ETFs

Market participant	Economic incentive
Buyer/seller of ETF shares	Buys ETF shares at a lower price and sells at a higher price later.
Trading venue	Earns revenue from transaction fees paid by market participants trading on their platform. Listing exchange also earns listing fees paid by ETF issuers.
Broker	Earns commissions by fulfilling client buy/sell orders through finding matches in the secondary market.
Market maker	Profits from spreads of their bid/ask quotes. Arbitrages between an ETF’s intrinsic value and its market price.
Lead market maker (LMM)	Profits from spreads of their bid/ask quotes. Arbitrages between an ETF’s intrinsic value and its market price. Receives economic incentives from the exchange, such as lower transaction fees and higher rebates.
Electronic market maker (EMM)	Captures arbitrage opportunities by using high-frequency trading algorithm.
Institutional sales and trading desk	Earns commissions by providing market making services to institutional clients for their large transactions.
Derivative trading desk	Maintains risk neutral of their total portfolio by trading a wide range of financial instruments, such as ETFs, swaps, and index futures.
Short seller of ETF shares	Profits from falling ETF share prices. Borrows ETF shares, sells them now, and buys back later at a lower price to return shares to the lender to make profits.
Create-to-lend desk	Driven by clients’ demand of borrowing ETF shares. Profits from lending fees.
Authorized participant (AP)	Acts as an agent for market makers and other liquidity providers to create/redeem ETF shares and earn commissions. Some APs also earn revenue through market making activities.
ETF issuer	Earns fees as a percentage of fund net assets.