The Story of ETF Creation and Redemption
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Uploaded by isharesetfs on Oct 6, 2011
Ever wonder what allows ETFs to be liquid? The answer is "creation and redemption," the process that lets ETFs trade even when volume is low. Using simple illustrations and a metaphor about flowers, this seven-minute animation will change the way you look at ETFs.
And once you hear the story behind ETF liquidity, spread the knowledge -- share the video!
- 31 likes, 1 dislikes
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Uploader Comments (isharesetfs)
All Comments (9)
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U saw us that the supply of ETFs can be incresed or decresed based on the demand>>>>>>
How?
as the demand increses, the AP hat to create more creation units by delivering the actual shares to the custodian and the no. of shares are limited !!!!!!!!!!!!1
And what do the custodian do of the deposited shares?
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I wonder how much underlying volume is generated daily from ETF Creation/Redemption due to ETF Arb?
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Uh, given your presentation where did the "new" flowers come from? It seems that you are repackaging the same flowers which means that the ETFs would be buying and selling the same stock. And how can this be good? Would this not mean that large redemptions could not be filled?
treetorn 4 months ago
@treetorn New ETF shares are created when individual stocks from the stock market are delivered to the ETF manager. Each ETF share represents proportional ownership of the individual stocks held in the fund. Redemptions—both large and small—are filled by giving back the stocks that the redeemed ETFs represent. Does this answer your question?”
isharesetfs 4 months ago