Monday April 22, 2013
We erred in a statement regarding ETFs. A reader sends this information.
The only things that have any bearing on the actual expansion or contraction of an ETF's underlying portfolio is the creation and redemption feature and the slight adjustments to keep in line with the index. There is no such thing as a withdrawal from an ETF.
The creation and redemption is only accomplished by the authorized participants (usually the big brokerages). These are done in large chunks, typically 50,000 to 100,000 shares of the ETF. The AP can exchange the underlying portfolio for newly created shares in the ETF, or vice versa to get their money out of an ETF. So, they buy or sell the underlying portfolio stocks separately.
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