BlackRock, Inc. (NYSE: BLK) released research findings on financial advisors’ perceptions of and impact from the May 6th market event known as the “Flash Crash,” along with advisors’ views of current market sentiment. Commissioned by the iShares Exchange Traded Funds (ETFs) business and conducted by Market Strategies International, the survey found that the majority of advisors believe market structure issues were the primary driver of the sharpest single-day point decline in Dow Jones history, followed by an immediate rebound.
Advisors pointed to an overreliance on computer systems and high-frequency trading as the primary drivers that contributed to the extreme market volatility on May 6th. Secondary contributors cited by advisors included the use of stop-loss orders, the support of market makers and questions with exchange routing rules.
The survey also indicated that most advisors’ accounts were not impacted by the events of May 6th. In fact, the most common account impact was a stop-loss order triggered by the “Flash Crash” at a significantly reduced value, which happened to about a quarter of advisors.
Universally, according to the survey, advisors are encouraged with the initial recommendations by the SEC to make the needed changes to market structure. The single-stock circuit breaker rule proposed by the SEC is one of the primary solutions advisors endorse to address the causes of the May 6th market decline. Advisors surveyed also favor clearer inter-market routing guidelines to rectify market structure problems and feel strongly towards placing trading audits and expanding the role of the lead market maker.
“The findings of the financial advisor survey around May 6th are noteworthy because they indicate that advisors believe that market structure issues were at the root of the ‘Flash Crash’ and that the initial recommendations made by regulators to fix structural market problems are a step in the right direction,” said Rob Stone, Ph.D., Executive Vice President at Market Strategies International. “In addition, advisors’ market sentiment leans towards the view of continued or increased market volatility and, despite the ‘Flash Crash,’ advisors state that they will use ETFs most often in uncertain markets.”
As it relates to the macroeconomic environment, the majority of advisors surveyed expect current market volatility will either increase or remain at today’s level over the next six months. Furthermore, those surveyed anticipate an event similar to May 6th will likely occur again, no matter what solutions are adopted. Regardless of the cause — economic or structural like the “Flash Crash” — advisors identified ETFs as the best investment vehicles to navigate a volatile market environment followed by bonds and mutual funds.
“We commissioned the ‘Flash Crash’ Perceptions Study to learn from financial advisors, one of the largest groups of ETF users, what they think about the market event that affected ETFs as a category. We continue to work with regulators by providing insights and observations into ways to further improve the existing market structure so that an event similar to May 6th can be prevented,” said Noel Archard, Head of U.S. iShares Product at BlackRock.
Market Strategies International is a full-service market research and consulting firm with extensive experience in the financial services sector. The staff is comprised of consultants, researchers, statisticians, and project managers. Founded in 1989, Market Strategies is the 16th largest research firm in the U.S. according to “Honomichl Top 50,” published in the June 2009 issue of Marketing News. iShares commissioned Market Strategies to conduct custom research with financial advisors on the unique events of May 6th 2010. The sample was a random set of 380 Retail Financial Advisors who have used or managed ETFs within the past six months.
BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At June 30, 2010, BlackRock’s AUM was $3.15 trillion. BlackRock offers products that span the risk spectrum to meet clients’ needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including separate accounts, mutual funds, iShares® exchange traded funds, and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of March 31, 2010, the firm has approximately 8,500 employees in 24 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com.
iShares is the global product leader in exchange traded funds with over 430 funds globally across equities, fixed income and commodities, which trade on 16 exchanges worldwide. The iShares Funds are bought and sold like common stocks on securities exchanges. The iShares Funds are attractive to many individual and institutional investors and financial intermediaries because of their relative low cost, tax efficiency and trading flexibility. Investors can purchase and sell shares through any brokerage firm, financial advisor, or online broker, and hold the funds in any type of brokerage account. The iShares customer base consists of the institutional segment of pension plans and fund managers, as well as the retail segment of financial advisors and high net worth individuals.
About Market Strategies International
Market Strategies International is a leader in custom and syndicated research through unmatched industry knowledge, superior science and quality results. The company has more than 325 senior consultants, researchers, statisticians and project managers provide high-end consultation and execute sophisticated analytics with insight and accuracy. Areas of expertise include: Financial Services, Energy, Communications, Healthcare, and Technology.
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