25 years: Derivatives trading & ETFs
Market-makers are the only market participants authorised to create units with ETF fund managers, but they have to get the ETF shares from the fund manager. The way they do this is through a creation/redemption process. This video helps you understand the creation/redemption processes, along with their benefits and disadvantages.
Market-makers are the only market participants authorised to create units with ETF fund managers, but they have to get the ETF shares from the fund manager. The way they do this is through a creation/redemption process. This video helps you understand the creation/redemption processes, along with their benefits and disadvantages.
Subscribe to watch
Access this and all of the content on our platform by signing up for a 14-day free trial.
12 mins 49 secs
Market-makers are the only market participants authorised to create units with ETF fund managers, but they have to get the ETF shares from the fund manager. The way they do this is through a creation/redemption process that involves the market-maker exchanging the equivalent ETF securities, rather than cash, to the fund manager in exchange for ETF shares.
Key learning objectives:
Understand the creation/redemption process
Understand the benefits and disadvantages of the creation/redemption process
Access this and all of the content on our platform by signing up for a 14-day free trial.
During the day a market-maker (authorised participant) will sell ETF shares to investors, and buy the equivalent basket of securities from the market to hedge themselves. At the end of the day, they will have a residual position, they have shares, and require the ETF shares to deliver to the investors.
An ETF fund manager will then exchange that residual position of shares for the required number of ETF shares.
It is an ‘in-kind’ creation, meaning that the market-maker delivers the shares, not money.
Access this and all of the content on our platform by signing up for a 14-day free trial.
There are no available videos from "Gontran de Quillacq"