ICR1018U

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1 ETF Pre-Trade User Guide _PreTradeGuide_v6.indd 1

2 ETF Pre-Trade A tool to help institutions navigate ETF trading Institutional investors can face challenges when it comes to ETF trading, where the associated costs can often be difficult to estimate. Until recently, institutions only had access to broader application trading cost tools that treat ETFs as single stocks, disregarding the liquidity of the underlying basket of securities a consideration that can materially impact ETF trading costs. And compiling underlying basket liquidity data manually can be a tedious and time-consuming undertaking. The ETF Pre-Trade tool is the first of its kind designed specifically for ETFs, offering a solution to institutional investors seeking to better understand ETF trading strategies and their associated costs. The tool delivers ETF trading cost estimate transparency, both for transacting in the ETF and its underlying basket of securities. Designed as a web-based platform, the Pre-Trade tool features BlackRock s proprietary trade cost models for both equity and fixed income ETFs, helping clients analyze trading costs across ishares and their underlying assets. Evaluating various trading strategies ETF Pre-Trade estimates trading costs based on BlackRock s propriety t-cost models. Researchers at BlackRock have developed different models to help you evaluate multiple trading strategies: ETF/Basket Blend Model: Estimates the cost of trading an optimized blend of the ETF itself and the underlying basket (relative to mid-point price) over the course of a full trading day (VWAP). ETF Model: Estimates the cost of trading the ETF itself relative to the exchange mid-point price over the course of a full trading day (VWAP). Basket Model: Estimates the cost of trading the underlying basket of securities relative to the basket s exchange mid-point price over the course of a full trading day (VWAP) _PreTradeGuide_v6.indd 2

3 Getting started This guide will help you learn the following ETF Pre-Trade Tool functionality: 1. Enter a trade Compare estimated trading costs 3. View key liquidity metrics for the ETF and its underlying basket Examine underlying portfolio composition 5. View recent trading activity in selected ETF 6. View contact information for liquidity providers and ishares 2 7. View a summary of all trades entered 8. Appendix: Order entry options for Advanced entry 3 For illustrative purposes only. This information should not be relied upon as research, investment advice or a recommendation regarding the ishares Funds or any security in particular _PreTradeGuide_v6.indd 3

4 1. Enter a trade This guide will help you learn the following ETF Pre-Trade Tool functionality: A. Get help selecting an ETF: The Explore ETFs function directs you to an ishares ETF product screener that can help you find an ETF that fits your needs B. Select your country of domicile: This will default to the country where you ve registered for the Tool. Note that you can only view ETFs listed for sale in your region. Changing your country of domicile will permit you to see funds listed for sales in that region. D. Enter your trade: Basic: Enter the ticker and exchange listing, buy/sell, amount (either notional or shares) and currency in the required fields Advanced: Enter the ticker and trade size in the single field provided. Please see appendix for a list of entry options Bulk: Copy and paste trades from your Excel or CSV file directly into the Enter a Trade field: C. Choose your method of ETF trade entry: Basic: Enter your trade details in the specified fields. You have the ability to enter multiple trades, one at a time. Advanced: Super-users of the tool may want to learn how to work faster by entering their trades in a single field. Bulk: Enter trades in bulk by copying and pasting from Excel or CSV format C D B A For illustrative purposes only. This information should not be relied upon as research, investment advice or a recommendation regarding the ishares Funds or any security in particular _PreTradeGuide_v6.indd 4

5 2. Compare estimated trading costs View estimated trading costs for various trading strategies A. Select desired trading strategy: i. ETF/Basket Blend: Trading cost estimate for an optimized blend of the ETF itself and the underlying basket (relative to mid-point price) over a full trading day (VWAP) i ii iii A B C ii. Basket: Trading cost estimate for the underlying basket of securities relative to the basket s exchange mid-point price over a full trading day (VWAP) iii. ETF: Trading cost estimate for the ETF itself relative to the exchange mid-point price over a full trading day (VWAP) B. View estimated cost breakdown for selected strategy: Implicit costs (bps): Includes market impact and bid/ask spread for equities; bid/ask spread only for fixed income Taxes (bps): Includes only stamp taxes Fees (bps): Denotes ETF creation/redemption fee C. View estimated trading cost comparison for all strategies as a function of trade size. You can adjust your time zone for trading using the dropdown above. If you select the Indicative Risk strategy, you will also be given the option to view this chart as a function of time _PreTradeGuide_v6.indd 5

6 3. View key liquidity metrics for the ETF and underlying basket Get a snapshot of how your selected ETF trades relative to its underlying basket A B I C D E F J G H A. The 20-day historical average daily volume (ADV) for the selected ETF B. The 20-day historical average bid/ask spread in basis points for the selected ETF C. The 20-day historical average bid/ask spread in dollars for the selected ETF D. The percentage of the selected ETF ADV your entered trade would represent F. The 20-day historical average bid/ask spread in basis points for the selected ETF s underlying basket G. The percentage of the selected ETF s underlying basket ADV your entered trade would represent H. The percentage of the selected ETF s underlying market open at the given time I. Link to trading activity tab E. The 20-day historical ADV for the selected ETF s underlying basket J. Link to portfolio tab _PreTradeGuide_v6.indd 6

