Authorized participant
Definition · Level 0 · Market basics
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A large dealer allowed to deal directly with an ETF’s issuer: it creates or redeems ETF shares in bulk, which keeps the ETF’s price close to its net asset value.
Example
When an ETF trades above its NAV, an authorized participant buys the stocks, creates new ETF shares and sells them.
Where Tradecraft teaches it
Level 0 · Market basics, in the lesson “ETFs & mutual funds”: Funds you can buy to own an index, and why an ETF’s price stays close to what it holds.
Related terms
- Creation / redemptionHow ETF shares are made and destroyed: creation swaps a basket of stocks for new ETF shares; redemption swaps ETF shares back for the basket.
- ETFExchange-traded fund: a pooled fund whose shares trade all day on an exchange like a stock, usually tracking an index at low cost; creation and…
- Mutual fundA pooled, professionally managed investment vehicle you buy from and sell back to the fund itself once a day, at the net asset value (NAV)…
- NAVNet asset value per share: what a fund owns minus what it owes, divided by its number of shares.
- 52-week high / all-time highThe highest price over the past year of trading / the highest price ever recorded (split-adjusted).
- Account equityWhat you would keep after selling everything in the account and repaying the loan: market value minus what you owe.