Sentences with phrase «arbitrage mechanism»
The phrase "arbitrage mechanism" refers to a way of making profit by taking advantage of price differences for the same asset in different markets. Full definition
«There is no mentionable arbitrage mechanism, only GBTC shares you can buy / sell are the year - old + [Bitcoin Investment Trust] ones,» one punter wrote on r / BitcoinMarkets.
coindesk.com
Mutual funds on the other hand, do not have this arbitrage mechanism, so the fund manager is responsible for this continuous buying / selling / re-balancing, hence the hefty transaction fees.
When the price of the ETF deviates from the underlying asset value, institutions utilize the arbitrage mechanism afforded by creation units to bring the ETF price back into line with the underlying asset value.
On the other hand, thanks to the arbitrage mechanism that all ETFs have and similar to open - end mutual fund valuation, the value of an ETF as traded stays very close to the net asset value of the underlying securities in the ETF, with a spread of around 1 % if any.
When the deliverable commodity is not in plentiful supply (or when it does not yet exist) rational pricing can not be applied, as the arbitrage mechanism is not applicable.
An arbitrage mechanism is used to keep the trading price close to net asset value of the ETF holdings.
That's why you often see closed - end funds trading at massive premiums or discounts to their NAV: There's no arbitrage mechanism available to keep supply and demand pressures in check.
Although the Journal did not describe the arbitrage mechanism, its story claimed that narrowing spreads between the bitcoin price and the GBTC price allowed traders to profit as they would when arbitraging an exchange - traded fund (ETF) and its underlying assets.