Switch It Up and Pair Your ETF Trades

Learn how using a “switch” trading strategy can create efficiencies to improve overall execution cost and quality.

When investors are making an allocation change from one exchange traded fund (ETF) exposure to another, using a “switch” trading strategy can create efficiencies to improve overall execution cost and quality.

A switch trade is when an investor presents both the buy and sell order of two separate block trades to the same market makers. Especially in tax loss harvest trades or a change in asset class manager, these ETF exposures have overlapping or at the very least, correlated holdings. If market makers are able to buy the ETF an investor is selling, and simultaneously sell the ETF the investor is buying, they are creating a natural hedge to offsetting long/short pair trade. This trading strategy can help reduce the market makers cost and risk of providing the liquidity, should they have only priced the trade as two separate transactions. When risk and cost can be reduced for market makers, pricing can be more efficient for the end investor which would only add to their bottom-line return.

In this hypothetical example, an investor was able to implement a tax loss harvest trade from ETF A into ETF B as a perfectly executed “Switch Trade”. If ETF A was sold at midpoint of the bid/offer spread and if the investor was able to buy ETF B on the BID, the investor may potentially generate a spread savings of $700! This is significant because, if you assume in an individual trade, ETF A would likely sell on the bid and ETF B bought on the offer. That’s real money and it goes directly to the investors bottom line return. 

By working with issuer capital markets experts and investor platform trading desks who have the ability to price switch trades with the market making community, even better ETF trading outcomes are within reach.

Learn more about investing in Matthews Active ETFs at

Michael Barrer
VP, Head of ETF Capital Markets
Matthews Asia




The views and information discussed in this report are as of the date of publication, are subject to change and may not reflect current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. Investment involves risk. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies. Past performance is no guarantee of future results. The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Matthews Asia and its affiliates do not accept any liability for losses either direct or consequential caused by the use of this information.