XEQT Liquidity Explained: Bid-Ask Spreads, Volume, and Why You Can Always Buy and Sell

A friend of mine almost didn’t buy XEQT. He had been investing in U.S. tech stocks for years — Apple, Tesla, Nvidia — the kind of names that trade tens of millions of shares every single day. When I suggested he simplify his portfolio with XEQT, he pulled up the daily volume on his brokerage app, saw a few hundred thousand shares, and frowned.

“That’s it? What if I need to sell and nobody’s buying?”

I get it. I had the exact same worry when I first started investing in XEQT. I remember checking the volume one quiet Tuesday afternoon, seeing something like 200,000 shares traded, and doing the mental math: Is that enough? What if the market crashes and everyone’s trying to sell at once? Will I be stuck holding the bag?

It turns out that worry was completely unfounded — and the reason why is one of the most interesting things about how ETFs work. XEQT’s real liquidity is far, far greater than its daily trading volume suggests. In fact, worrying about XEQT’s liquidity is like worrying about whether the ocean has enough water for you to take a swim.

Let me explain why.

1. Why Most People Misunderstand ETF Liquidity

Here’s the fundamental misunderstanding that trips up most new investors: ETF liquidity does not work the same way as stock liquidity.

With an individual stock like Apple or Royal Bank, the daily trading volume tells you pretty much everything you need to know. If 50 million shares of Apple trade every day, that means there are lots of buyers and sellers, tight spreads, and you can get in and out quickly. If a tiny penny stock trades 5,000 shares a day, you might have trouble selling without moving the price against you.

This is why people look at XEQT’s volume — typically a few hundred thousand shares per day — and compare it to something like Apple’s volume, and think XEQT is “less liquid.” That comparison makes sense for stocks. But ETFs are not stocks.

With ETFs, the daily volume is just the tip of the iceberg. The real liquidity sits underneath, in the form of:

• The liquidity of the underlying holdings — the actual stocks and ETFs inside XEQT
• The creation and redemption mechanism — which can generate new ETF shares on demand
• Market makers and authorized participants — who are financially incentivized to keep things running smoothly

Think of it this way: a stock has a fixed number of shares outstanding. If demand surges, the only shares available are the ones someone else is willing to sell. But an ETF? New shares can be created out of thin air (well, out of the underlying securities). That changes the liquidity game completely.

2. XEQT’s Underlying Holdings Are Among the Most Liquid in the World

XEQT is a “fund of funds” — it holds four underlying iShares ETFs:

• XIC — iShares Core S&P/TSX Capped Composite Index ETF (Canadian stocks)
• XUU — iShares Core S&P U.S. Total Market Index ETF (U.S. stocks)
• XEF — iShares Core MSCI EAFE IMI Index ETF (international developed stocks)
• XEC — iShares Core MSCI Emerging Markets IMI Index ETF (emerging market stocks)

Each of these underlying ETFs is itself massively liquid. XIC alone holds companies like Royal Bank, Toronto-Dominion Bank, Shopify, and Canadian Natural Resources — blue chips that trade huge volumes on the TSX every day. XUU holds the entire U.S. stock market: Apple, Microsoft, Amazon, Google, the works. We’re talking about the most heavily traded securities on the planet.

So when you think about XEQT’s liquidity, don’t just look at how many XEQT shares traded today. Ask yourself: how liquid are the thousands of stocks that XEQT ultimately owns? The answer is: extremely liquid. We’re talking about trillions of dollars in combined daily trading volume across global equity markets.

This is the liquidity that actually backs your XEQT shares. And it’s essentially bottomless for any retail investor.

3. How Market Makers and the Creation/Redemption Process Work

This is where things get really interesting, and it’s the key to understanding why you can always buy and sell XEQT.

What Are Authorized Participants?

Authorized Participants (APs) are large financial institutions — in Canada, think RBC Capital Markets, TD Securities, National Bank Financial, and similar players — that have a special agreement with BlackRock (the company behind iShares and XEQT).

APs have a superpower that regular investors don’t: they can create brand-new XEQT shares or destroy (redeem) existing ones.

