How do you start an ETF Fund?

Question

The most famous ETF is (GLD). The sponsor of GLD is World Gold Trust Services, LLC in New York. I would like to know how did they get an ETF to trade on NYSE? What are the requirements for ETFs and how do you get them listed?

For instance, if I wanted to start an ETF that trades Baseball Cards or Beanie Babies, whatever, what are the steps?

Answer 1

Register with the SEC for starters.  Line up lots of money for another.

Answer 2

Unfortunately you would never get approval from any US stock exchange or the SEC to trade trade Baseball Cards or Beanie Babies. That just makes no sense.

ETF listing must be under SEC Rule 19b–4(e).

The Gold ETF is not quite the most "famous." In terms of volume, the SPY (S&P 500 Index) and QQQQ's (NASDAQ 100) are the most traded.

Answer 3

It would not be cost effective.

Answer 4

Well you wouldn't be able to do that because there isn't a recognised market in Baseball cards and therefore no recognised or established index. An ETF is a securitised version of something that already exists as a liquid market and who's object is to track that underlying market. Take Gold. There is an established valuation system for the daily price of gold that everyone follows and recognises (and trades on). So to start an ETF you buy a load of gold and put it into a safe place. Then you get the market(or market makers to buy the shares that you have issued against the physical gold and buy and sell those shares to the public. All ETFs work differently. Some run off the back of indices or Futures. Take the FTSE100 index. The ETF provider buys a load of all the shares in the FTS100 (from MMs) then swaps  those shares for their  ETF FTSE100 (in the same value) The MMs can job the ETFs (i.e. Buy the shares when they think they are cheap and swap them for ETFs when the price goes up and then sell the ETFs, and vice versa. The ETF provider makes a little turn on the ETFs, called the TER(Total Expense Ratio) and the MMs make a little bit of money on jobbing the stock. This is why the cost of ETFs (included in the share price) is lower then most trackers(passively managed funds) See http://www.shareworld.co.uk/index.php?pa... or if you have further questions see their homepage