Creation Unit
The fixed block of fund shares that can be created or redeemed in a single transaction with the fund itself.
Funds do not issue or cancel shares one at a time; they deal in units of a stated size, commonly in the thousands of shares, together with a defined basket of assets or cash. The size makes fund-level dealing practical only for large firms, so everyone else buys and sells existing shares on the exchange. Unit size and the daily order cutoff time influence how tightly the arbitrage mechanism can hold the share price to the value of the holdings, because a large minimum raises the profit threshold at which arbitrage becomes worthwhile. For digital-asset products, the basket is expressed as a stated quantity of the asset per unit, or its cash equivalent.
In der Praxis
A product's prospectus states both the number of shares in a creation unit and the time by which an authorized participant must place an order for that business day.
Das häufige Missverständnis
That any investor can redeem shares back to the fund, when redemption occurs only in whole creation units and only through an authorized participant.