Authorized Participants (AP)

Authorised participants are large financial firms (usually big broker-dealers or banks) that work with an ETF/ETP provider to create new shares of the fund or redeem (remove) shares in bulk, helping keep the fund’s market price close to the value of what it owns (its net asset value, or NAV).

Authorised Participants (APs) in Crypto
Authorised participants are large financial firms (usually big broker-dealers or banks) that work with an ETF/ETP provider to create new shares of the fund or redeem (remove) shares in bulk, helping keep the fund’s market price close to the value of what it owns (its net asset value, or NAV).

What Are Authorised Participants (APs)?

Authorised participants are the ETF’s wholesalers. When demand rises, they create extra shares by delivering either the actual assets (e.g., bitcoin) or cash to the fund. When there are too many shares in the market, they redeem them by returning ETF shares and receiving assets or cash back. This back-and-forth keeps the ETF’s price near its NAV and makes the product easier to trade.

How Do Authorised Participants Work?

  • Creation (adding shares):
    1. AP gathers the required “basket” (the assets or cash).
    2. AP delivers the basket to the fund’s custodian.
    3. The fund issues a large block of new ETF shares (a “creation unit”) to the AP.
    4. The AP sells those shares on the exchange to meet investor demand.
  • Redemption (removing shares):
    1. AP buys ETF shares in the market.
    2. AP returns them to the issuer.
    3. The fund sends back the basket (assets or cash).
    4. Those ETF shares are cancelled, reducing supply.

Why Authorised Participants Matter to Crypto

  1. Keep prices honest – They create/redeem shares to pull the ETF price back towards NAV, reducing premiums/discounts.
  2. Better tradability – Their ability to add/remove shares supports tighter bid–ask spreads and deeper markets.
  3. Lower friction with in-kind – Where allowed, APs swap the actual coins (not cash), avoiding extra conversions and slippage.
  4. Watch-outs – If only a few APs are active—or they step back during turmoil—premiums/discounts can widen until activity resumes.

Key Takeaways – Authorised Participants (APs)

  • Who they are: Big firms that make or remove ETF shares in bulk.
  • What they do: Keep ETF prices near NAV and help markets run smoothly.
  • Crypto angle: “In-kind” (moving coins, not cash) is usually cheaper and tracks better.
  • Risk: Limited AP activity can mean wider premiums/discounts in choppy markets.