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Where do ETFs initially come from?

ETFs are "created" by large investors and institutions in block- sized units of shares (or multiples thereof) known as "Creation Units" of a respective ETF. A creation requires a deposit with the trustee of a specified number of shares of a portfolio of stocks closely approximating the composition of a specific index and cash equal to accumulated dividends in return for specific Index Shares. Similarly, block-sized units of ETFs can be redeemed in return for a portfolio of stocks approximating the index and a specified amount of cash. A unit of 50,000 shares (or multiples thereof) is required to create SDPRs, Nasdaq-100 Index Tracking Stock, Select Sector Funds and DIAMONDS, while a unit of 25,000 shares is required to create MidCap SPDRs.

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