In July, I wrote about European ETF secondary-market liquidity, concluding that, in general, investors' concerns about wide bid-offer spreads were not backed up by the data, but that there was a wide variation between fund types (see article here).

How has the continuing deterioration in equity markets changed this picture, if at all?

XETRA, the Deutsche Boerse section that has the largest number of ETF listings in Europe, has recently published its quarterly "ETF Facts and Figures", which includes a calculation of the "XETRA liquidity measure" (or "XLM") for all 356 ETFs listed on the XETRA market. To recap, the XLM measures the cost to an investor of a "round-trip" trade; in other words, a simultaneous purchase and sale of an ETF, based on a notional trading size of €25,000. It thus measures the bid-offer spread (although it does not factor in brokerage commissions).

Although the report does not include the month of October, which saw the most dramatic market moves and the appearance of some short-lived, but significant discounts to index values in certain ETFs, it's still an interesting exercise to trace the evolution of ETF liquidity over the year-to-date.

First, here's a look at the ten cheapest and ten most expensive European ETFs that were bought and sold in the secondary market at XETRA during Q3.

Ten Cheapest European ETFs To Trade

Cheapest of all to trade are the two largest money market ETFs in Europe, offered by Lyxor and DB x-trackers. The tightness of the bid-offer spreads goes a long way to explaining the popularity of these cash management vehicles, which have raised several billion euros in assets since their introduction.

The other funds in the top ten are short-maturity government bond funds and two DAX trackers. With a few Euro STOXX 50 equity ETFs just outside the ten-cheapest list, but also with single-figure dealing spreads in basis points, this reinforces the image of the DAX and Euro STOXX 50 as the most liquid European equity ETFs—let's say the European equivalent of the S&P 500 SPDR (NYSEArca: SPY) and the NASDAQ-100 QQQs (NasdaqGM: QQQQ).

What about the other end of the scale?

Ten Most Expensive European ETFs To Trade

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