Authorized participants play a key role in the primary market for ETFs. To be active as authorized participants, they must enter into a corresponding participation agreement with the ETF beforehand. These are the only partners authorized to purchase or redeem ETF units directly with the fund.
Authorized participants: Key partners in the primary market . . .
Although authorized participants may also invest in ETF units over the long term, as a rule they act as dealers on the open market, using their ability to exchange creation units with the underlying securities in order to provide liquidity for the ETF units while at the same time ensuring that the intraday market price of the ETF units approximates to the net asset value of the underlying assets.
. . . and in OTC trading
In addition, they also participate in over-the-counter trading (OTC trading). In OTC trading, ETFs are traded directly between the investor and the authorized participant, enabling big-ticket orders to be transacted very efficiently in various currencies at low cost.