When Goldman Sachs decided to quit as a lead market maker for ETFs, you have to ask just how liquid ETFs would be in volatile, declining market. Goldman Sachs was dissatisfied with a business that yielded fractional pennies on trades while, as a large bank, it was required to maintain strict regulatory capital requirements for liquidity. This retreat from the ETF market maker business means that smaller, less regulated firms, which will not have strict capital requirements, will be picking up the Goldman Sachs ETF market making business and be responsible for the liquidity of ETF trades.
In "ETF Liquidity: A Market Maker's Perspective" and "Understanding a Market Maker's Risk Can Help You Save on Transaction Costs" in this Vanguard publication, there is a discussion of the market maker process. The articles also advise not attempting transactions at the opening or close of the
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