Meet with PWL Capital: https://pages.pwlcapital.com/en-ca/contact-us?utm_source=content&utm_medium=youtube&utm_campaign=rationalreminder_yt Avoid Online Scams https://pwlcapital.com/stay-safe-online/ Ben Felix or any PWL employee will never reach out to you on social media platforms or WhatsApp to give financial advice. These are scammers trying to commit fraud. In this episode, we are joined by Morley Conn, Director of Sales and Strategy, ETF Services at Scotia Global Banking and Markets, for a deep dive into the mechanics of the ETF ecosystem. With more than 30 years of experience across equities, foreign exchange, and money markets, Morley pulls back the curtain on the creation and redemption process, ETF liquidity, block trading, market making, and the often-overlooked infrastructure that allows ETFs to trade efficiently every day. We explore how authorized participants and market makers facilitate liquidity, why ETF liquidity is driven by the underlying holdings rather than trading volume, and how large institutional ETF trades are executed. Morley also explains the differences between Canadian and U.S. ETF markets, discusses common misconceptions investors have about ETF trading, and shares practical advice for retail investors seeking better execution. This conversation offers a rare look at the operational machinery behind one of the most important innovations in modern investing. Timestamps: 0:00:00 Intro 0:05:16 The players involved with creating and managing an ETF 0:08:07 How an ETF is created and redeemed 0:12:32 How the creation and redemption process is related to managing the ETF portfolio 0:13:20 How this is different from mutual fund portfolio management 0:15:41 How secondary market trading affects the ability of ETFs to use the Capital Gains Refund Mechanism 0:18:29 What happens when an ETF's NAV diverges from its market price 0:22:16 How ETF block pricing works when there are illiquid or infrequently priced underlying assets 0;23:47 How the authorized participant manages its risks when the underlying is illiquid or trading on a closed market 0:24:52 What determines how wide the bid-ask spread is on an ETF 0:30:58 How the authorized participant's arbitrage activity affects market depth for people placing large trades 0:35:27 The difference between a NAV trade and an at risk trade, and when each one makes more sense 0:37:57 The involvement market makers have with new ETF products 0:39:58 What retail investors need to be aware of when trading ETF units 0:43:45 When it makes sense to place a block trade order for an ETF 0:45:13 How ETF blocks get priced 0:50:23 What happens to an ETF's assets when the ETF is closed down 0:54:00 The percentage of ETF flows that are retail versus institutional 0:55:27 The types of institutions using ETFs 0:56:29 How retail ETF activity differs from institutional 0:59:51 How the Canadian and U.S. ETF markets differ 1:03:57 How the tax efficiency of ETFs in Canada differs to that of the U.S. 1:05:45 The most common ETF misconceptions 1:10:09 How CRM3 total cost reporting will affect the ETF market 1:13:27 Morley defines success in his life 1:16:22 Disclaimer Links From Today’s Episode: Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/ Rational Reminder on YouTube — https://www.youtube.com/channel/ Benjamin Felix — https://pwlcapital.com/our-team/ Benjamin on X — https://x.com/benjaminwfelix Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/