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Hi, can explain how CSPX that trade in LSE track the S&P500 at the trading time when US Market still not yet opened ?
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Tan Choong Hwee
Edited 29 Nov 2021
Investor/Trader at Home
Trading of ETF itself and ETF trading of underlying stocks are 2 different activities. You may want to read this article to understand how ETFs works:
https://www.etf.com/etf-education-center/etf-ba...
The Creation/Redemption Mechanism is the key to how ETFs are created and redeemed in the form of Creation Units by the Authorized Participants. Basically the underlying shares are put together by Authorized Participants, who bought the shares in exact allocation as the index, packaged it as Creation Units and delivered them to ETF provider. Once ETFs are created, they are traded just like regular shares, whose price are subjected to supply and demand in the market.
In summary, CSPX is traded in LSE during LSE trading hours, what investors buy/sell are the Creation Units representing the underlying shares, which are traded during US market trading hours.
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Futures run 23.5hours. You can look at the S&P500 futures market. Professionals tend to trade in the futures market because you can get in and out even after markets are closed in your stock exchange.
Change in price swings can be reflected here before your market opens