"Market makers in even the most thinly traded ETFs understand that the midpoint of their daily 4 p.m. quote will be preserved in prospectuses and on ETF Web sites for years to come. These market makers have a stake in attracting traders to the ETFs they trade. Consequently, they monitor their real-time bid/offer NAV calculations closely as 4 p.m. approaches. Even if they have to widen or otherwise change their spread for a few seconds, they will work to get the midpoint of their bid and offer as close to the expected 4 p.m. NAV as possible. (6) Their 4 p.m. quote is the most widely scrutinized and least useful bid/offer of the day.

Publication of this premium and discount information based on 4 p.m. ETF share quotes and NAV calculations has led to overuse of MOC orders, especially for ETFs that are thinly traded. Most investors do not realize that MOC transactions in ETFs are not reflected in most ETF reported premiums or discounts in any way. Nonetheless, MOC orders often are used by individuals and defined contribution retirement plan investors who are accustomed to buying and selling no-load mutual fund shares at NAV. Publication of this premium and discount information accounts for the fact that MOC trades account for a disproportional share of ETF trading volume."