An authorized participant (AP) is a recognized body that has a relationship with an ETF provider to create or redeem exchange traded funds (ETFs). Most APs are market makers or large investment houses.
An authorized participant has the ability to approach an ETF provider with either:
- The exact number of securities which the ETF provider uses to make an ETF, which the AP will exchange for the ETF itself
- An ETF, which the AP will exchange for the underlying securities which make up the ETF.
Typically, these exchanges are done in blocks referred to as creation units.