Stocks, on the other hand, are issued by a company through an investment bank. While a company can issue stock or buy back stock at any time, generally these changes are infrequent. So, for long periods of time, the amount of shares outstanding in a given stock is constant. The difference in structure is manifested when stocks and ETFs are traded. When you buy or sell a stock, you generally are trading with a counterparty with a different market view of where the stock is headed. In essence, in a typical stock trade, a bullish viewpoint and a bearish viewpoint come together at a similar price point, enabling a trade to occur. An ETF trade is different. A large proportion of ETF trades take place between a bullish or bearish investor and a liquidity provider. So instead of buying from another investor with an opposing viewpoint, the investor typically is trading versus a liquidity provider.
Liquidity Provider :link:
A liquidity provider is an individual or institution which acts as a market maker in a given asset class. This means that the liquidity provider will act as the both the buyer and seller of a particular asset, thus making a market.
"Liquidity provider" is essentially synonymous with "market maker." :link: Their function is to facilitate trading in securities and other financial instruments by providing a pool of shares, (which they own), so that buyers and sellers can trade easily without having to locate and deal with other individual traders. https://www.youtube.com/watch?v=CO2EMZqMLUY :link:
and https://www.cmegroup.com/education/courses/trading-and-analysis/market-makers-vs-market-takers.html
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Buy-sell spread
The 'buy-sell spread' (the difference between the prices that you can buy and sell ETF units at) could be considered a cost for you when you buy or sell ETF units, although market makers usually ensure the spread remains relatively small.
If you're buying you can calculate the 'dollar spread' by subtracting the NAV from the offer price, and then calculate 'percentage spread' by dividing the 'dollar spread' by the offer price.
