![]() When ETF shares are “sold short” the seller must deliver those shares to the buyer within two days. These desks buy and sell ETF shares throughout the trading day to make a profit (proprietary trading) or to execute client orders (agency execution). ![]() Many firms with LMM desks have both proprietary trading and agency execution capabilities. In other cases, these functions fall to separate parties. Sometimes, the same firm will serve as both an LMM and an AP based on its internal capabilities. In the ETF world, the role of a lead market maker (LMM) is to provide liquidity, per the listing exchange requirements, for the ETF shares during regular trading hours. How does a lead market maker differ from an AP? This oversight service ensures the AP delivers its securities to the ETF trust, and that the ETF delivers its shares to the AP. The DTCC serves as an additional layer of protection between the AP and the fund to guarantee the transaction.
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