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Understanding ETF Premiums and Discounts

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One of the benefits of Exchange Traded Funds is the fact that the price of ETF units generally reflect the market value of its holdings. Understanding ETF Premiums and Discounts.

One of the benefits of Exchange Traded Funds is the fact that the price of ETF units generally reflect the market value of its holdings. Understanding ETF Premiums and Discounts.

Market Price vs. NAV

Since ETFs trade on a stock exchange, they have two end-of-day “values”. The first is a closing market price, which is determined by trading activity on the exchange. Typically, this is the price at which the units last traded during the trading session (or the mid-point of the bid and ask quotes if the ETF does not trade during that trading session). The second value is Net Asset Value (NAV), which is calculated by the ETF’s independent fund accountant after the market closes. NAV is the weighted-average price of the ETF’s underlying securities, minus liabilities such as management fees and expenses, then divided by units outstanding. Understanding ETF Premiums and Discounts.

What is a Premium or Discount?

A premium or discount to NAV occurs when the market price of an ETF on the exchange rises above or falls below its NAV. If the market price is higher than NAV, the ETF is said to be trading at a “premium”. If the price is lower, it is trading at a “discount”. An ETF may trade at a premium or discount when, for example;

· its underlying assets trade at different hours than the stock exchange (e.g., commodities)
· its underlying assets trade infrequently (e.g., bonds)
· markets are in a heightened state of instability or flux (e.g., at market open or close)

Many ETFs track well-known indices for which performance data is independently reported by the stock exchange and financial news and data providers such as Thomson Reuters or Bloomberg. The daily closing price they quote is usually the price at which units last traded during the trading session. For ETFs that don’t trade frequently throughout the day, the quoted “last price traded” may not correspond to the daily change in the value of the ETF’s underlying index or basket of securities. This might lead an investor to mistakenly conclude that an ETF is trading at a premium or discount to its NAV.

Market Makers and their Role The majority of Canadian-listed ETFs generally trade with a tight bid/ask spread on either side of NAV, regardless of how often they trade. A tight bid/ask spread is facilitated by the presence of a “market maker”, a designated broker-dealer firm that tracks an ETF’s NAV throughout the trading day. The market maker is obligated to ensure liquidity and to attempt to maintain a tight bid/ask spread close to NAV. It does this by buying or selling ETF units from its own inventory when there are too few buyers or sellers in the market. This allows investors to get their orders filled as near to NAV as possible, when they choose to execute them, regardless of trading volume.

How a Premium or Discount can Occur

Understanding ETF Premiums and Discounts. There are three main reasons why the closing market price of an ETF may deviate from its NAV on any given day:

1. The last trade of the day usually occurs at the bid or ask price posted by the market maker, which reflects a spread on either side of NAV
2. The last daily trade of the ETF on the exchange may occur earlier in the trading day rather than at the market close*
3. The ETF’s underlying assets may trade infrequently or at different hours than the stock exchange (e.g., commodities or bonds)

*The greater the time between the last trade and the close of the market, the greater the spread can be.

The chart below illustrates a hypothetical ETF trading at a discount to NAV on Day 1, and how this results in a higher price change on Day 2:

ETF discount

For Illustration Purposes Only Premiums and discounts usually converge towards the NAV on the following trading day.

Horizons ETFs is a member of Mirae Asset Global Investments. Commissions, trailing commissions, management fees and expenses all may be associated with an investment in exchange traded products managed by AlphaPro Management Inc. and Horizons ETFs Management (Canada) Inc. (the “Horizons Exchange Traded Products”). The Horizons Exchange Traded Products are not guaranteed, their values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the Horizons Exchange Traded Products. Please read the prospectus before investing.

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After one year, BTC ETFs in the US have reached $660B in trading volume; the UK and Hong Kong are making progress in crypto adoption and regulation

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The crypto investment journey is shaped by volatility, even in a bull market. Significant longer-term returns are frequently accompanied by substantial short-term drawdowns.

The crypto investment journey is shaped by volatility, even in a bull market. Significant longer-term returns are frequently accompanied by substantial short-term drawdowns.

The table below from our research team shows how many Bitcoin drawdowns of 10% or greater there have been since 2010. In this bull cycle, we anticipate similar short-term fluctuations as price discovery unfolds. However, as BTC continues to mature, these drawdowns may be less severe and volatility may continue to come down over time.

Source: Hashdex Research with data from Messari (from July 21, 2010 to December 31, 2024).

Market Highlights | Jan 06 2025 – Jan 12 2025

One-year anniversary US bitcoin ETFs

• Spot bitcoin ETFs recorded a total trading volume of $660 billion in the last 12 months, with $36.2 billion in total net inflows.

• The unprecedented success of these products underscores the important role of ETFs in institutional adoption and price action throughout 2024.

Hong Kong sets up blockchain “guide” for banks

• Hong Kong’s Monetary Authority set up a “supervisory incubator” to help banks manage risks with blockchain adoption and experimenting.

• This initiative highlights the growing importance of blockchain technology worldwide and Hong Kong’s plan to become a crypto hub.

UK crypto staking legislation

• The UK treasury amended legislation enabling crypto staking services to be exempt from the rules of governing collective investment scheme.

• This supports our perspective that more regulatory clarity for crypto investors will come in 2025, helping to accelerate adoption.

