Investing · General financial education

Creation and redemption

ETFs generally do not sell shares to, or redeem shares from, retail investors one by one. Large partners, called authorized participants, create and redeem blocks in the primary market.

In more detail

FINRA describes creation units as large blocks that these partners buy or redeem directly with the ETF. The partners typically sell some or all of those shares in the secondary market, on an exchange. Investors buy and sell there as they would a share. Unlike a traditional mutual fund that is not exchange-traded, the price can deviate from the underlying value.

Background

Read next to ETFs, NAV and costs: the mechanism explains why exchange trading is the usual path. It is not an invitation to create units yourself. Finmon names no partner.

An example

An authorized participant creates a large block with the ETF and sells shares on the exchange. You buy a single share there. You do not create the block yourself.

A common misconception

Anyone can create and redeem single ETF shares directly with the fund, just like a savings account.

FINRA describes creation and redemption in large blocks by authorized participants. Retail investors typically trade on the exchange.

Source: FINRA · Exchange-traded funds. Last reviewed: 2026-11-01. Editorially reviewed on 2026-11-01. Next review 2027-11-01. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.