Exchange-traded funds took the heat for the latest market “flash crash,” but BlackRock CEO Larry Fink said Tuesday they shouldn’t be blamed.
The Aug. 24 market tumult saw the Dow Jones industrial average plunge at the open, losing more than 1,000 points at one juncture. During the plunge, many ETFs, which trade like stocks, saw their prices tumble well below the net asset value of their components.
It wasn’t the first time ETFs were at the center of a market storm. The $2 trillion industry also was faulted by some for the March 6, 2010, flash crash.
Fink, whose firm manages an industry-leading $822 billion ETF portfolio as part of its total $4.5 trillion under management, believes the problems were more related to market structure than the products themselves.
“We have taken this as a serious issue,” Fink said during the DealBook conference in New York. “Most people … have decided this is a market-structure problem.”
In all, 1,278 market “circuit breakers” were tripped, causing a halt in trading. Fink said that once trading resumed, the ETFs all returned to normal pricing.
“We look at this as a good wake-up call. We can’t accept that kind of market action, but I would not be as hysterical,” Fink said. “I would address how you fix this.”