Barron’s: How to Fix the ETF Industry

Chris Dieterich reports ETFs aren’t in crisis, but are in transition. Changes are needed so investors can trade safely. Problem: Market orders are the default choice on all brokerage platforms. The fix: Investor education, but brokerages could do more. A group called the Modern Markets Initiative, a trade group for high-speed traders, suggested a mechanism it called the “retail circuit breaker,” which would automatically suspend a trade if it was about to be executed above or below some threshold, say 5%, of the value of the ETF’s assets. Others suggest new order types that could accomplish the same goal. Even more obvious: Set the default to a limit order, which forces the investor to determine the parameters in which they are willing to buy or sell.