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Create and Redeem ETFs

Create and Redeem ETFs

Create and Redeem ETFs

IBKR will facilitate the ETF creation and redemption process for you with ETF issuers.

ETF creation and redemption offers IBKR Pro clients the following benefits:

  • Buy or sell a large quantity of ETF shares in one execution at the Net Asset Value (NAV)
  • Create ETFs that are hard to borrow and lend them out via the Stock Yield Enhancement Program or use them to cover your short positions

Eligibility

All Interactive Brokers LLC institutional clients who clear trades on our platform are eligible to request ETF creation and redemption. Simply contact us to start the process.

How to Create and Redeem ETFs at IBKR

To create an ETF, you can do one of the following:

  • Buy the underlying stock components of the ETF and contact IBKR to create the ETF from these components.
  • Go short on all or some of the underlying components of the ETF if there is a sufficient equity in your account to support the resulting margin requirement, and IBKR will borrow the components for delivery.

To redeem an ETF:

  • Buy the ETF and contact IBKR to redeem the ETF and receive the components.

During the creation process, IBKR must deliver the underlying stock components to the ETF issuer. If the account is currently holding the components, then IBKR will deliver them to the issuer. If the account does not currently hold the components, then IBKR will borrow them on the client's behalf. The redemption process works in reverse.

To initiate the process of ETF creation/redemption, please create a ticket. Requests for equity ETFs must be submitted to IBKR by 3:00 PM EST to accommodate ETF issuer deadlines of 4:00 PM EST. Certain ETFs have earlier deadlines. Cut-off times for fixed income ETFs vary.1

Note: Once you submit the ETF creation or redemption order, the transaction is irrevocable and you will be unable to cancel your request.

A selection of ETFs for which IBKR accepts orders is at the bottom of the page. IBKR may accept orders for ETFs which are not on the list and are issued by:

  • Alpha Architect
  • ARK Investment Management
  • Blackrock Fund Advisors (iShares)
  • Charles Schwab Investment Management
  • ETF Managers Group
  • ETF Series Solutions
  • First Trust Portfolios
  • Invesco Exchange-Traded Fund Trust
  • PIMCO ETF Trust
  • State Street Bank and Trust Company (SPDR)

Please contact your Sales representative or support for details.

Mechanics of ETF Creation and Redemption

The process of creating and redeeming ETFs at Interactive Brokers is simple and straightforward. The unit of ETF creation/redemption is set by the ETF issuer, with each unit containing anywhere from 10,000 to 100,000 shares of an ETF (see chart below). Creations and redemptions settle on a T+2 cycle basis.

Creation process for ETFs with in-kind settlement

Trade Date

  1. Submit a ticket to create a certain number of ETF units.
  2. You will receive a reply quoting the fees.
  3. IBKR will determine if your account will remain in margin compliance with the creation of the requested ETF.
  4. Once approved, IBKR initiates the creation order with the issuer.
  5. A buy order for the ETF and sell orders for the components will be processed in your account.2
  6. If the account is not already long a sufficient quantity of the ETF’s components per the resulting delivery obligation, a short position in the ETF components will appear. This can be avoided by buying the remaining quantity of components on the date of creation.
  7. The ETF creation trade and any resulting positions are reflected in the account.

Settlement Date

  1. IBKR delivers the ETF’s components to the ETF issuer.
  2. IBKR receives the ETF shares from the issuer.
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Issuer

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Sends ETF

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Sends ETF Component
Shares Electronically

Interactive Brokers Interactive Brokers
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Electronically
Provides ETF

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Requests an
ETF (x units)

IBKR clients is long components, buys the component(s),
or short position is created.

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IBKR Cleared Institutional client

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Issuer

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ETF Sends
Component Shares

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Sends ETF

Interactive Brokers Interactive Brokers
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Electronically Provides
Component Shares

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Redemption Request

IBKR client is long the ETF, buys the ETF, or
a short position is created.

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IBKR Cleared Institutional client

The redemption process is the opposite of the creation process.

Trade Date

  1. Submit a ticket to redeem a certain number of ETF units.
  2. You will receive a reply quoting the fees.
  3. IBKR will determine if your account will remain in margin compliance with the redemption of the requested ETF.
  4. IBKR will reject an ETF redemption order if it results in a short position for that ETF.
  5. Once approved, IBKR initiates the redemption order with the issuer.
  6. A sell order for the ETF and buy orders for the components will be processed.2
  7. The ETF redemption trade and any resulting positions are reflected in the account.

