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| Barclays I shares |
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| Understanding ETF's |
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An ETF is an investment vehicle that combines key features of traditional mutual funds and individual stocks. ETFs are open-ended funds which like index mutual funds represent portfolios of securities that track specific indexes. A distinct difference is that ETFs trade like stocks and can be bought and sold (long or short*) on an exchange and can employ the same trading strategies used with stocks.
ETF shares are created differently than traditional shares of stocks. Traditionally a company issues a set number of shares through an initial public offering (IPO) and then the shares are traded in the secondary market. Volume is an indication of how many shares are available at a given price. ETF shares can essentially provide unlimited liquidity through a process called creation and redemption. ETF shares can be created on-demand by Authorized Participants such as institutional trading desks and other approved market makers. They are released directly into the secondary market at a price equal to the cost of purchasing the basket of securities that make up the index the ETF is tracking. ETF volume is an indication of how many shares have already traded, not how many shares could be traded. |
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