Multi-basket ETF
| Party | Roles |
|---|---|
| Index Provider | The Index Provider is the source of the index data (e.g., S&P, Dow Jones, or Russell). |
| Fund Advisor | The Fund Advisor manages the funds to seek to track their respective benchmark index. |
| The Fund Advisor determines the component stocks required to be delivered to effect a creation order, called the Portfolio Composition File (PCF). | |
| The PCF is transmitted to the NSCC nightly, which disseminates the information to all participants. | |
| Authorized Participant (AP) |
The Authorized Participant places creation (or redemption) orders to facilitate issuance of new shares. |
| Creation Orders are based on the previous day's Portfolio Composition File in multiples of usually 50,000 shares. | |
| Creation Orders are effective (like any other mutual fund) at the end-of-day NAV. | |
| Creation Orders are settled by delivering securities instead of cash. | |
| The specialist may be an AP, although other large broker dealers may be APs as well. | |
| Distributor | The Distributor processes creation/redemption orders and ensures that they are in good form. |
| The Distributor then passes valid orders to the Transfer Agent for record keeping and processing. | |
| Transfer Agent (TA) | The Transfer Agent records creation/redemption orders. |
| The Transfer Agent tracks orders on a creation unit basis and monitors total shares outstanding. | |
| The Transfer Agent transmits creation orders to the NSCC for bursting into the component stocks. | |
| NSCC | The NSCC "bursts" creation unit orders into their underlying position. |
| At settlement, the NSCC facilitates the movement of stocks versus ETF shares in the DTC accounts of the counter-parties, including the custodian. | |
| Fund Accountant | As with any mutual fund, the Fund Accountant prices the securities and calculates the net asset value (NAV) each day. |
| Secondary Market Investors |
Investors trade ETF shares in the secondary market as with any listed common stock. |
| Intermediary (BD, FA) |
Intermediaries (BD, FA) advise client investors directly and sell/recommend ETF shares, possibly in connection with wholesaler. |
| Specialist | A Specialist creates a fair and orderly market for ETF shares on the exchange floor (i.e., ETF shares trading post). |
| This allows the Specialist to regulate the supply of new ETF shares (Creation/Redemption) in response to customer demand in the secondary market. | |
| Listing Exchange | The Listing Exchange (e.g., NYSE or AMEX) lists the ETF units and records trading prices, volumes. |