Creation Unit: The unit size aggregation in which an Authorized Participant can create or redeem ETF shares with the fund or trust. The creation unit size can vary by fund and ranges from 25,000 to 600,000 shares. ETFs typically issue shares in creation unit size in exchange for a predefined basket of the underlying index securities. Authorized Participants engaging in the creation and redemption process will typically be charged a creation or redemption fee that varies from fund to fund. The fees for creations and redemptions can be found in the prospectus of each ETF.
Creations/Redemptions: The process by which Authorized Participants transact directly with the fund on an "in kind" basis. Creations/Redemptions occur in Creation Unit aggregations or multiples thereof and involve delivering a specified basket of securities to the fund in exchange for ETF shares and vice versa. Creations/Redemptions occur at the end-of-day Net Asset Value (NAV) of the fund to avoid dilution of existing fund shares. Creations/Redemptions involve an "in kind" transfer of securities, a transaction that is not a taxable event for the fund. This allows imbalances between supply and demand for ETF shares to be satisfied without having an adverse taxable effect upon existing ETF shareholders.
Equal Dollar Weighted Index: In an equal dollar weighted index, share quantities for each of the component stocks in the index are determined as if one were buying an equal dollar amount of each stock in the index. Equal dollar weighted indexes are usually rebalanced to equal weightings either quarterly, semi-annually, or annually.
ETF(s): Exchange Traded Fund(s)
Exchange Traded Fund(s): Exchange Traded Fund(s) are open-ended registered investment companies under the Investment Company Act of 1940, which have received certain exemptive relief from the SEC to allow secondary market trading in the ETF shares. ETFs are index-based products, in that each ETF holds a portfolio of securities that is intended to provide investment results that, before fees and expenses, generally correspond to the price and yield performance of the underlying benchmark index.*
Intraday Indicative Value (IIV): An Intraday Indicative Value is published by NYSE Alternext US for each ETF as a reference value to be used in conjunction with other ETF market information. The Intraday Indicative Value for an ETF is typically published under a separate symbol every 15 seconds over the Consolidated Tape and calculated throughout the trading day based on the last sale prices of the securities specified for creation and redemption plus any estimated cash amounts associated with the creation unit, all on a per-ETF share basis. This value is also referred to as an "Underlying Trading Value", "Indicative Optimized Portfolio Value (IOPV)", and "Intraday Value", in various places such as the prospectus and marketing materials for different ETFs. The Intraday Indicative Value is designed to give investors a sense of the relationship between a basket of securities that are representative of those owned in the ETF and the share price of the ETF on an intraday basis.
Modified Market Capitalization Index: This index is set up much like a Market Capitalization Weighted Index, however, there has been an adjustment to the weights of one or more of the components. This is typically done to avoid having an index that has one or a few stocks representing a disproportionate amount of the index value.
Net Asset Value (NAV): The NAV of an ETF is determined in a manner consistent with other mutual funds. The NAV is calculated by taking the total assets of the ETF, less liabilities, divided by the number of ETF shares outstanding.
Portfolio Composition File: This is a file created by the ETF fund manager or trustee each day after the market close. Its purpose is to tell Authorized Participants the securities and share quantities that would be required to effect a Creation or Redemption on the next trading day. NYSE Alternext US also uses the Portfolio Composition File to calculate the Intraday Indicative Value for the majority of ETFs listed on NYSE Alternext US.
Premium/Discount: The amount (stated in dollars or percent) by which the selling or purchase price of an ETF is greater than (Premium) or less than (Discount) its face amount/value or net asset value (NAV). See also Net Asset Value (NAV).
Price Weighted Average: A price weighted average is computed by taking the average of the market prices of the stocks that make up a particular index. Since the value of the index is based on averaging the prices of the components of the index, the index must have equal share quantities of each of the stocks.
Symbology: Several data elements related to ETFs are published daily using a combination of the IIV and the two character extensions defined below. (Note: Data elements related to iShares MSCI index funds are not yet published under this method).
IIV.EU: The estimated cash amount per Creation Unit, for Creations/Redemptions executed. The estimated cash amount per Creation Unit is designed to give Authorized Participants an idea of approximately how much cash per creation unit will be needed to create or redeem ETF shares on a given day. The methodology used to determine this amount varies among the different fund managers and trustees according to their investment policies.
IIV.NV: The prior day's per share Net Asset Value (NAV). The NAV of an ETF is determined in a manner consistent with other mutual funds. The NAV is calculated by taking the total assets of the ETF, less liabilities, divided by the number of ETF shares outstanding.
IIV.TC: The total cash required per Creation Unit for Creations/Redemptions executed the prior day to ensure that the Creations and Redemptions occur at NAV. This ensures that existing ETF shares do not experience any dilution in value as a result of Creation and Redemption activity.
IIV.SO: The shares outstanding as of the prior day (in thousands). Since ETFs are open-ended, the number of shares outstanding for an ETF may change on any day that the market is open.