Making ETFs work

Market makers are quite simply the firms that make ETFs happen. If fund managers are the mechanics, market makers supply the mechanics with the car parts and the oil to keep ETFs running. The creation of an ETF officially starts with a regulated market maker, otherwise known as an authorised participant (AP). For an ETF fund to be successful, it must be liquid and allow investors to trade in and out in real-time. This is not dependent on the fund’s average trading volume or the number of shares traded per day. Instead, a better measure of ETF liquidity is the liquidity of the underlyi...