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A comment on Individual Investors Get Burned by Collapse of Complex Securities. Parent comment

Re:Individual Investors Get Burned by Collapse of Complex Se... by JumpCrisscross on Monday June 01, 2020 @05:40PM (#23384266)
> When I create in SPY I can submit a basket+cash component equivalent to 50,000 shares and get back 50,000 SPY

No, you can't. An authorized participant can.

All ETFs, by definition, involve creation and redemption mechanisms. It's what separates them from other ETPs.

> How exactly would I create/redeem this basket in kind?

You can't.

According to the prospectus [1], "in exchange for the deposit or delivery of a basket of assets (securities and/or cash)". Going into deeper mechanics [2], creation and redemption involve the AP entering into offsetting swaps with the ETP.

[1] https://www.proshares.com/media/prospectus/statutory_prospec...

[2] https://www.proshares.com/media/prospectus/statement_of_addi...

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Re:Individual Investors Get Burned by Collapse of Complex Se... by haltingproblem on Monday June 01, 2020 @05:46PM (#23384338)
>> How exactly would I create/redeem this basket in kind?

>You can't.

Thank You.

As to your earlier point about AP, the bar is pretty low in SPY because I used to work at desk that was one ;)

[ Parent | on HN ]