Creation and Redemption
The Seeding and Launch of an ETF
A variety of processes are involved in the development of an ETF. Issuing firms speak with clients, they assess the markets, and they then devise creative concepts for exposures that they can wrap in an ETF structure. Part of the development process involves determining whether the fund will track an index or be actively managed. They decide whether the fund will use perfect replication or optimize its portfolio, and they obtain whatever regulatory approvals are necessary to bring the fund to market. Near the end of that process, they determine on which exchange they will list the fund’s shares and whether the fund will have a lead market maker (LMM). Not all funds come to market with an ...
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