Tim Buckley: Greg, a large amount has been written about ETFs in the recent market place environment. They’re producing up the preponderance of buying and selling out there. They’re giving a ton of liquidity. Now, 90% of the buying and selling that goes on with ETFs takes place in the secondary market place. Just two buyers are discovering every other in the market place and they are setting the rate. In the 10% of instances wherever there’s an AP (approved participant) included, why really don’t you explain that method? Due to the fact as a consequence, factors like discounts arrive into play, and I believe it would be beneficial for our shoppers to understand that a small bit improved.
Greg Davis: So what comes about in a redemption scenario is an AP would be delivering ETF shares to Vanguard. Vanguard would in essence be delivering the underlying bonds of that ETF back again to the AP.
Tim: And so there the AP will get a basket of bonds.
Greg: That’s suitable.
Tim: They are not obtaining money, they are obtaining a basket of bonds that they are going to have to market. In a unstable environment, they are actually not fairly certain what they are going to be able to market.
Greg: And there is bigger uncertainty about the pricing of these bonds. And so they are going to demand people, essentially, some coverage for the price tag for any uncertainty about the rate that they are going to acquire in the marketplace when they have to go by and liquidate all these specific line goods.
Tim: So when an investor sees a price reduction on an ETF, they actually really should say that, hey, that’s the rate of liquidity. If I want out now that’s what I’m going to have to spend.
Greg: So that’s something that totally have to establish in. But they really should also believe if they really don’t need liquidity at that position in time, they are improved off waiting around. Right, they are improved off waiting around. But if you need that liquidity, that’s the rate you have to spend.