# How the IQ Liquidity Score is computed

> How ETFIQ scores how easy each ETF is to trade: six parts, fixed anchors, weights, flags and sources, version v0.1. No fund is recommended.

Data as of Oct 22, 2026. Rebuilt every trading night.

As of Oct 22, 2026.

## How the IQ Liquidity Score is computed

181 of 4,805 ETFs have an IQ Liquidity Score, as of Oct 22, 2026.

### What the score measures

The IQ Liquidity Score asks one question. Can you buy or sell this fund at a fair price, at your size, today and on a bad day?

It runs from 0 to 100, and 100 is best. The scale is fixed, so a score moves only when the fund's own figures move.

Fund size and the ETF's own trading volume are left out. A small fund with liquid holdings can score high.

Each fund also shows its percentile among the scored funds in its category. Bond, international and crypto funds are naturally wider than US large-cap funds.

It measures trading conditions, not the fund. It is not a rating or a recommendation.

### The six parts and their weights

Each part is scored 0 to 100. The score is their weighted average over the parts measured for the fund, with the weights rescaled to those parts.

| Part | Question | Measure | Weight |
| --- | --- | --- | --- |
| Cost to trade | What does a normal trade cost? | The issuer's 30-day median bid/ask spread, in % of the midpoint | 30% |
| Capacity | How much can trade without moving the price? | What the holdings making up 95% of the weight can absorb in a day | 25% |
| Price fidelity | Does the price match the value? | The median and 95th percentile of the daily closing premium or discount, 12 months | 15% |
| Primary market | Can dealers create and redeem shares freely? | Active authorized participants in the latest Form N-CEN | 15% |
| Bad-day behaviour | Does it hold up in a sell-off? | The premium on the 10 worst S&P 500 days of the year, against other days | 10% |
| Depth | How much is offered at the posted price? | Dollars shown at the best bid and offer. Not measured until Phase 2 | 5% |

### The anchors

Each figure scores 100 at its good anchor and 0 at its bad one, on a log scale between them. A spread of 0.02% against 0.04% matters as much as 1% against 2%.

| Figure | Scores 100 at | Scores 0 at |
| --- | --- | --- |
| Median spread | 0.02% | 2% |
| Daily capacity | $1bn | $1m |
| Median premium or discount | 0.05% | 2% |
| 95th percentile premium or discount | 0.25% | 5% |
| Bad-day premium, times the usual | 1 times | 4 times |
| Depth at the quote | $1m | $5,000 |

### Primary market points

Authorized participants are the dealers who create and redeem a fund's shares. An active one created or redeemed some in the fund's latest N-CEN year.

With two or more active, less 15 points if one did more than 80% of the dollars created and redeemed.

Less 20 points if a fund older than a year had no creation or redemption in the 12 months to its last month held. The floor is 0.

| Active dealers | Points |
| --- | --- |
| 0 | 0 |
| 1 | 25 |
| 2 | 45 |
| 3 to 4 | 65 |
| 5 to 9 | 85 |
| 10 or more | 100 |

### When a fund is not scored

Cost to trade and price fidelity are both required. Without both, the fund shows "Not scored".

Price fidelity needs at least 20 days of closing premium.

A fund under 60 trading days old shows "Too new to score", with its parts so far.

A fund under a closing notice keeps its figures but has no tier, and carries a "Closing" flag.

A part that cannot be measured says "not measured". It is never guessed or filled with a category average.

The page always says how many of the six parts were measured.

### The tiers

| Score | Tier | For a retail order |
| --- | --- | --- |
| 85 to 100 | Trades like a giant | Cost is a rounding error at normal sizes. |
| 70 to 84 | Liquid | Cheap to trade with a limit order at most times. |
| 55 to 69 | Liquid with care | Use limits, avoid the open, watch the premium. |
| 35 to 54 | Thin | Costs are real. Patience and limits matter. |
| 0 to 34 | Hard to trade | Expect a wide spread or a price far from value. |

### The flags

Small but liquid: net assets under $100m, or median volume under 20,000 shares, and a score of 70 or more.

Big but costly: net assets of $1bn or more, and a score under 55.

Price can drift from value: a median premium or discount above 0.5%, or a 95th percentile above 2%.

One dealer: one active authorized participant, or one doing more than 80% of creations and redemptions.

Closing: the fund's issuer has filed a notice naming its last trading day.

### Cost for your order

At $1,000 and $10,000 the one-way cost is half the spread.

At $100,000 and $1m it adds a market impact term that grows with the square root of the order against capacity. Those two are labelled estimates until the term is calibrated on trade data.

Full cost to own, at $10,000: the fee for each year held, plus one round trip at the spread, plus the median premium or discount.

A fair limit: the midpoint plus half the typical spread, rounded up to a whole cent.

### The formulas

Lower is better (spread, premiums, bad-day multiple): s = 100 x clamp((ln bad - ln x) / (ln bad - ln good), 0, 1).

Higher is better (capacity, depth): s = 100 x clamp((ln x - ln bad) / (ln good - ln bad), 0, 1).

Capacity: C95 = the minimum, over the holdings making up 95% of the weight, of 10% of each holding's 20-day median dollar volume divided by its weight. Cash is left out.

Price fidelity = the average of the median premium score and the 95th percentile score.

Bad-day multiple = the median premium on the bad days over the median on other days, each floored at 0.05% first.

Cost at size Q = spread / 2 + k x daily volatility x the square root of (Q / C95), with k = 1 until calibrated.

Score = the sum of each part's score times its weight, over the sum of the weights measured, rounded to a whole number.

### Sources

Spreads: each fund's issuer, as Rule 6c-11 requires it to publish them.

Premiums: the closing price over the NAV the fund's issuer publishes, less one, computed by ETFIQ.

Capacity: the fund's holdings, and their daily volume from Tiingo.

Authorized participants: the SEC's Form N-CEN data sets.

Creations and redemptions: the fund's daily shares outstanding and its N-PORT filings.

Fees: the fund's prospectus. Daily volatility: Tiingo daily prices.

### Version

Method v0.1, frozen on 2026-10-20. Any change to an anchor or weight is a new version, published here.

v0.1, 2026-10-20: Bad-day behaviour anchors from 1.5 to 10 times the usual to 1 to 4 times, because Phase 1 measures the premium, not the spread.

Every file is open: trading-cost.json , trading-capacity.json , trading-score.json .

### Where to next

The score measures trading conditions, not the fund. ETFIQ makes no recommendations.

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Source: ETFIQ, independent ETF data. Recomputed nightly from public filings and prices.
Cite: ETFIQ, How the IQ Liquidity Score is computed, data as of Oct 22, 2026. https://etfiq.com/methodology/liquidity
Licence: https://etfiq.com/license/ Figures ETFIQ computes are free to use with attribution: ETFIQ (etfiq.com). Issuer data stays under its owner's terms.
HTML: https://etfiq.com/methodology/liquidity