"What is a SPDR ETF"
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SPDR stands for Standard&Poors Depositary Receipts. Traders call them Spiders. They were originally issued January 29, 1993 and were the first Exchange Traded Fund or ETF.
The Spiders ETF fund is a kind of trust. Per its prospectus, it's "SPDR Trust, Series 1 (A Unit Trust Investment)." It is a "Pooled Investment Designed to Closely Track the Price and Yield Performance of the S and P 500 Index." The Spider Trust trustee is the State Street Bank and Trust Company in Boston MA.
The SPDR fund holds shares in the Standard&Poor's 500 index in the same proportion as the index itself
The shares of stock are in proportionate to all 500 companies in the index itself. That's how it's net asset value remains closely aligned with that market index. Your one SPDR share buys you an undivided interest in that pool of the stock of those 500 companies.
This eliminates the cost of running the S&P Exchange Traded Fund. All they have to do is hold the shares of stock. Sometimes Standard&Poors changes the index itself, kicking one company out and replacing it with another company. Then the Spider ETF must do likewise, selling all shares of the banished company and buying the proper proportion of the newly added company.
The trading symbol of Spiders is SPY. Since the shares of SPY trade back and forth every day depending upon supply and demand, it sometimes happens that the actual prices of Spider shares differs from its underlying asset value or net asset value per share. The most common term for the "true" value of a Spider S&P ETF share is underlying trading value.
This underlying trading value shifts constantly during the day, of course, because the prices of each of the 500 stocks are constantly moving up and down. So the underlying trading value is calculated every 15 seconds, and this number goes by the symbol SXV. When there's enough of a discrepancy, arbitrageurs step to buy and sell, keeping SPY and SXV closely aligned.
There're around 20 market makers for S&P Spiders on the American Stock Exchange. Creation Units (the number of shares an Authorized Party can buy to create new shares) are 50,000 shares or multiples of that. Dividends are distributed quarterly.
Another popular ETF Exchange Traded Fund is the Diamonds, which tracks the 30 stocks of the Dow Jones Industrial Average.
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