Operational shorting and ETF liquidity provision

• 成果类型: Article
• 署名作者: Evans, Richard B.; Moussawi, Rabih; Pagano, Michael S.; Sedunov, John
• 署名单位: University of Virginia; Villanova University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2026.104241
• 发表日期: 2026-06
• 页码: 104241
• 关键词: EXCHANGE-TRADED FUNDS; Short selling; Failure to deliver; authorized participants; Market making; liquidity; Retail trading; Short-sale constraints; Exchange-traded funds; FAILS-TO-DELIVER; SHORT-SELLERS; MARKET; failures

摘要

ETF market makers can satisfy excess demand in secondary markets by selling shares that are not yet created. While this ability to operationally short is not unique to ETFs, it plays a central role in ETF liquidity provision. We propose and validate a novel operational shorting measure. In addition to constituting a majority of ETF short interest, it is associated with higher retail trading activity and short-term return reversals, consistent with liquidity-supplying motives. Accounting for operational shorting is important in examining ETF returns, mispricing, and the asset-pricing implications of ETF trading on underlying securities.