iShares - Guidance

Where and How to Trade, Conditions, Financial Clearing, Costs, Dividends, and Other Rights

Difference Between the Primary and Secondary Markets, Creation and Redemption, Measuring Liquidity

Definitions and Differences of Brokers Qualified for Trading and Authorized Agents, Creation and Redemption In-Kind

Market Impact, Share Value, Positive/Negative Arbitrage, Factors Determining Spreads and Comparisons

	What is the difference between the primary market and the secondary market?
	How does the creation/redemption process function?
	How is the liquidity of an iShares Index Fund calculated?
	How are the quotas traded if the trading volume on the Brazilian stock market is lower than the order that I want executed?

The primary market is where a creation order for new quotas or redemption of existing quotas is done directly with the fund administrator through Authorized Agents. The secondary market refers to transactions for the purchase and sale of quotas done on the stock market.

The creation/redemption process is an increase/decrease in the number of quotas issued by a given Index Fund. This process requires the Authorized Agent, in the case of a creation order, to deliver – to the administrator – assets from the fund creation basked in exchange for a minimum lot of fund quotas. In the case of a redemption order, the Authorized Agent delivers a minimum lot of fund quotas to the administrator in exchange for a redemption basket from the fund. For example, in the case of the creation of quotas in an Index Fund whose basket just has 50 (fifty) stocks, the Authorized Agent must deliver 50 (fifty) stocks to the administrator in predetermined quantities that equal a cash amount (as the case may be) and is to receive a minimum lot of fund quotas from the administrator. To access the composition of the baskets applicable to creations and redemptions of minimum lots of fund quotas. The transactions on the primary market are done exclusively by Authorized Agents.

iShares Index Funds are open funds, which benefit from the ability of Authorized Agents to create new quotas or redeem existing quotas at any time, thus adjusting market liquidity. Therefore, besides the volume of the fund quotas traded on the secondary market, the Index Funds have an additional level of liquidity deriving from the possibility of creating new quotas. This creation capability depends on the trading volume of the assets that comprise the basket. The latter is the determinative factor for the additional liquidity of the iShares Index Funds.

You will have to consult a broker who is also an Authorized Agent to evaluate the feasibility of trading on the primary market. The minimum lot of quotas on the primary market is 100,000 (one hundred thousand) quotas for iShares Index Funds.