Market Metrics | The Nasdaq Crypto Index™

This week was marked by a drawdown for crypto assets, with the NCI™ falling 4.7%. Still, year to date, the index only lags gold (+2.3%) in performance, reinforcing the “debasement trade” theory we presented in the last Hash Insider.

Source: Hashdex Research with data from CF Benchmarks and Bloomberg (from December 31, 2024 to January 12, 2025).

It was a red week for all NCI™ components, with XRP (+6.1%) being the lone exception. Potential drivers of this negative performance include better-than-expected US payroll data, which might suggest higher inflation in the future, a traditionally bearish driver for short-term price action.

Source: Hashdex Research with data from Messari (from January 05, 2025 to January 12, 2025).

Market Metrics | Indices tracked by Hashdex

Source: Hashdex Research with data from CF Benchmarks and Vinter (from January 12, 2024 to January 12, 2025).


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Information för innehavare av Valour Fantom (FTM)-certifikat

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Information för innehavare av Valour Fantom (FTM)-certifikat: Detaljer om Sonic-migreringen och byte av namn. Bytet från Fantom (FTM) till Sonic (S) markerar övergången till det nya Sonic huvudnätet, med FTM-innehavare som kan uppgradera sina tokens till S i förhållandet 1:1. Valour kommer att hantera hela migreringsprocessen på uppdrag av Valour Fantom (FTM) certifikatinnehavare, vilket säkerställer en sömlös övergång.

Information för innehavare av Valour Fantom (FTM)-certifikat: Detaljer om Sonic-migreringen och byte av namn. Bytet från Fantom (FTM) till Sonic (S) markerar övergången till det nya Sonic huvudnätet, med FTM-innehavare som kan uppgradera sina tokens till S i förhållandet 1:1. Valour kommer att hantera hela migreringsprocessen på uppdrag av Valour Fantom (FTM) certifikatinnehavare, vilket säkerställer en sömlös övergång.

Som en del av denna process kommer certifikatet att döpas om från Valour Fantom (FTM) SEK till Valour Sonic (S) SEK.

Det är Valours mål att lägga till gratis airdrops av betydande värde till certifikatens NAV (Net Asset Value) när det är möjligt. Det är dock viktigt att notera att värdefulla airdrops ofta inte distribueras fritt till tillgångsinnehavare. Istället tilldelas dessa airdrops vanligtvis till betydande användare och bidragsgivare till nätverket som kompensation för deras aktiva engagemang och stöd till projektet. I situationer där distributioner är baserade på specifikt användarengagemang eller bidrag, är det osannolikt att Valour tar emot dessa airdrops.

Innehavare av Valour Fantom (FTM) behöver inte vidta några åtgärder, eftersom Valour kommer att hantera alla aspekter av utbytet och integrationen.

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Fidelitys Bitcoin ETF ser utflöden på 257 miljoner dollar, vad händer?

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Enligt Lookonchain-data från den 10 januari såg Fidelitys Bitcoin ETF betydande utflöden, vilket återspeglar försiktiga investerares sentiment. Det var emellertid inte bara Fidelitys Bitcoin ETF som såg utflöden, det gäller även denna emittents Ethereum ETF. Samma sak gäller även för andra amerikanska börshandlade fonder som spårar kryptovalutor.

Enligt Lookonchain-data från den 10 januari såg Fidelitys Bitcoin ETF betydande utflöden, vilket återspeglar försiktiga investerares sentiment. Det var emellertid inte bara Fidelitys Bitcoin ETF som såg utflöden, det gäller även denna emittents Ethereum ETF. Samma sak gäller även för andra amerikanska börshandlade fonder som spårar kryptovalutor.

Amerikanska Bitcoin ETFer såg ett nettoutflöde på 2 152 BTC (cirka 201,21 miljoner USD), där Fidelitys Bitcoin ETF bidrog till detta med ett utflöde på 2 752 BTC (257,26 miljoner USD). Trots detta fortsätter Fidelity att inneha betydande 205 488 BTC värderade till 19,21 miljarder dollar.

På liknande sätt hade Ethereum ETFer ett nettoutflöde på 45 684 ETH (148,11 miljoner USD), främst driven av Fidelity, som stod för 44 998 ETH (145,88 miljoner USD).

10 Bitcoin ETFer

NetFlow: -2 152 BTC (-$201,21 MUSD) varav Fidelitys utflöden -2 752 BTC (-257,26 M) och har för närvarande 205 488 $BTC($19,21B) under förvaltning.

9 Ethereum ETFer

NetFlow: -45 684 ETH(-$148,11 miljoner) varav Fidelity utflöden 44 998 ETH (145,88 MUSD).

Fidelitys Ethereum-innehav uppgår nu till 415 503 ETH, värderat till 1,35 miljarder dollar. Dessa rörelser tyder på en omkalibrering av innehav, möjligen påverkad av marknadsförhållanden eller strategisk ombalansering när investerare navigerar i början av 2025-trender.

BlackRock överglänste av Fidelity i spot Bitcoin ETF

Denna utveckling följer en utmanande period för BlackRock, som upplevde två betydande Bitcoin-utflöden i december – det största sedan ETFernas start.

Fidelitys aggressiva ackumulering belyser dess engagemang för att stärka sin position på krypto-ETF-marknaden, vilket signalerar växande institutionellt intresse och konkurrens i denna snabbt utvecklande sektor.

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