFs.

Here's why volume is relevant:

Liquidity: High-volume ETFs are more liquid, meaning they can be bought or sold easily without causing a significant price change. This is important for investors as it allows them to enter or exit positions without impacting the price too much.

Bid-Ask Spread: High-volume ETFs typically have narrower bid-ask spreads. The bid-ask spread is the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept. A narrower spread means lower transaction costs for investors.

Price Discovery: High trading volumes can lead to better price discovery, which means the market price of the ETF more accurately reflects its underlying value. This is because, with more trades, there's a higher likelihood that the ETF price will reflect the collective knowledge and sentiment of a larger pool of investors.

Market Impact: If an ETF has a low trading volume, large trades can significantly impact its price. This is less of a concern with high-volume ETFs (read: 5 Best-Performing Sector ETFs of the Third Quarter).

Lower Tracking Error: High trading volumes might help in better tracking of the underlying index, leading to a lower tracking error, especially for index ETFs. This is because the arbitrage mechanism works efficiently when the ETF is actively traded.

Indication of Interest: High trading volume can also be an indication of high interest in a particular market or sector. For example, if an ETF that tracks a specific industry has a high trading volume, it could indicate that many investors are interested in that industry.

Volatility: ETFs with low trading volumes can sometimes be more volatile than those with high volumes. This is because a small number of trades can have a larger impact on the price of the ETF.

That said, we have highlighted 10 ETFs that have seen higher average volumes in the third quarter and are thus the top 10 funds in terms of trading volume, per etfdb.com (see: all the Category ETFs here).

ProShares UltraPro Short QQQ (SQQQ) – Average Daily Volume: 169.7 million shares

ProShares UltraPro Short QQQ provides three times inverse exposure to the daily performance of the Nasdaq-100 Index, charging 95 bps in annual fees. The index measures the performance of the 100 largest domestic and international non-financial companies listed on Nasdaq based on market capitalization. ProShares UltraPro Short QQQ has AUM of $2.6 billion.

Direxion Daily Semiconductor Bull 3x Shares (SOXL) – Average Daily Volume: 92.2 million shares

Direxion Daily Semiconductor Bull 3x Shares targets the semiconductor corner of the technology sector with three times leveraged exposure to the NYSE Semiconductor Index. Direxion Daily Semiconductor Bull 3x Shares has amassed about $12.1 billion in its asset base while charging 72 bps in fees per year.

Direxion Daily Semiconductor Bear 3x Shares (SOXS) – Average Daily Volume: 60.8 million shares

Direxion Daily Semiconductor Bear 3x Shares targets the semiconductor corner of the technology sector with three times inverse leveraged exposure to the NYSE Semiconductor Index. It has amassed about $864.9 million in its asset base while charging 88 bps in fees per year.

ProShares UltraPro QQQ (TQQQ) – Average Daily Volume: 58.8 million shares

ProShares UltraPro QQQ seeks to deliver three times the return of the daily performance of the NASDAQ-100 Index, charging investors 0.88% in expense ratio. The index measures the performance of the 100 largest domestic and international non-financial companies listed on Nasdaq based on market capitalization. ProShares UltraPro QQQ is the most popular and liquid ETF in the leveraged space, with AUM of $24.4 billion.

Direxion Daily TSLA Bull 2X Shares (TSLL) – Average Daily Volume: 52.1 million shares

With AUM of $2.3 billion, Direxion Daily TSLA Bull 2X Shares is by far the largest U.S.-listed single-stock ETF on the market. It offers two times (200%) the daily percentage change of the common stock of Tesla, charging 86 bps in annual fees.

SPDR S&P 500 ETF (SPY) – Average Daily Volume: 51.9 million shares

SPDR S&P 500 ETF tracks the S&P 500 Index and holds 503 stocks in its basket, with information technology, financials, healthcare, and consumer discretionary accounting for double-digit allocation each. SPDR S&P 500 ETF charges investors 9 bps in annual fees and has AUM of $585.5 billion. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 4 ETFs Yielding 7% or More & Outperforming S&P 500).

Direxion Daily S&P 500 Bear 3x Shares (SPXS) – Average Daily Volume: 45.7 million shares

Direxion Daily S&P 500 Bear 3x Shares provides three times inverse exposure to the S&P 500 Index and charges 93 bps in annual fees. It has AUM of $466.5 million.

GraniteShares 2x Short NVDA Daily ETF (NVD) – Average Daily Volume: 39.2 million shares

GraniteShares 2x Short NVDA Daily ETF seeks two times (200%) inverse the daily percentage change of the common stock of Nvidia NVDA. It has an expense ratio of 1.50% and has gathered $69.7 million in its asset base.

Financial Select Sector SPDR Fund (XLF) – Average Daily Volume: 37.7 million shares

Financial Select Sector SPDR Fund seeks exposure to 72 companies in the financial services, insurance, banks, capital markets, mortgage real estate investment trusts, consumer finance, and thrifts and mortgage finance industries. Financial Select Sector SPDR Fund is an ultra-popular financial ETF with AUM of $41.6 billion. It charges 9 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Top ETF Stories of the First Nine Months of 2024).

iShares 20+ Year Treasury Bond ETF (TLT) – Average Daily Volume: 37.5 million shares

iShares 20+ Year Treasury Bond ETF provides exposure to long-term Treasury bonds by tracking the ICE U.S. Treasury 20+ Years Bond Index. iShares 20+ Year Treasury Bond ETF holds 46 securities in its basket and charges 15 bps in annual fees. TLT is one of the most popular and liquid ETFs in the bond space, with an AUM of $60.4 billion and a Zacks ETF Rank #4 (Sell).

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NVIDIA Corporation (NVDA) : Free Stock Analysis Report

SPDR S&P 500 ETF (SPY): ETF Research Reports

Financial Select Sector SPDR ETF (XLF): ETF Research Reports

ProShares UltraPro QQQ (TQQQ): ETF Research Reports

Direxion Daily S&P 500 Bear 3X Shares (SPXS): ETF Research Reports

ProShares UltraPro Short QQQ (SQQQ): ETF Research Reports

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