How Creation Works

When there’s strong demand for XEQT and the price starts creeping above the value of its underlying holdings (the Net Asset Value, or NAV), here’s what happens:

1. An AP notices that XEQT is trading at a slight premium to its NAV
2. The AP buys the underlying securities (or equivalent baskets) on the open market
3. The AP delivers those securities to BlackRock
4. BlackRock issues brand-new XEQT shares to the AP (in large blocks, typically 25,000-50,000 shares at a time)
5. The AP sells those fresh XEQT shares on the TSX

This increases the supply of XEQT shares, which pushes the price back down toward NAV. The AP pockets the small difference as profit.

How Redemption Works

When there’s selling pressure and XEQT’s price dips below NAV, the process runs in reverse:

1. An AP buys up “cheap” XEQT shares on the TSX
2. The AP delivers those shares to BlackRock
3. BlackRock gives the AP back the underlying securities
4. The AP sells those underlying securities on the open market for a small profit

This reduces the supply of XEQT shares, which pushes the price back up toward NAV.

Why This Matters for You

The creation/redemption process means three critical things:

• XEQT’s supply is essentially unlimited. Unlike a stock where there’s a fixed number of shares, new XEQT shares can always be created to meet demand.
• You can always find a buyer or seller. Even if no other retail investor wants to trade with you, market makers and APs are always there.
• The price stays close to fair value. The arbitrage mechanism keeps XEQT’s market price within a few cents of its NAV at virtually all times.

This is why my friend’s worry was misplaced. He was thinking of XEQT like a stock with limited shares. But the ETF structure means there’s always liquidity available — it’s just sourced differently than what he was used to.

4. XEQT’s Actual Liquidity Metrics

Let’s look at some concrete numbers to put this in perspective.

Average Daily Trading Volume

XEQT typically trades several hundred thousand shares per day, and often over a million on active days. In dollar terms, that’s tens of millions of dollars changing hands every single day on the TSX alone. For a Canadian-listed all-in-one ETF, that is substantial.

Assets Under Management (AUM)

XEQT has grown into one of the largest ETFs in Canada, with over $7 billion in assets under management. That massive AUM is a strong signal of investor confidence and ensures deep, consistent liquidity. Funds with large AUM attract more market makers and more attention from authorized participants — creating a virtuous cycle of liquidity.

Typical Bid-Ask Spread

XEQT’s bid-ask spread is typically just $0.01 to $0.02 — that’s one to two cents. On a $30 share, we’re talking about a spread of roughly 0.03% to 0.07%. That is remarkably tight, and it means you’re paying almost nothing in hidden trading costs.

What This Means for a Typical Investor

Let’s say you’re investing $5,000 into XEQT. With a 1-cent spread, you’re effectively paying about $1.50 to $3.00 in spread costs on that entire purchase. Compare that to a $10 commission you might pay at a traditional brokerage (though on Wealthsimple, the commission is $0), and you can see that XEQT’s trading costs are trivially small.

Even if you’re investing $50,000 or $100,000 at a time, XEQT’s liquidity can handle it without breaking a sweat. We’ll talk more about large orders later.

5. Bid-Ask Spreads Explained Simply

If you’re newer to investing, the “bid-ask spread” might sound like financial jargon. But it’s actually a simple concept, and understanding it will make you a better investor.

What Are the Bid and Ask Prices?

At any given moment, there are two prices for XEQT on the stock exchange:

• The bid price — the highest price someone is currently willing to pay for XEQT. This is what you’ll receive if you sell right now.
• The ask price — the lowest price someone is currently willing to accept for XEQT. This is what you’ll pay if you buy right now.

The difference between these two prices is the spread. If XEQT has a bid of $30.50 and an ask of $30.51, the spread is $0.01 (one cent).

Why Does the Spread Matter?

The bid-ask spread is essentially a hidden transaction cost. Every time you buy at the ask and later sell at the bid, you lose the spread. The tighter the spread, the less this costs you.

Here’s a quick example:

• You buy 500 shares of XEQT at the ask price of $30.51 = $15,255.00
• The “fair value” is the midpoint: $30.505 per share = $15,252.50
• You’ve “paid” $2.50 in spread costs

That’s tiny. But with a less liquid investment, those costs can add up fast.

What Does a “Tight” Spread Mean?

When people say an ETF has a “tight” spread, they mean the gap between bid and ask is very small. A tight spread is a sign of good liquidity — it means there are lots of buyers and sellers competing, which pushes the bid and ask prices closer together.

