NYSE Arca Exchange

What Is the NYSE Arca Exchange?

7 min read

What is the NYSE Arca Exchange? One’s one of the exchanges on the stock market. Many stock exchanges exist in the US stock market. The most popular ones are the NYSE and NASDAQ. Others exist specifically for commodities or foreign exchanges. Today, we will explore one that deals uniquely with exchange-traded products (ETPs).

The NYSE Arca exchange includes Exchange-Tarded Funds (ETFs), Exchange-Traded Notes (ETNs), and Exchange-Traded Vehicles (ETVs). It also deals with options trading related to each security. The NYSE Arca exchange has the world’s most significant ETF trading volume. So, let’s take a deeper look into this market.

NYSE Arca Exchange ETFs

What is the NYSE Arca Exchange? How did NYSE Arca come into existence? It was formed when the NYSE acquired a leading trading network called Archipelago in 2006.

Since 1996, Archipelago has facilitated electronic trading for major US exchanges. Since the merger, both the NYSE and NYSE Arca have been owned by the Intercontinental Exchange (ICE).

Today, 80% of all exchange-traded products are traded on the NYSE Arca based on Assets Under Management (AUM).

NYSE Arca Functioning

What is the NYSE Arca Exchange? The NYSE Arca exchange works similarly to any other stock exchange, except it deals mostly with ETFs. Some managing firms list their funds on the NYSE or NASDAQ, and others decide to go with NYSE Arca.

In December 2021, the latter led all US exchanges with a 16.3% market share. This translated to almost 2900 ETFs and over $7T in AUM. So why do fund managers pick this exchange over others?

It offers the best bid-ask spread and the most up-to-date quotes. Finally, it is also possible to transact in the dark. This means a trade can be conducted anonymously without affecting the market, which is a plus for large trade orders. 

They promote liquidity, rapid trade execution, and a user-friendly platform. Fund managers sometimes list their products on more than one platform. For example, an ETF can have a home on the NASDAQ and NYSE Arca trading platforms. 

NYSE Arca Exchange Features

What is the NYSE Arca Exchange? As we stated earlier, the NYSE Arca exchange also allows options trading. It uses a combination of electronic trading and old-school open outcry. The volume on this exchange is about 10% of the total volume options across all exchanges.

The last feature on the NYSE Arca exchange is the ProShares Bitcoin Strategy ETF (NYSEARCA: BITO). This ETF was the first approved because it didn’t directly invest in Bitcoin. Instead, it tracks Bitcoin Futures.

VanEck, Valkyrie, and, most recently, Teucrium were also approved for listing an ETF on the exchange. Since its approval, many funds have applied to be listed on the exchange, but most were rejected. 

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Top 5 ETFs on NYSE Arca

Now that we know more about the NYSE Arca exchange, it’s time to discover its five most popular ETFs by annual cash flow.

1. Invesco Optimum Yld Dvsfd Cmd Str No K-1 (PDBC)

Invesco’s actively managed fund invests in commodity-linked futures and other financial instruments linked to commodity futures. Its top futures holdings are sulfur heating oil, zinc, gasoline, crude, natural gas, and gold. The fund also distributes a yearly dividend depending on its performance.

2. JPMorgan Equity Premium Income (JEPI) 

JPMorgan’s fund is focused on distributing a variable monthly dividend and limiting volatility in its price. This year’s performance is well below an average year (-8%), but dividends are above 11% yearly. In addition, there is a high turnover ratio among its 116 stocks, at almost 200%. 

3. First Trust Global Tactical Commodity Strategy Fund (FTGC)

 First Global’s portfolio also focuses on commodity-linked futures. Currently, they all expire in Nov ’22. However, its distribution is different from Invesco’s. It’s heavily invested in soybeans, gold, and aluminum. Gasoline is much further down the list. It hasn’t performed as well as Invesco’s fund this year but remains at an 18% YTD return. There is also a variable yearly dividend. 

4. SPDR Blackstone Senior Loan (SRLN) 

Blackstone’s fund invests in senior loans. The heaviest sectors are tech and telecommunications. It aims to preserve capital and distribute regular dividends. Its current dividend yield is 4.85%. However, investors have lost some of their capital since the fund’s inception.

5. JPMorgan Ultra-Short Municipal Income (JMST)

JPMorgan’s municipal income fund is the last on the list. It distributes monthly dividends exempt from federal income taxes. Low-risk and low-reward. Capital is almost guaranteed to remain constant, and dividends are only 1.43% yearly.

BATS Exchange (Better Alternative Trading System)

What is the NYSE Arca Exchange? Bonus time! BATS is a lesser-known exchange that was founded in 2005. Today, it is part of the CBOE exchange. In 2017, it was acquired for $3.4B. So, what made BATS a valuable acquisition?

BATS quickly made its mark by offering companies free listing on its platform when a certain number of shares were traded daily. It aimed to compete with the big boys. In 2008, BATS entered the European market to expand its presence in the stock market.

The exchange acquired Chi-X Europe, the largest European multilateral trading facility (MTF), to keep momentum. In 2012, BATS accounted for 10-12% of all daily equity trading in the US. 2016, the exchange was the second-largest US equity exchange by market share.

It was also the largest ETF exchange. As we saw earlier, that title now belongs to NYSE Arca. A series of mergers and acquisitions followed to allow its institutional investors spot trading, swap execution, and forward trading services

Failed IPO

To expand its business, BATS attempted to go public in 2012. However, a series of glitches that affected over 400,000 trades prevented that attempt. As a result, stocks were sold lower than the national best bid and offer price. As a result, it violated a US national regimentation. Later that decade, it was acquired by the CBOE. 

BATS’s daily equity trading is down to about 6% of all US markets today. It lists global, North American, emerging markets, developed markets, and other international equities. Many of them have multi-billion dollars in AUM.

Final Thoughts: NYSE Arca Exchange

To conclude, the US stock exchanges don’t only consist of the NYSE and NASDAQ. Other exchanges trade ETFs and other global equities, such as the NYSE Arca exchange and BATS, now part of the CBOE. It doesn’t take much more expertise to trade on these exchanges. Every day, traders have access to these platforms through their brokers. ETF seekers will surely find what they’re looking for.

If you want to learn more about profiting from the stock market, head to our free library of educational courses. We have something for everyone, including trading options for those with small accounts. 

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