7 4. Examine underlying portfolio composition Look under the hood at the selected ETF s underlying basket of securities A C B D A. Gauge liquidity of underlying securities. This chart shows the ETF trade in terms of its size relative to the ADV of the securities in the underlying portfolio. In this example ($100m buy of the Core S&P 500 ETF, IVV), the trade will not exceed 0.25% of the ADV of any of the underlying securities in the S&P 500. B. View sector breakdown of underlying portfolio C. For fixed income ETFs, view credit rating breakdown of underlying bonds D. View country breakdown of underlying portfolio _PreTradeGuide_v6.indd 7

8 5. View recent trading activity in selected ETF See what you can learn from the selected ETF s recent trading history A B i ii iii A. View data for largest recent trades in selected ETF B. Drag the vertical bar to select time of day to view ETF historical intraday liquidity metrics i. The ETF 20-day average daily volume for a given time throughout the trading day ii. The ETF 20-day average bid/ask spread for a given time throughout the trading day iii. The percentage of the selected ETF s underlying constituent market open at a given time _PreTradeGuide_v6.indd 8

9 6. View a summary of all trades entered Take a side-by-side look at how different ETF trades compare A. View multiple entered ETF trades. All entered ETF trades will appear in this carousel. To remove a trade from this view, hover over it and click remove B A C B. View a summary of all entered ETF trades. This table includes associated trading data and liquidity metrics for both the ETF itself and the underlying basket of securities C. View/hide ETF and basket characteristics sidebar. This sidebar includes basic information for both the ETF and underlying basket. It can be hidden to expand your selected screen view _PreTradeGuide_v6.indd 9

10 7. View contact information for liquidity providers and ishares Get the support you need to navigate the ETF Pre-Trade Tool and execute your trade A. Access educational resources, including a video tutorial, a one-page overview and a glossary of terms. C A B B. View contact information for ishares teams who can help you navigate the Pre-Trade Tool C. Connect with liquidity providers for the ETF you wish to trade. Note that the liquidity providers highlighted have been provided for informational purposes only. They are provided on the basis of BlackRock s internal analysis of their active and direct involvement in the ETF market. This does not represent all available brokers that you may contact for trade execution _PreTradeGuide_v6.indd 10

11 8. Appendix: Order entry options for Advanced entry The advanced trade entry option allows for several methods of entering ETF trade information. The table below outlines the options available for entering a trade in this open-ended field. The advanced trade entry option allows for several methods of entering ETF trade information. The table below outlines the options available for entering a trade in this open-ended field. Desired trade Entry option #1: Short form Entry option #2: Long form Entry option #3: Specify exchange listing* Entry option #4: Specify currency* BUY $1,000,00 of the ishares Core S&P 500 ETF (IVV US) IVV 1m IVV IVV US 1m IVV US 1m USD BUY 1,000,00 shares of the ishares Core S&P 500 ETF (IVV US) IVV 1m sh IVV 1m shares IVV US 1m sh IVV US 1m sh USD SELL $1,000,00 of the ishares Core S&P 500 ETF (IVV US) IVV -1m IVV IVV US -1m IVV US -1m USD SELL 1,000,00 shares of the ishares Core S&P 500 ETF (IVV US) IVV -1m sh IVV -1m shares IVV US -1m sh IVV US -1m sh USD * If not specified, the currency and listing default to your country of domicile _PreTradeGuide_v6.indd 11

12 Carefully consider the Funds investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds prospectuses or, if available, the summary prospectuses which may be obtained by visiting or Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal. No proprietary technology or asset allocation model is a guarantee against loss of principal. There can be no assurance that an investment strategy based on the ishares Pre-Trade Analytics Platform will be successful. The tool is provided on an as-is basis. BlackRock expressly disclaims all warranties, express or implied, statutory or otherwise with respect to the tool (and any results obtained from its use) including, without limitation, all warranties or merchantability, fitness for a particular purpose or use, accuracy, completeness, originality and/or non-infringement. In no event shall BlackRock have any liability for any claims, damages, obligations, liabilities or losses relating to the tool including, without limitation, any liability for any direct, indirect, special, incidental, punitive and/or consequential damages (including loss of profits or principal). There can be no assurance that an active trading market for shares of an ETF will develop or be maintained. This material is provided for educational purposes only and is not intended to constitute investment advice or an investment recommendation within the meaning of federal, state or local law. You are solely responsible for evaluating and acting upon the education and information contained in this material. BlackRock will not be liable for direct or incidental loss resulting from applying any of the information obtained from these materials or from any other source mentioned. BlackRock does not render any legal, tax or accounting advice and the education and information contained in this material should not be construed as such. Please consult with a qualified professional for these types of advice. This material is not intended to be a recommendation or advice by BlackRock. If this material were construed to be a recommendation by BlackRock, BlackRock would seek to rely on Department of Labor Regulation Section (c)(1). As such, by providing this material to you, a plan fiduciary that is independent of BlackRock, BlackRock does not undertake to provide impartial investment advice or give advice in a fiduciary capacity. Further, BlackRock receives revenue in the form of advisory fees for our mutual funds and exchange traded funds and management fees for our collective investment trusts. The ishares Funds are not sponsored, endorsed, issued, sold or promoted by S&P Dow Jones Indices LLC, nor does this company make any representation regarding the advisability of investing in the Funds. BlackRock is not affiliated with S&P Dow Jones Indices LLC BlackRock, Inc. All rights reserved. BLACKROCK and ishares are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners. Prepared by BlackRock Investments, LLC, member FINRA _PreTradeGuide_v6.indd 12