XEQT’s spread is among the tightest of any ETF on the TSX. Here’s how it compares:

As you can see, the difference is dramatic. A $10,000 investment in XEQT costs you pocket change in spread. The same amount in a penny stock could cost you more than $200 just to get in the door — and that’s before the stock even moves.

A Real-World Analogy

Think of the bid-ask spread like the markup at a currency exchange kiosk at the airport. When you exchange Canadian dollars for U.S. dollars, the kiosk buys your CAD at one rate and sells you USD at a slightly worse rate. The gap between those rates is how the kiosk makes money. A big-name bank in a competitive location has a small gap. A random kiosk in a remote airport has a huge gap. XEQT is like trading at the big bank — the gap is tiny.

6. When Liquidity Actually Matters: Practical Trading Tips

Even though XEQT is very liquid, there are a few practical tips that can help you trade more efficiently and shave off a little extra cost.

Limit Orders vs. Market Orders

• Market order: You buy or sell immediately at the best available price. Simple, fast, but you have no control over the exact price. With XEQT, market orders are usually fine since the spread is so tight.
• Limit order: You set the maximum price you’re willing to pay (or minimum you’ll accept when selling). The trade only executes at your price or better.

My recommendation: For most regular XEQT purchases, market orders are totally fine. The spread is so small that you’re typically paying a fraction of a cent more than you would with a limit order. But for larger purchases (say, $25,000+), I’d suggest using a limit order set near the current ask price — just as a little extra insurance against paying more than you intended.

Best Time of Day to Trade

This is a tip that applies to all ETFs, not just XEQT: avoid trading in the first and last 15 minutes of the trading day.

Here’s why:

• At market open (9:30 AM ET), prices are volatile as the market digests overnight news. Bid-ask spreads tend to be wider.
• At market close (3:45-4:00 PM ET), market makers start reducing their exposure, and spreads can widen slightly.
• Mid-day (10:00 AM - 3:30 PM ET) is generally the sweet spot. Markets are fully open, including U.S. markets (which matters because most of XEQT’s underlying value comes from U.S. and international stocks), spreads are tightest, and prices are most stable.

For the average investor buying a few hundred or even a few thousand dollars of XEQT, this barely matters. But if you’re investing $50,000+ in a single trade, placing your order mid-morning is a small edge worth taking.

Commission-Free Platforms Make This Even Easier

One of the reasons I recommend Wealthsimple for buying XEQT is that the commission is $0 for Canadian-listed ETFs. That means the only trading cost you face is the bid-ask spread — and as we’ve established, that’s typically just a penny or two per share. Your total round-trip cost of buying and eventually selling $10,000 worth of XEQT? Maybe $6-12. That’s nothing.

Compare this to a traditional brokerage where you might pay $5-10 per trade. On a small $500 monthly contribution, that $10 commission is a 2% drag on your returns — far more meaningful than any spread cost.

7. Can You Sell $100K+ of XEQT Without Issues?

Short answer: yes, absolutely.

I see this question come up on Reddit and Canadian personal finance forums all the time. Someone has accumulated a large XEQT position — maybe $100,000, $250,000, or even $500,000 — and they’re nervous about whether they can liquidate it without problems.

Here’s why it’s a non-issue:

You don’t need to sell it all at once. Even if you’re cashing out a $500,000 position, you can break it into multiple trades over a day or two. But honestly, for most amounts that retail investors deal with, you can probably sell in a single order.

Market makers will absorb your order. XEQT regularly trades millions of dollars in value per day. A $100,000 sell order is routine — it’s a rounding error compared to the daily volume.

The creation/redemption mechanism is your backstop. Even if there were unusual selling pressure, authorized participants can step in, buy up the “cheap” XEQT shares, redeem them with BlackRock, and sell the underlying securities. This process provides a massive liquidity cushion that doesn’t show up in daily volume numbers.

XEQT’s underlying holdings are ultra-liquid. Remember, we’re talking about thousands of stocks across global developed and emerging markets. The underlying liquidity is in the trillions. Your six-figure order is like pouring a glass of water back into the ocean.

Practical Tips for Larger Trades

If you’re selling a very large amount (say, $250,000+), here are a few tips:

• Use limit orders to control your execution price
• Trade mid-day when spreads are tightest
• Consider splitting into 2-3 smaller orders if you’re concerned
• Don’t panic-sell during a crash — spreads widen during market stress (though they’re still quite manageable for XEQT)

But for the vast majority of readers, you’ll never need to worry about this. Just place your order and it’ll fill almost instantly.

