A creation or redemption fee is a charge an ETF sets on authorized-participant creates or redeems to offset basket trading or operational costs. It widens the arbitrage band: authorized participants need a larger premium or discount before creating or redeeming is economical.
Covered in: Why ETF Liquidity Is Not the Same as AUM · How ETFs Actually Trade (book) · ETF Market Structure Explained (book)
Related terms
Go deeper: books by Will Lee, CFA
For traders, PMs, and ETF specialists: a practitioner's deep dive into APs, market makers, NAV vs. iNAV, and trading under stress.
Get the ETF Liquidity Cheat Sheet
Subscribe to receive a free two-page ETF Liquidity Cheat Sheet, plus an occasional email when a new explainer is published.
No spam. Unsubscribe anytime.
Disclaimer
This material is provided for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security.
All views expressed are the author’s own and do not represent the views of any employer or affiliated organization.