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Authorized Participant

  

Categories: Trading, Banking

If you’re an authorized participant, you’re a major player in the world of exchange traded funds (ETF). You are a liquidity master because you can create more ETFs, or reduce the number of ETFs on the market. Authorized participants would include huge banks and other similar large-scale financial institutions.

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Finance: What is Closet Indexing?0 Views

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Finance a la shmoop what is closet indexing? shirts here shoes there

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panties um sorry what's that doing there [Man holding a pair of panties]

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underwear...those aren't mine really okay it's not referring to a

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literal closet, closet indexing is a financial strategy that professional

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investment managers aren't all that proud to be doing hence they keep their

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activities in the closet and it's you know like this guy yeah if that's one of [Man appears behind rack of shirts]

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them closet index are you.. most investment managers performance is

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pegged to a given investment index like the S&P 500 or the Russell 2000 or the

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30-year US government paper so if a manager was indexing to the Dow Jones

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average well, they'd note the 30 stocks in it like

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these...... and their closet [List of Dow 30 stocks]

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indexed portfolio would just riff off the stocks in the rough weighting

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amounts that comprise the Dow like here's Microsoft but they might have in

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their portfolio a tenth of a percent more in Microsoft than is in the Dow

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index because they are slightly less bearish about the future prospects of

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the once-great company you know then the rest of the street has and they might [People purchasing stocks]

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well they just should and by keeping their portfolio very close to their

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going along collecting their salaries and they live to you know dress another

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Up Next

Finance: What Are ETFs?
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What are ETFs? They are Exchange Traded Funds, and unlike index funds, they don't really change, or rebalance, based on the industries represented...

Finance: What is a Liquid Market?
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A liquid market is a market featuring high trading volumes, i.e. investors actually want to put their cash to work.

Find other enlightening terms in Shmoop Finance Genius Bar(f)