Authorized Participant

Authorized participant - Authorized participants are large companies and other entities who that have been chosen by an exchange trading fund (ETF) sponsor to take upon themselves the responsibility of getting the underlying assets needed to create the exchange trading fund. Market makers and specialists in large institutions are often authorized participants. The authorized participant plays a crucial role in the development of an exchange-trading fund. They must secure large blocks of underlying shares of equity and other assets for the success of the exchange-trading fund. A second function of the authorized participant begins when the block of underlying securities have been obtained, that is when the authorized participant must transfer these securities usually to a custodian bank.