Authorised participants by the numbers

All iShares ASX listed ETFs are supported by numerous APs. On average, iShares Australian-domiciled ETFs have 11 “contracted” APs and 5 “active” APs (Figure 1). A contracted AP has an effective agreement in place with an ETF issuer, even if the AP does not regularly create or redeem ETF shares. An active AP has created or redeemed shares of an iShares ETF within the last year to July 2023.¹

Not all APs are active at the same time. For example, some institutions may complete formal paperwork to become an AP so they can participate when they see opportunities to profit or provide liquidity for key client demand. This presence of contracted APs helps ensure vibrant competition exists to provide ETF creation and redemption services. If an active AP were to step away, another contracted AP could step in to execute creation and redemption activity—even if they hadn’t been active in the fund previously.

Because larger ETFs—those with more assets under management (AUM)—typically have higher trading volumes and client demand, they tend to be supported by a greater number of APs than funds with smaller AUM.

Large iShares ETFs with over A$1 billion in assets are supported by more active and contracted APs, and iShares ETFs that trade over A$3m daily also benefit from more support from active/contracted APs (Figure 2).

The breadth of the AP universe should alleviate any concerns that iShares Australian listed ETFs rely too heavily on a limited number of institutions. Indeed, total creation and redemption activity is spread across many APs. In total, 7 APs created and redeemed shares over the year to August 2023. The AP with the highest percentage of activity, accounted 26% of all ETF creations and redemptions by gross dollar value (Figure 3).

APs are key contributors to smooth ETF operations; however, we should remember that trading on the secondary market is generally larger than the primary market. For ETF investors, this can mean reduced spreads and less trading in the underlying ETF basket of securities.

Based on data for one year to the end of July 2023, we estimate that the ratio of secondary market activity to primary market activity for iShares Australian listed ETFs is 1.9 (Figure 4), meaning that for every dollar created/redeemed in the primary market, $1.90 is traded on the exchange.

With the growth of the ETF market in Australia by both assets under management and number of ETFs, it is not a surprise to see that the number of primary market orders by APs has increased to support the new and less established products (lower but growing AUM and trading). For iShares ETFs in Australia, in the year to July 2023 compared to the previous year, the biggest growth in number of orders is in international equity ETFs, supporting the asset growth and new products (Figure 5). An efficient and cost-effective primary market process with a diverse number of APs is key to supporting this growth.

iShares Australia ETF creations and redemptions are spread over a diverse base of APs. iShares Australia has agreements in place with a multitude of APs, and while every AP is not always active in all funds at the same time, additional APs stand ready to step in when opportunities arise. Larger funds, by assets and by trading volume, may typically have more APs than smaller funds, but small funds take advantage of the scope of the AP universe. Overall, iShares Australia can use global AP relationships to bring an ETF ecosystem to the locally listed ETFs, creating a broad engagement by APs, supporting a healthy ETF ecosystem.²