8. XEQT vs. Other Canadian ETFs: Liquidity Comparison

XEQT is one of the most liquid ETFs on the Toronto Stock Exchange, but how does it stack up against its closest competitors?

A few takeaways:

• XEQT and VEQT are neck and neck in terms of liquidity. Both are enormously popular with Canadian DIY investors, and both trade with penny-wide spreads. You can’t go wrong with either from a liquidity standpoint.
• VFV is slightly more liquid in raw volume, but it’s a different product (S&P 500 only, not globally diversified). Its popularity with Canadian investors who want pure U.S. equity exposure gives it an edge in daily trading volume.
• XGRO is slightly less liquid than XEQT, but still perfectly fine for retail investors. The spread is essentially the same.

The bottom line: among major Canadian all-in-one ETFs, liquidity is simply not a differentiating factor. They’re all highly liquid, and you’ll have no trouble trading any of them.

9. The “Liquidity Illusion” With Individual Stocks

Here’s an irony that most investors don’t appreciate: sometimes what looks liquid isn’t, and what looks illiquid actually is.

My friend who was worried about XEQT’s volume? He was happily holding individual Canadian small-cap stocks that traded maybe 50,000 shares a day. On paper, those stocks had “decent” volume. But there’s a catch.

With an individual stock, the daily volume really is all the liquidity you get. If you try to sell a large block of a small-cap stock, you can easily move the price against yourself. There’s no creation/redemption mechanism. There’s no underlying basket of liquid assets. There are fewer market makers paying attention. The bid-ask spreads are wider, and they blow out during volatility.

I’ve experienced this firsthand. Years ago, I held a position in a mid-cap Canadian resource stock. The daily volume looked fine at around 100,000 shares. But when I tried to sell my position during a sector downturn, the bid just kept stepping away from me. Every time I thought I had a buyer, the bid dropped. It took me three days to fully liquidate at prices I was happy with.

That has never happened with XEQT. Not once. Not during the COVID crash. Not during the rate-hike sell-offs. Not during any market correction. I’ve always been able to buy or sell XEQT instantly, at essentially the price I expected.

That’s the difference between true liquidity (backed by an ETF creation/redemption mechanism and ultra-liquid underlying holdings) and the illusion of liquidity (a stock with “decent” volume that evaporates when you actually need it).

10. Conclusion: XEQT Liquidity Is a Non-Issue

If you’ve read this far, you now understand ETF liquidity better than most investors — including many financial advisors. Let me sum up the key points:

• XEQT’s real liquidity goes far beyond its daily trading volume. The creation/redemption mechanism and the liquidity of its underlying holdings mean you can always buy and sell.
• The bid-ask spread is tiny — usually just a penny or two, costing you a few dollars on a typical investment.
• Market makers and authorized participants are financially incentivized to keep XEQT liquid and trading close to its fair value.
• You can trade $100,000+ of XEQT without any issues. For most retail investors, liquidity is essentially unlimited.
• ETF liquidity is actually superior to stock liquidity in many ways, thanks to the creation/redemption mechanism.

My friend? After I explained all this to him, he moved most of his portfolio into XEQT. Now he spends less time worrying about individual stock liquidity and more time doing the things he actually enjoys. His portfolio is simpler, his costs are lower, and he sleeps better at night.

The real risk with XEQT isn’t that you can’t sell it — it’s that you spend so much time worrying about things like liquidity that you delay getting invested in the first place. Time in the market matters far more than trading volume metrics.

So stop checking the daily volume. Set up your regular contributions. And let the market makers, authorized participants, and creation/redemption mechanism do their job. They’ve been doing it flawlessly for decades, and they’ll keep doing it long after you and I have retired.

Focus on what you can control: saving consistently, keeping costs low, and staying invested for the long term. XEQT handles the rest.

Related Reading

• What is XEQT? A Comprehensive Guide
• How ETFs Actually Work: The Hidden Mechanics Behind XEQT
• XEQT for Beginners
• Best Platform to Buy XEQT in Canada
• When Is a Good Time to Buy XEQT?
• Get started with Wealthsimple and earn a $25 bonus