SIE practice questionmediumETFs
Which of the following is a true statement about ETF share creation and redemption?
- AETF share creation requires all cash transactions.
- BRetail investors directly create or redeem ETF shares with the fund.
- CThey are typically handled by institutions through in-kind transfers of securities.✓ Correct answer
- DETF shares are only created at fund inception.
Explanation
Why C — They are typically handled by institutions through in-kind transfers of securities.
ETF shares are created/redeemed by authorized participants who transfer securities to/from the ETF sponsor (in-kind). Retail investors buy/sell shares in the secondary market and do not directly interact with the fund.
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