Visual Guide to ETFs

Negotiating Your ETF Trading Prices

 

KEY POINT:

The assets in ETFs can change dramatically on any given day due to clients entering and exiting the fund via creations and redemptions. A critical piece of the structure shifts the costs of trading the baskets outside the fund, to the APs. They essentially pass it back to each individual client via commissions and spreads. This is a structural advantage because all investors as a group are not hit with execution fees due to the moves of any one particular investor.

It is surprising to me how many investors in significantly sized blocks of ETFs agree to trade at whatever price is offered to them. In a sense, that is the equivalent of walking into a car dealer, without doing any price research, ...