Network Structures of the US Market with ETFs

The paper examines dependability and connectedness of US ETFs market. The ETFs market represents one of the most dynamic developing markets with new financial instruments. Since 1993, when the first ETF called Spider was introduced in dual listing in US and Canada, this market has grown to more than 3.200 ETF products at the end of 2013. About one third of these ETFs are traded in the United States in markets of NYSE that is dominating, Nasdaq or BATS. In the US market there are traded ETFs in the asset value more than 1.150 billion. Despite its fast growth and significant size, there is very little research on the structure of the ETFs market. The usage of network structure helps to fully identify relation between particular ETFs. In the analysis the most important ETFs (measured with their asset value) will be analysed on the individual and the provider basis. The provider basis is chosen because the US ETFs market is concentrated and three main providers (iShares, State Street Global Advisory and Vanguard) represent more than 80 percentage of the ETFs market. The application of the graph theory contributes to particularized understanding relations between these ETFs. Network modelling of ETFs market offers a powerful tool, because it provides much view on dependences of ETFs's behaviour.