Authorized Participant

Authorized Participant

He or she is the protagonist of the ETF creation/redemption process most investors will never know. Designated by an ETF issuer, the AP is someone with purchasing power who creates and redeems shares of an ETF, keeping the supply elastic to meet demand. When there’s new appetite for a given ETF, the AP will create shares of that ETF through the in-kind creation/redemption mechanism, keeping supply ample and helping the ETF trade in line with its net asset value (NAV). Ample supply means no need for steep premiums. When demand dries up and ETF share prices face a discount, the AP can redeem shares of the ETF from the market, reducing supply, allowing the ETF to trade back in line with its NAV. The AP plays a crucial role in ETF liquidity and trading.