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Trading liquidity is a critical dimension of any security. For those investors who wish to be able to exit a security efficiently without large BID/ASK spreads, or without the size of their own position moving the market, being aware of the amount of money flowing through the trading of the security is key.

Dollar trading volume is a more useful figure when examining liquidity than market-cap. Regardless of size, if it doesn't trade actively, liquidity is limited, and exit risks are high. Also, because share volume is not a useful comparison between securities, dollar volume is the better choice (for example X shares per day at $10 per share is quite different than X shares per day at $30 per share, but $Y dollars per day is directly comparable to $Z dollars per day).

Because it is hard to relate to really big numbers that are associated with some daily dollar volumes, and because nobody wants to wait all day to execute a sell order, we think a more useful and more comprehensible number for most investors is the dollar trading volume per minute, instead of per day.

Here is list of the 20 most liquid MLPs by dollar trading volume per minute. To see the primary business activity of each, see Part 1. (Click to enlarge)

Although it is not an MLP, it may be interesting to include AMJ (a JP Morgan ETN tracking the Alerian index of the 50 largest MLPs). AMJ trades 41,220 dollars per minute based on average share volume. That would put it between #12 and #13 in the list above.


Holdings Disclosure: As of August 9, 2010 we own EPD, KMP ,ETP, and PAA variously in some managed accounts. We do not currently own any other securities mentioned in this article in any managed accounts.

Disclaimer: Opinions expressed in this material and our disclosed positions are as of August 9, 2010. Our opinions and positions may change as subsequent conditions vary. We are a fee-only investment advisor, and are compensated only by our clients. We do not sell securities, and do not receive any form of revenue or incentive from any source other than directly from clients. We are not affiliated with any securities dealer, any fund, any fund sponsor or any company issuer of any security. All of our published material is for informational purposes only, and is not personal investment advice to any specific person for any particular purpose. We utilize information sources that we believe to be reliable, but do not warrant the accuracy of those sources or our analysis. Past performance is no guarantee of future performance, and there is no guarantee that any forecast will come to pass. Do not rely solely on this material when making an investment decision. Other factors may be important too. Investment involves risks of loss of capital. Consider seeking professional advice before implementing your portfolio ideas.