Authorised Participant
An institution permitted to create and redeem ETF units directly with the fund, keeping the market price aligned with value.
How it is identified
Test: the entity has an agreement with the fund permitting creation and redemption in creation-unit blocks
Unit
qualitative
In depth
The authorised participant is the arbitrageur in the ETF structure: it profits from any gap between market price and underlying value, and in doing so closes the gap. When it is inactive — because the basket is illiquid, or the arbitrage is unprofitable after costs — the ETF can drift far from its indicative value, which has happened in Indian debt and international ETFs. Their presence is therefore a quiet but important quality check on an ETF. Many also act as market makers, quoting continuous two-way prices on the exchange.
Worked example
An ETF trades at ₹251 against an indicative value of ₹245. An authorised participant buys the ₹245 basket, creates units, sells them at ₹251 and pockets ₹6 a unit — an action that pushes the price back toward ₹245.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Authorised Participant” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.