Primary Market Definition

Jan 16, 2024

Reviewed by: etf.com Staff

Edited by: etf.com Staff

Learn more about Primary Market

The Primary Market in ETFs represents the foundational arena where the creation and redemption of ETF shares occur. Authorized Participants, typically institutional investors, engage directly with the ETF issuer to create or redeem shares. This process involves exchanging a basket of securities for ETF shares during creation or swapping ETF shares for the underlying securities during redemption. The primary market mechanism ensures the efficient functioning of the ETF ecosystem, aligning the market price with the Net Asset Value (NAV) and contributing to the fund's overall liquidity and stability.

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ETF Glossary

ETF Glossary is etf.com’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.

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