Goldman Exit Shows Shortage of ETF Traders who Make Market Tick

Mike Venuto speaks with The Globe and Mail

A shortage of specialized traders who oversee ETF transactions on stock exchanges is threatening the boom in exchange-traded funds.

Issuers complain that it’s becoming increasingly difficult to hire lead market makers, or LMMs, who work to minimize the difference between the prices that buyers are willing to pay and sellers will accept. What’s the problem? With almost 2,000 funds in the U.S., the resources of these traders are wearing thin.

Goldman Sachs Group Inc. curbed its LMM business last year. And now even some of the high-frequency upstarts that took its place seem to be souring on the exchange-traded frenzy, data from the New York Stock Exchange show.

“Since the start of the year, no one wants to LMM,” said Mark Esposito, founder of Dallas-based Esposito Securities. “That weeds out some products from coming to market.” Esposito’s firm acts as an alternative source of startup money for new funds — a role also traditionally played by these traders.

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