# ETFs

COUNTERPARTIES

NYSE

XFT

AP

REDEMPTION

1 AP <mark style="color:red;">buys ETF shares</mark> from market\
2 AP <mark style="color:red;">delivers ETF shares</mark> to BlackRock\
3 AP <mark style="color:red;">receives</mark> ETF underlying <mark style="color:red;">securities</mark>\
4 AP <mark style="color:red;">sells</mark> ETF underlying <mark style="color:red;">securities</mark>

CREATION

1 AP <mark style="color:purple;">buys</mark> creation basket of ETF underlying <mark style="color:purple;">securities</mark>\
2 AP <mark style="color:purple;">delivers</mark> creation basket of <mark style="color:purple;">securities</mark> to ETF\
3 AP <mark style="color:purple;">receives</mark> new <mark style="color:purple;">ETF shares</mark>\
4 AP <mark style="color:purple;">sells shares</mark> in market

REDEEM\
AP buys ETF shares → delivers to issuer → receives underlying → sells underlying

CREATE\
AP buys basket → delivers basket → receives ETF shares → sells shares

discount = buy+redeem = buy+swap

DISCOUNT
\
1 Buy NYSE share $9.80, NAV $10
\ <mark style="background-color:yellow;">2 Deliver share to XFT</mark>
\
3 Receive 10 BTCX tokens
\
4 Swap 10 BTCX for 10 USDC
\
5 Redeem 10 USDC

DISCOUNT
\
1 Buy NYSE share $9.80, NAV $10
\
2 Deliver share to XFT
\
3 Receive 10 BTCX tokens
\
4 Swap 10 BTCX for 10 USDC
\
5 Swap 10 USDC for bitcoin

discount = buy+redeem = buy+swap

Creation and redemption

<figure><img src="/files/PEHf5QC7x70UWwbaog3u" alt=""><figcaption></figcaption></figure>

<figure><img src="/files/KSeij8wtBsfW25xkN6VW" alt=""><figcaption></figcaption></figure>

<figure><img src="/files/5OYkzSD7ZBovbL1XVTBc" alt=""><figcaption></figcaption></figure>

RESOURCES

<https://www.blackrock.com/au/insights/ishares/authorised-participants-and-market-makers>

<https://www.schwabassetmanagement.com/content/understanding-etf-creation-and-redemption-mechanism>

<https://www.ssga.com/us/en/intermediary/insights/master-the-mechanics-of-etf-trading>

<https://www.congress.gov/crs_external_products/R/HTML/R45318.web.html>

<https://www.citigroup.com/rcs/citigpa/storage/public/icpublic/Citi-Securities-Services-Understanding-ETFs-Playbook.pdf>

<https://www.kellogg.northwestern.edu/faculty/jagannathan/teaching/practicum/2004/files/Final-Reports/ETF%20Arbitrage%20.pdf>


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://docs.xft.finance/learn/etfs.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.