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The are ETFS that are traded on the EU stock exchanges that follow the SP500.

My question is if for example at 3pm New York time (when European markets are closed) the Sp500 crashes 15% how this will be reflected to the European Etfs?

I would expect that when the markets open people will sell but until enough people sell for a few hours the ETF will not reflect the index it supposedly follows.

Is this assumption correct? Or will the Etf be adjusted before the opening?

Taking this thinking one step further. One could imagine a scenario that the stocks in the index crash or go up but the Etf does not follow. Is it possible? And if yes then why do we say they follow the index?

idipous
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1 Answers1

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Stock and ETF prices at the open of trading, as at all other times that markets are open, arise from matching of bids and offers (buy and sell orders) voluntarily submitted by traders and market makers. There is no inherent reason that an ETF would start trading at the same price where it closed the previous session, except in the very unlikely case that a substantial number of traders carelessly left orders standing overnight and did not cancel or modify them after the overnight events. The ETF may officially show the previous close as its last quote up until the open, but everyone knows this quote is stale, and the moment any actual trading happens it will be at the price reflecting current information (here, down 15%).

nanoman
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