Regular readers may have noticed a new data feature on the site. Here’s how to interpret the numbers.

(The new feature is available today ETF Data Daily: Big Move Into Short S&P 500 ETF ).

ETFs are unique for many reasons, perhaps the most interesting of which is the daily “creation and redemption” process. That is the process by which institutional investors either increase or decrease the total number of shares outstanding in an ETF each day to meet market demand.

Every day, ETF companies are required by law to publish the total shares outstanding for every ETF they manage. Changes in shares outstanding create a picture of asset flows from day to day.

This is an incredible piece of information, because it is the best—and really, the only—way to see where investors are placing their bets in the market.

Historically, investors and the media alike have had to guess where investors were placing bets. If Microsoft’s stock went up, we might say that investors were pouring into Technology. But of course, this has never been true. With individual stocks, there is a seller for every buyer. So no matter how much MSFT’s stock goes up, there have been an equal number of buyers and sellers.

With ETFs, that’s not true. Because of the creation/redemption process, we can definitively say that investors were putting either more or less money to work in any area of the market where ETFs exist.

The best way to process that information has been the subject of much debate here in our research department. Matt’s been an advocate of looking at aggregate numbers. On a day like Friday, that puts the big funds with the big volumes consistently at the top of the list.

It’s important to put the numbers in context, however. The SSgA SPDR S&P 500 (NYSEArca: SPY), for instance, regularly features creations and redemptions of billions of dollars on any given day: the $4.6 billion that flowed out of the fund on Friday was unusual, but not overly so. And put in the context of the $24 billion of SPY that changed hands in the course of the day, and the $67 billion base of assets in the fund, $4.6 billion is believable. Having watched the daily flows for a year now, I can tell you that reading any kind of signal value from one day’s redemptions in the big ETF giants is foolhardy.

Instead, I find it much more interesting to look at the surprises in lesser known and less high-volume funds.

Looking again at Friday, I find it much more interesting that the ProShares Short Real Estate fund (NYSEArca: REK) more than doubled in a single day (to $12.7 million in assets). Or that short funds in general all experienced big creation days. That’s an indicator of sentiment I can believe in.

I also think it’s interesting to look at the big volume surprises, like the First Trust ISE Global Platinum ETF (NYSEArca: PLTM) experiencing almost nine times its normal volume. And what’s up with the iShares MSCI All Peru ETF (NYSEArca: EPU) gaining 7% in new assets? Is there a story there?

Is there a magic trading signal to be reliably extracted from this daily data dump on ETF activity? I think that remains to be seen. But I do think that the flows add significant information to help us understand the day’s market activity.

The new feature will be published every day on IndexUniverse.com before the market opens, so come to the site to check it out.