At its heart is a hugely developed proprietary trading operation, meaning it makes bets with its own funds rather than those from investors.
It is best known for giving liquidity to assets by offering a guaranteed buy and sell price, particularly within the booming sphere of exchange-traded funds (ETFs) – pooled securities that track assets such as stocks.
Market maker? Jobber?
The complexity presumably coming from how ETFs have an “actual” value, given that they can be either mimiced by holding the underlying, or can be swapped in and out for the underlying. So, there’s the market price of the ETF which varies according to ebb and flow, then also that change in the underlying and balancing across the two of them could indeed be profitable if you can do the calculations.
Yes, they’re a broker in ETFs. But more importantly they’re an “authorised participant”. They’re arbitraging the price of the ETF against a “creation unit” – a package of all the shares in the index the ETF tracks, which is what keeps the price of the ETF in line with the index.
Arbitrageur