I have been looking here for the information on the Bid/Ask spread of the Vanguard Ftse All-World Units Etf A on the Italian market. Here it is reported "Ask: n.d. X n.d" and "Bid: 84,1 x 119", with a price of €84,64. What does it mean that the aks is not defined? Should I instruct my bank to buy with a limit order strategy? Moreover, how can I be sure that the price of the ETF correspond to the price of the underlying stocks (the ETF follows an index but is not supposed to be exactly equal to that index) and is not artificially inflated by the demand and offer forces of the secondary market?
1 Answer
The Vanguard FTSE All-World UCITS ETF is an Irish UCITS structured fund, which prices its portfolio daily at the close of market. This level of transparency encourages authorized participants/market makers to engage in arbitrage to keep the market price in line with the net asset value of the fund. I'd expect very minimal premium/discount spreads as long as the underlying securities are liquid, which they should be given the funds investment strategies.
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2I think I have understood. If there was a significat difference between the value of the ETF and that of the underlying securities then the authorized participants/market makers could profit from it. This mechanism keeps the difference close to zero.– MrRobotJan 23, 2021 at 17:43
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Exactly. As long as the securities held by the fund are liquid and the active participants have transparent pricing information, it will be profitable for them to create/redeem shares as needed to keep the market liquid and prices in line with NAV. Jan 23, 2021 at 18:45