What is a market maker?

Market makers look at the price of the underlying assets to determine the market related price of Exchange-Traded Funds (ETFs). Let us assume that the market maker is tracking share prices. The price of all the shares in that index will be considered when determining the correct price of the EFT. Market makers place massive a buy order at approximately 0.5% below the combined price and a sell order 0.5% above the combined price. In other words the market maker creates a supply and demand. This ensures that you always pay a market related price for the ETFs that you buy. The one percent difference between the buy and the sell price is called the spread.