Assessing liquidity of UCITS ETF can be challenging as the picture is one of fragmentation.
Over 80% of UCITS ETF trading (across all providers both by notional and tickets) occurs off the primary listing on exchange via dedicated RFQ MTF (Multi-lateral Trading Facilities) platforms including Tradeweb and Bloomberg RFQE. Simple ADV metrics may not include this explicit liquidity.
Liquidity of an ETF sub-fund is often fragmented by multiple share classes (ACC/DIS/HSC) listed on different exchanges in many currencies. Therefore, only considering the liquidity of one share class or listing to be indicative of the sub-fund is "incorrect".
Even more importantly, ADV does not consider implicit liquidity. Implicit liquidity means the liquidity the MM can generate by considering the ETF itself, the underlying constituents, futures or other ETFs as the hedge to an ETF trade. Please consider the following example.
An ETF tracking the S&P500 that never trades. It has zero explicit liquidity but still billions of dollars of implied liquidity as you can hedge large orders with S&P 500 futures. Indeed, MMs can use futures, the underlying constituents or other ETFs as a hedge.
You can apply this logic for FI ETFs too. Through the in kind negotiated creation redemption process APs create liquidity by delivering stratified samples of the index according to duration, credit, sector, country and specific risk. The beauty of the ETF wrapper is it is as liquid as the hedge the MM can utilise.
Clients should consider the explicit liquidity of the ETF (i.e. the ADV of the ETF shares themselves) as well as the implicit liquidity of the ETF (i.e. how much could be traded by assessing the hedge alternatives).