GlossaryAdvanced

Authorized Participant

A large financial institution permitted to create and redeem ETF shares directly with the issuer, keeping the share price tied to the underlying asset.

An Authorized Participant (AP) is a large bank or financial institution — not the ETF issuer and not a retail investor — permitted to create and redeem an ETF's shares directly with the issuer, generally in large blocks.

When a spot ETF's share price drifts from its net asset value, an Authorized Participant's arbitrage activity (creating new shares when the price is high, redeeming shares when it's low) is what pulls the price back in line — see Kaavon's "Spot Crypto ETFs Explained" research article for the full mechanism.

Examples

Major banks commonly act as Authorized Participants for large spot crypto ETFs.
Retail investors buy and sell ETF shares on the open exchange and never interact with the Authorized Participant creation/redemption process directly.