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Page "Arbitrage" ¶ 20
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ETFs and trade
Exchange-traded funds ( ETFs ) are open-end funds or unit investment trusts that trade on an exchange ; they have gained in popularity recently.
Because ETFs can be economically acquired, held, and disposed of, some investors invest in ETF shares as a long-term investment for asset allocation purposes, while other investors trade ETF shares frequently to implement market timing investment strategies.
Commodity ETFs trade just like shares, are simple and efficient and provide exposure to an ever-increasing range of commodities and commodity indices, including energy, metals, softs and agriculture.
The initial actively traded equity ETFs have addressed this problem by trading only weekly or monthly, however today, actively managed ETFs trade at the discretion of the manager and to date, there have been no instances of front running.
Actively traded debt ETFs, which are less susceptible to front-running, trade their holdings more frequently.
Because ETFs trade on an exchange, each transaction is generally subject to a brokerage commission.
Traders should be cautious if they plan to trade inverse and leveraged ETFs for short periods of time.
Since ETFs trade on the market, investors can carry out the same types of trades that they can with a stock.
However exchange-traded funds ( ETFs ) have gained rapidly in popularity, being seen as a less expensive way to trade all futures markets as well as some more exotic markets not otherwise available to retail day traders.

ETFs and open
A mutual fund is bought or sold at the end of a day's trading, whereas ETFs can be traded whenever the market is open.

ETFs and market
Some advocate adopting a strategy of investing in every security in the world in proportion to its market capitalization, generally by investing in a collection of ETFs in proportion to their home country market capitalization.
In contrast, the market price of an ETF trades in a narrow range very close to its net asset value, because the structure of ETFs allows major market participants to redeem shares of an ETF for a " basket " of the fund's underlying assets.
Since the market downturn of late 2008 a number of fixed income ETFs have traded at premiums of roughly 2 % to 3 % above their NAV.
There were a total of 158 emerging market ETFs listed on the Exchange in May 2011 compared with 126 on the New York Stock Exchange ( NYSE Arca ) and 93 on Deutsche Boerse.
Like closed-end funds, ETFs are traded throughout the day on a stock exchange at a price determined by the market.
To keep the market price close to net asset value, ETFs issue and redeem large blocks of their shares with institutional investors.
Over 2007, the market for exchange-traded funds ( ETFs ) grew with the addition of 150, bringing the total number of listed ETFs to 240, representing 18 % of the trading volume in shares and 10 % of the trading volume in non-government bonds.
The ability to purchase and redeem creation units gives ETFs an arbitrage mechanism intended to minimize the potential deviation between the market price and the net asset value of ETF shares.
In the United States, most ETFs are structured as open-end management investment companies ( the same structure used by mutual funds and money market funds ), although a few ETFs, including some of the largest ones, are structured as unit investment trusts.
* Buying and selling flexibility – ETFs can be bought and sold at current market prices at any time during the trading day, unlike mutual funds and unit investment trusts, which can only be traded at the end of the trading day.
Similar to ETFs and traded and settled exactly like normal shares on their own dedicated segment, ETCs have market maker support with guaranteed liquidity, enabling investors to gain exposure to commodities, on-exchange, during market hours.
The fully transparent nature of existing ETFs means that an actively managed ETF is at risk from arbitrage activities by market participants who might choose to front run its trades.
Leveraged exchange-traded funds ( LETFs ), or simply leveraged ETFs, are a special type of ETF that attempt to achieve returns that are more sensitive to market movements than non-leveraged ETFs.
In contrast, ETFs are not redeemed by holders ( instead, holders simply sell their ETF shares on the stock market, as they would a stock, or effect a non-taxable redemption of a creation unit for portfolio securities ), so that investors generally only realize capital gains when they sell their own shares or when the ETF trades to reflect changes in the underlying index.

ETFs and with
Securities with which ISINs can be used are Equities, Fixed income and ETFs only.
At the end of 2010, there were 923 ETFs in the United States with combined assets of $ 992 billion.
* Ontarians will pay more for management and other fees associated with investment funds, such at: mutual funds, segregated funds and ETFs.
Purchases and redemptions of the creation units generally are in kind, with the institutional investor contributing or receiving a basket of securities of the same type and proportion held by the ETF, although some ETFs may require or permit a purchasing or redeeming shareholder to substitute cash for some or all of the securities in the basket of assets.
ETFs had their genesis in 1989 with Index Participation Shares, an S & P 500 proxy that traded on the American Stock Exchange and the Philadelphia Stock Exchange.
As of September 2010, there were 916 ETFs in the U. S., with $ 882 billion in assets, an increase of $ 189 billion over the previous twelve months.
As of June 2012, in the United States, about 1200 index ETFs exist, with about 50 actively managed ETFs.
Index ETF assets are about $ 1200 billion, compared with about $ 7 billion for actively managed ETFs.
For index ETFs that invest in indices with thousands of underlying securities, some index ETFs employ " aggressive sampling " and invest in only a tiny percentage of the underlying securities.
While HOLDRs have some qualities in common with ETFs, including low costs, low turnover, and tax efficiency, many observers consider HOLDRs to be a separate product from ETFs.
The cost difference is more evident when compared with mutual funds that charge a front-end or back-end load as ETFs do not have loads at all.
The redemption fee and short-term trading fees are examples of other fees associated with mutual funds that do not exist with ETFs.

ETFs and prices
Some critics claim that ETFs can be, and have been, used to manipulate market prices, including having been used for short selling that has been asserted by some observers ( including Jim Cramer of theStreet. com ) to have contributed to the market collapse of 2008.

ETFs and set
Using the automated tools an account holder can set a specific dollar amount to invest at a given interval into direct stocks or ETFs.

ETFs and by
Currently, there are also 3x performance ETFs issued by ProShares that exist too ; which attempt to replicate ( 300 % leverage ) against the Dow.
ProShares issued by ProFunds offer other related NASDAQ-100 ETFs such as the 2x, which attempts to match the daily performance of the NASDAQ-100 by 200 % and the Inverse 2x, which attempts to match the inverse daily performance by 200 %.
* Market exposure and diversification – ETFs provide an economical way to rebalance portfolio allocations and to " equitize " cash by investing it quickly.
There are several advantages to bond ETFs such as the reasonable trading commissions, but this benefit can be negatively offset by fees if bought and sold through a third party.
The most common way to construct leveraged ETFs is by trading futures contracts.
In the U. K., ETFs can be shielded from capital gains tax by placing them in an Individual Savings Account or self-invested personal pension, in the same manner as many other shares.
According to a study on ETF returns in 2009 by Morgan Stanley, ETFs missed in 2009 their targets by an average of 1. 25 percentage points, a gap more than twice as wide as the 0. 52-percentage-point average they posted in 2008.
In a survey of investment professionals, the most frequently cited disadvantage of ETFs was the unknown, untested indices used by many ETFs, followed by the overwhelming number of choices.

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