As retail investors, we can take things for granted at times. While ETFs have democratised investing for the main street investors, investing/trading in ETFs would not be possible if not for the market participants greasing the wheels behind the scenes.

More specifically, I am referring to the creation and redemption process of ETFs’ shares. In this article, I will highlight the key roles that market makers and authorized participants have within the ETF industry and how they shaped the ETF trading process.

Liquidity is the ease of conversion from cash to asset securities and vice versa. In the ETF land, there are two forms of liquidity. First is the liquidity of the ETF itself. Second is the liquidity of the underlying holdings of the ETF. Also known as the underlying liquidity.

In general, underlying liquidity is more important. An ETF which has poor liquidity in itself