Summary

The primary market, where ETF shares are issued and redeemed, is the key to this novel structure. It enables open-ended issuance and facilitates arbitrage between the basket and the ETF. If you can understand how this works, then you can unlock the keys to utilizing these products advantageously in your portfolios. There is a wealth of information now being provided to investors about what is going on inside these funds and how that is affected by trading on the exchanges. It is easy to get tripped up and misunderstand some of the information, which we have seen from both novices and professionals, but we must remember that ETFs issued under the Investment Company Act of 1940 are some of the most transparent investment vehicles ever developed. ...

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