Understanding How ETF Portfolios Work
The Primary Markets
ETFs have the unique advantage of interacting in both the primary and the secondary markets daily. The primary market is where the funds undergo their process of creation and redemption. Everything that happens in the primary market is related to the actual underlying portfolio. Creations and redemptions generally take place at net asset value (NAV), and it is therefore important to understand this process to transact efficiently in the secondary market. In the secondary market, trading takes place separately from the underlying basket. The fund can trade at prices that are dictated by ...
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