Who creates ETFs?

ETFs are launched by an issuer (the fund sponsor), but new ETF shares are typically created in the market by authorized participants (APs). APs are large financial institutions that can exchange a basket of securities (or cash) for new ETF shares.

This creation/redemption process is what helps keep ETF prices close to NAV and supports liquidity. When demand rises, APs can create more shares; when demand falls, APs can redeem shares and receive underlying assets.

As an investor, you don't create ETF shares yourself—you buy and sell on the exchange. But understanding who creates shares explains why many ETFs can trade efficiently even when volume looks modest.