Key players
Learn how ETFs trade, where they get liquidity, common order types, how premiums and discounts work and more.
Who are the key players?
The ETF market is actually made up of two markets–a primary market where ETF shares are created and redeemed, and a secondary market where ETF shares trade on an exchange.
Here are the key players in each market:
Primary market
ETF managers (for example, Vanguard) manage the ETF and its portfolio of securities.
Authorized participants are institutions that interact directly with an ETF manager to create and redeem large blocks of ETF shares.
Secondary market
Market makers provide intraday liquidity for securities on the stock exchange. They compete for orders by publishing bid and ask quotes for a number of shares.
Lead market makers are assigned to ETF products listed on an exchange. The lead market maker has certain quote, trading and other service obligations set by the exchange and receives incentives for meeting those obligations.
Block-desk traders help ensure that large ETF trades are executed efficiently. When executing ETF block trades, they are able to find liquidity in an ETF regardless of its average daily volume or the liquidity shown on the trading screen.
Investors buy and sell ETF shares on an exchange at an agreed-upon price.
ETF fundamentals
Basics
Learn the basics of ETFs, including their history, how they compare to mutual funds, what types are available and more.
Indexing
Indexing, how ETFs are indexed, the differences between excess return and tracking error, and more.
Strategies
Learn about strategic and tactical uses for ETFs, including asset and sub-asset allocation, portfolio completion, cash equitization and more.