It has been the best of times and worst of times for the Financials Select Sector SPDR ETF (NYSE Arca: XLF) and its sector siblings.

A quick look at the divergent paths of XLF's trading levels and its overall assets speak to the both the positive and negative aspects of 2008 for exchange-traded funds focused on the Financials sector.

XLF moved over to the New York Stock Exchange seven days ago, and since then, it has been the most active daily stock on the NYSE and NYSE Arca twice. However, this week has proved to be no exception to the wild ride XLF has been on since the market tumult began.

In the past two days, all ETFs long Financial stocks fell sharply after Citigroup shares dropped more than 20% on Wednesday, and by yesterday gave up almost 50% of their value.

XLF lost more than 10% on Wednesday and reached a 52-week low two days in a row, with shares trading at less than one-third the value of the ETF's 52-week high of $32.14 achieved last December.

At the other end of the financials spectrum, ProShares UltraShort Financials (NYSE Arca: SKF) rose more than 20% on Wednesday when Citi began its slide.

"It's rough swimming up stream; this year has showed us what it's like to be a salmon," said Dan Dolan, director of Select Sector SPDRs.

Assets in the Select Sector SPDRs had plummeted by nearly $3 billion through Wednesday. At the same time, overall trading has soared. Dolan noted that through Wednesday, share counts for the SPDRs were at an all-time high, up almost 80% year-to-date.

The net new number of shares outstanding in the Select Sector SPDRs is 1.2 billion shares, and in the third quarter alone, the Select Sector SPDRs added a net 322 million shares. Trading volumes rose from 90 million a day in 2007 to 255 million daily this year.

Five years ago, the average daily volume for the Select Sectors was 5 million.

Market depreciation is the obvious driver of the asset free fall. What's the driver of the massive spike in trading volume? Dolan sees ETFs being increasingly used by the trading community to prosper on the market volatility in a manner less risky than bets on individual stocks.

"You can't play individual stocks the way you used to, and ETFs work especially well with sector volatility that is hard to handle in one name," Dolan said.