# How ETFs Trade

> Independent educational site by Will Lee, CFA, CAIA, FRM explaining ETF market structure: where ETF liquidity comes from, how spreads and premiums/discounts form, how authorized participants and creation/redemption work, and why ETFs show liquidity stress faster than mutual funds. Educational only; not investment advice.

## Articles
- [Why ETF Liquidity ≠ AUM](https://howetfstrade.com/etf-liquidity-aum/): Why AUM and trading volume don't measure ETF liquidity, and what does: the underlying basket, market makers and creation/redemption.
- [Why ETFs Surface Liquidity Constraints Faster Than Mutual Funds](https://howetfstrade.com/etf-vs-mutual-fund-liquidity-stress/): Why ETF spreads and discounts widen first in market stress, while mutual fund NAVs defer and smooth the same liquidity costs.

## Reference
- [ETF glossary](https://howetfstrade.com/etf-glossary/): 37 ETF market-structure terms with short definitions.
- [ETF trading-cost calculator](https://howetfstrade.com/etf-trading-cost-calculator/): Round-trip cost from half-spreads, premium/discount and commissions, plus an annualized figure with the expense ratio. Formulas are shown on the page.
- [Free ETF market structure diagrams](https://howetfstrade.com/diagrams/): Four diagrams (two markets, liquidity flow, AUM vs. liquidity, stress transmission), free to use with credit "Source: howETFsTrade.com".
- [FAQ](https://howetfstrade.com/#faq): Six common questions about ETF liquidity, volume, spreads and stress.

## Downloads
- [ETF Liquidity Cheat Sheet (PDF)](https://files.howetfstrade.com/etf-liquidity-cheat-sheet.pdf)
- [Diagram pack (PDF)](https://files.howetfstrade.com/etf-market-structure-diagram-pack.pdf)
- [Diagrams as PNG (ZIP)](https://files.howetfstrade.com/etf-diagrams-png.zip)

## Books by Will Lee, CFA
- [All books](https://howetfstrade.com/books/): Book pages with descriptions and Kindle links.
- [How ETFs Actually Trade](https://howetfstrade.com/books/how-etfs-actually-trade/): For traders, PMs, and ETF specialists: a practitioner's deep dive into APs, market makers, NAV vs. iNAV, and trading under stress. Kindle: https://www.amazon.com/How-ETFs-Actually-Trade-Structure-ebook/dp/B0GCKMX9WS
- [ETF Market Structure Explained](https://howetfstrade.com/books/etf-market-structure-explained/): For advisors, investors, and new team members: a jargon-light foundation in creation/redemption, intraday value, and common liquidity myths. Kindle: https://www.amazon.com/ETF-Market-Structure-Explained-Without-ebook/dp/B0GDZ7BDYB
- [Active ETFs](https://howetfstrade.com/books/active-etfs/): For ETF product managers, issuers, capital markets teams, and allocators: capacity, execution costs, and liquidity trade-offs when active strategies run in an ETF. Kindle: https://www.amazon.com/Active-ETFs-Liquidity-Execution-Trade-Offs-ebook/dp/B0GGX2MVTZ

## Glossary terms
- [Active ETF](https://howetfstrade.com/etf-glossary/active-etf/)
- [Arbitrage band](https://howetfstrade.com/etf-glossary/arbitrage-band/)
- [Ask (offer)](https://howetfstrade.com/etf-glossary/ask/)
- [Assets under management (AUM)](https://howetfstrade.com/etf-glossary/assets-under-management/)
- [Authorized participant (AP)](https://howetfstrade.com/etf-glossary/authorized-participant/)
- [Average daily volume (ADV)](https://howetfstrade.com/etf-glossary/average-daily-volume/)
- [Balance-sheet constraints](https://howetfstrade.com/etf-glossary/balance-sheet-constraints/)
- [Basis point (bp, bps)](https://howetfstrade.com/etf-glossary/basis-point/)
- [Bid](https://howetfstrade.com/etf-glossary/bid/)
- [Bid-ask spread](https://howetfstrade.com/etf-glossary/bid-ask-spread/)
- [Capacity](https://howetfstrade.com/etf-glossary/capacity/)
- [Cash creation and redemption](https://howetfstrade.com/etf-glossary/cash-creation-and-redemption/)
- [Creation and redemption](https://howetfstrade.com/etf-glossary/creation-and-redemption/)
- [Creation basket (basket)](https://howetfstrade.com/etf-glossary/creation-basket/)
- [Creation unit](https://howetfstrade.com/etf-glossary/creation-unit/)
- [Custom basket](https://howetfstrade.com/etf-glossary/custom-basket/)
- [Dilution (fund flows)](https://howetfstrade.com/etf-glossary/dilution/)
- [ETF liquidity](https://howetfstrade.com/etf-glossary/etf-liquidity/)
- [ETF sponsor (issuer)](https://howetfstrade.com/etf-glossary/etf-sponsor/)
- [Exchange-traded fund (ETF)](https://howetfstrade.com/etf-glossary/exchange-traded-fund/)
- [Expense ratio](https://howetfstrade.com/etf-glossary/expense-ratio/)
- [Hedging](https://howetfstrade.com/etf-glossary/hedging/)
- [In-kind transfer](https://howetfstrade.com/etf-glossary/in-kind-transfer/)
- [Intraday indicative value (iNAV, IOPV)](https://howetfstrade.com/etf-glossary/intraday-indicative-value/)
- [Limit order](https://howetfstrade.com/etf-glossary/limit-order/)
- [Market impact](https://howetfstrade.com/etf-glossary/market-impact/)
- [Market maker](https://howetfstrade.com/etf-glossary/market-maker/)
- [Market order](https://howetfstrade.com/etf-glossary/market-order/)
- [Midpoint (mid price)](https://howetfstrade.com/etf-glossary/midpoint/)
- [Mutual fund](https://howetfstrade.com/etf-glossary/mutual-fund/)
- [Net asset value (NAV)](https://howetfstrade.com/etf-glossary/net-asset-value/)
- [Premium / discount](https://howetfstrade.com/etf-glossary/premium-discount/)
- [Price discovery](https://howetfstrade.com/etf-glossary/price-discovery/)
- [Primary market](https://howetfstrade.com/etf-glossary/primary-market/)
- [Round-trip cost](https://howetfstrade.com/etf-glossary/round-trip-cost/)
- [Secondary market](https://howetfstrade.com/etf-glossary/secondary-market/)
- [Underlying liquidity](https://howetfstrade.com/etf-glossary/underlying-liquidity/)