Authorized participant

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Authorized Participant

An institutional investor that takes part in the creation of an exchange-traded fund (ETF). An exchange-traded fund is an investment company that tracks all the stocks on a particular exchange. When an ETF is created, an authorized participant buys the shares that are to underlie it and gives them to the fund's sponsor in exchange for units (or shares) in the new ETF. The authorized participant then sells these units to investors. Authorized participants are handpicked by the sponsor of the ETF.

Authorized participant.

An authorized participant is an institutional investor who takes part in the creation of exchange traded fund (ETF) shares.

The ETF sponsor selects authorized participants to assemble creation units, which are baskets of securities in the index that underlies the ETF. Each creation unit corresponds to a fixed number of shares in the ETF.

The authorized participant transfers the creation unit to the ETF sponsor in exchange for shares in the ETF, which can then be sold to other investors. Authorized participants may also redeem ETF shares by trading them back to the ETF sponsor for corresponding baskets of securities.

Since ETFs exchange shares only for corresponding baskets of securities and don't buy back shares investors wish to sell, they don't have to keep cash on hand or liquidate securities to meet redemption demands. As a result, ETFs are able to track the underlying index more closely and achieve tax efficiency.

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These products do not sell or redeem their shares at net asset value (NAV) except to authorized participants.
At a minimum, the Automated Activity Tracking and Access System shall incoiporatc on-line and telephony check in/check out services to (1) register authorized participants, (2) issue hunting/fishing/trapping/firewood permits, collect user fees, (3) track user access on installation, (4) generate reports and (5) communicate important announcements regarding rules and safety awareness to authorized participants.
The growing number of investors in the first-ever, and so far the only, exchange-traded fund in the country is a reflection of the investing public's demand for new and exciting financial products that suit their needs," said Gonzalo Ordonez, president of First Metro Securities Brokerage Corporation, the market maker and one of the authorized participants of the First Metro ETF.
However, shares may only be redeemed directly from a Fund by Authorized Participants, in very large creation/redemption units.
The SECP circular has stipulates the regulatory requirements for the authorization of ETFs, including investment restrictions, issuance and redemption of creation units, pricing and dealing, additional disclosure requirements, role of the authorized participants, and fees and expenses.
The regulations broadly cover the listing procedure for ETFs, trading and clearing and settlement of ETF units, disclosure requirements for asset management companies, obligations of authorized participants and fee structure.
At present, one of the safest methods on the market is virtual data exchange in a Cloud to which only authorized participants have access.
Because ETF units may be created or redeemed throughout business hours, arbitrageurs are constantly watching for disparities in their pricing, relative to the net asset value of the securities held in each ETE The ability of authorized participants (primarily large brokerage and arbitrage securities firms that are allowed to exchange baskets of individual, specified constituent securities for ETFs) to create and redeem shares acts to mitigate the variations between market price and underlying values.
Banks and brokerage houses acting as Authorized Participants contribute the Basket to the ETF and in turn receive "Creation Units" priced at net asset value from the ETF Trustee.
Only authorized participants may post material, which eliminates the problem of spam and other unwanted communications.
Depository institutions and other authorized participants use this service to send and receive large-value, time-critical payments.

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