Did they do this without losing money? I think you still...

Did they do this without losing money? I think you still misunderstand how an ETF works.

Firstly the ETF isn’t an investment vehicle to make money necessarily from the units it holds. The URA ETF simply has to hold a proportional weight of all the different shares to ensure the value of the ETF goes up and down in proportion to the shares that are held. The purpose is to track the weighted prices of the stocks, that allows someone to buy URA units and have exposure to everything underneath, it may or may not perform well, it’s not the point of URA that anything part of the underlying index does well or poorly, just to be an easy way for retail to access exposure with less fees.

If you were to buy all the exposure yourself, you also pay brokerage on all those trades. If you simply buy some URA then you pay less because you only are buying URA shares, not all the underlying ones.

The URA doesn’t pay cash money for the shares they have, institutional traders be it prop trading firms or brokers, give the underlying shares to URA and in exchange they receive shares of URA which they can sell in the market and make cash from those who want to buy URA.

The reverse happens for divestment of shares, they don’t receive cash, those same institutional traders will return URA units to the ETF and in return they get all the underlying shares, which they can dump on market or perhaps if they have shorted the underlying they use them to return to the lender.

So you could work out an implied price by noting the changes in share units and mark them to market, but because they don’t pay cash for the shares it’s only implied. The institutional traders could get their shares from anywhere even, they could borrow them from a lender and give them to URA to get ETF units if they wanted even, or get them in a capital raising.

The ETF doesn’t make money from buying and selling because it’s the traders who are doing creation and redemption who are actually doing the buying and selling and the ETF is more like an exchange, think of its value as the sell side of the book.

ETF arbitrage is a big money maker for institutions.

I’m not sure if I have explained that well.