Re:Vanguard Is Growing Faster Than Everybody Else Combined
by krit_dms on Wednesday April 19, 2017 @02:34AM
(#14145926)
Authorized participants (APs) exist for all ETFs. their purpose is to make sure that the ETF mirrors the underlying assets, and to provide liquidity.
Consider a ETF that consists of a single stock. IF the stock drops, the AP will lower its Bid/offer spread, and force the ETF down to the same level as the stock. But as this is a reaction to the stock falling, there is going to be a lag between the stock falling, and the ETF falling. This doesn't mean that you can sell the ETF at a higher price, necessarily.
Consider a ETF that consists of a single stock. IF the stock drops, the AP will lower its Bid/offer spread, and force the ETF down to the same level as the stock. But as this is a reaction to the stock falling, there is going to be a lag between the stock falling, and the ETF falling. This doesn't mean that you can sell the ETF at a higher price, necessarily.