ETF Dictionary

What Does the Creation of an ETF Process? 

The creation ETF involves converting a basket of securities into ETF shares. Let’s break down the steps involved in this process with KIS Vietnam ETF: 

• 1. AP will send an order to the Fund Manager to convert a Basket of Stocks for Exchange Traded Funds share
• 2. The purchased stocks are then constructed into what is known as a “creation unit “which is a large block of ETF shares that is typically swapped in-kind with the AP.
• 3. Issuing ETF Shares: The creation unit is swapped with the Fund Manager (FM), and in return, FM will issue new ETF shares. These newly created shares represent ownership in the underlying assets of the Exchange Traded Funds and can be traded on the open market.

The creation process is a mechanism that allows new shares of an ETF to be carried into the market by exchanging a basket of securities by APs, contributing to the liquidity and efficiency of the exchange-traded funds market.

>>> Learn more about: ETF Creation/Redemption in Vietnam

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