Settlement Date

  1. IBKR delivers the ETF shares to the issuer.
  2. IBKR receives the component shares from the ETF issuer.

Creation and redemption process for cash settled ETFs

  1. Submit a ticket to create or redeem a certain number of ETF units.
  2. You will receive a reply quoting the fees.
  3. IBKR will determine if your account will remain in margin compliance with the order of the requested ETF.
  4. IBKR will reject an ETF redemption order if it results in a short position for that ETF.
  5. Once approved, IBKR initiates the order with the issuer.
  6. A buy (create) or sell (redeem) order for the ETF will be processed.2
  7. The ETF trade, cash movement and any resulting position is reflected in the account.

Costs

  • IBKR charges a flat commission of USD 500 for each creation and redemption.
  • ETF issuers charge fees which Interactive Brokers will pass on to you.3
    • Equity ETFs generally have a flat fee between USD 300 and USD 3,000 per unit.
    • Fixed Income ETFs charge a percentage of NAV. This usually varies between 0% and 0.50% but can be higher. Some issuers charge an additional flat fee such as USD 500 per order.
    • Each ETF’s Statement of Additional Information (SAI) will contain the charges.
  • You may inquire about the exact cost by contacting support prior to submitting an order.

ETFs Available to Create and Redeem

Equity

Symbol Name Shares per Unit
SPY SPDR S&P 500 ETF Trust 50,000
DIA SPDR Dow Jones Industrial Average 50,000
MDY SPDR S&P MidCap 400 25,000
XLY Consumer Discretionary Select Sector SPDR 50,000
XLP Consumer Staples Select Sector SPDR 50,000
XLE Energy Select Sector SPDR 50,000
XLF Financial Select Sector SPDR 50,000
XLV Health Care Select Sector SPDR 50,000
XLI Industrial Select Sector SPDR 50,000
XLB Materials Select Sector SPDR 50,000
XLK Technology Select Sector SPDR 50,000
XLU Utilities Select Sector SPDR 50,000
QQQ Invesco QQQ Trust Series 1 50,000
IWM iShares Russell 2000 50,000
IBB iShares Biotechnology 50,000
VTI Vanguard Total Stock Market Index 100,000
VUG Vanguard Growth Index 25,000
BOXX Alpha Architect 1-3 Month Box 10,000
QMOM Alpha Architect US Quantitative Momentum 10,000
QVAL Alpha Architect US Quantitative Value 10,000
VMOT Alpha Architect Value Momentum Trend 10,000

Fixed Income

Symbol Name Shares per Unit
BOND PIMCO Total Return Active 20,000
CORP PIMCO Investment Grade Corporate Bond Index 50,000
HYS PIMCO 0-5 Year High Yield Corporate Bond Index 50,000
STPZ PIMCO 1-5 Year U.S. TIPS Index 50,000
LTPZ PIMCO 15+ Year U.S. TIPS Index 50,000
ZROZ PIMCO 25+ Year Zero Coupon U.S. Treasury Index 50,000
TIPZ PIMCO Broad U.S. TIPS Index 50,000
MINT PIMCO Enhanced Short Maturity Active 70,000
LDUR PIMCO Enhanced Low Duration Active 20,000
SMMU PIMCO Short Term Municipal Bond Active 20,000
MUNI PIMCO Intermediate Municipal Bond Active 20,000
PICB Invesco International Corporate Bond 50,000
BKLN Invesco Senior Loan 100,000
PVI Invesco Floating Rate Municipal Income 50,000
PWZ Invesco California AMT-Free Municipal Bond 50,000
PZA Invesco National AMT-Free Municipal Bond 50,000
PZT Invesco New York AMT-Free Municipal Bond 50,000

Disclosures

  1. ETF creation and redemption is a manual process subject to IBKR and issuer policies and procedures. There is no guarantee that your order will be processed until it is confirmed by IBKR.
  2. On Trade Date, buy and sell orders are processed at the previous day’s closing price. The buy and sell orders will be restated to reflect the Trade Date’s NAV and basket prices after they are reported by the issuer and processed on the next trading day.
  3. ETF creation and redemption may be subject to variable fees which may differ based on the action taken.