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English: ETF Arbitrage
Definitions: ETF institutional arrangements to implement the primary market and secondary market transactions simultaneously, so there may be investors to hedge when the difference between the ETF in the secondary market trading price of fund shares both.
Interpretation: When the secondary market ETF trading price is lower than its share of the net, which occurred when the discount transactions, large investors in the secondary market may be cheap to buy ETF, and redemption in the primary market (sell high) share and then sell the shares on the secondary market and the realization of arbitrage trading. In contrast, when the secondary market ETF trading price higher than its share of the net, which occurred in trade at a premium, the investor can buy a large basket of stocks in the secondary market at a market purchase ETF (the equivalent of buy low-cost ETF) share, then sell at high prices in the secondary market ETF trading arbitrage achieved. Arbitrage mechanism will force ETF secondary market price and net converge, so neither ETF similar closed-end fund a substantial discount in the secondary market trading, stock trading phenomenon substantial premium, but also to overcome the disk can not be open-ended fund weakness in the transaction.
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