ETFs try to reflect the movement of their net asset value, or combined value of all securities in an ETF’s portfolio divided by the number of ETF shares outstanding, as market makers or authorized participants create or redeem ETF shares by buying or selling baskets of underlying securities for ETFs.
Since ETFs trade like any other stock on an exchange, the ETF’s price can fluctuate throughout the day. ETFs typically update their underlying trading value, calculating the approximate NAV every 15 seconds throughout the trading day.
For ETFs that track international markets, the ETFs will naturally show a wider discount or premium to NAV since the U.S.-listed ETFs may be trading while the underlying overseas market is closed. However, if the underlying market has suspended trading on stocks, the divergence between an ETF’s price and underlying components may be exacerbated.
A similar case with the Greece ETF, Global X FTSE Greece 20 ETF (NYSEArca: GREK), has occurred. The U.S.-listed GREK is still trading but Greece has shut down the Athens Stock Exchange entirely after the government extended a bank holiday. [While Athens Exchange is Closed, the Greece ETF Show Goes On]
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Max Chen contributed to this article.