Morley Conn

And then these market makers of ETFs, ourselves included, will run inventories of various ETFs that we are involved with.

particularly if we are deemed the designated broker.

The designated broker is the ETF market maker who will have provided the original financing, seeding capital for that ETF to start issuing on the stock exchange.

So we'll be out there both buying and selling, showing reasonably tight markets for that ETF.

Our interactions with the market are another secondary level of liquidity.

So if we load up on a particular ETF,

We're long.

We've bought a lot of the product.

We might be on the board offering out that product and selling in the marketplace.

The third level of liquidity is what's known as primary.

Now, that can be a situation where – and this is a little bit of the stopgap or the lever that the stress valve for the marketplace –

When there's more buyers or there's more sellers, we as the market makers can go to the issuer as authorized participants and get more units issued into the marketplace.

How do we do this?

If I was to sell, I didn't own 100,000 shares of a particular ETF and I had a buyer of 100,000.

I would sell that product to that buyer.

investor, and I would hedge myself off with a basket of the underlying of that ETF.

At the end of the day, I would go to the ETF issuer and say, ETF issuer, I need 100,000 of your ETF units.

This is new issue that the ETF issuer will issue to me into the marketplace.

I, in turn, will exchange that basket of stocks that I have bought to hedge my position with the ETF issuer.

There's two types of exchanges that the market makers can do with an ETF issuer, guys.