when an ap sells stocks to the etf sponsor in return for shares in the etf the block of shares used in the transaction is called a creation unit if an etf closes with a share price of 101 and the value of the stocks that the etf owns is only worth 100 on a per share basis then the fund s price of 101 was traded at a premium to the fund s net asset value nav the nav is an accounting mechanism that determines the overall value of the assets or stocks in an etf 
conversely an ap also buys shares of the etf on the open market the ap then sells these shares back to the etf sponsor in exchange for individual stock shares that the ap can sell on the open market as a result the number of etf shares is reduced through the process called redemption the amount of redemption and creation activity is a function of demand in the market and whether the etf is trading at a discount or premium to the value of the fund s assets etfs in the united kingdomthe u k etf market is one of the largest and most diverse in europe with etfs listed on the london stock exchange lse that offer exposure to various asset classes and markets including equities fixed income commodities currencies real estate and alternative investments 9buying etfs in the u k allows inclusion in individual savings accounts isas which are tax efficient savings vehicles that allow investors to invest up to 20 000 per year without paying any income or capital gains tax on their returns 10 another benefit is that etfs attract no stamp duty which is a tax levied on ordinary share transactions in the u k 11u k investors can buy shares in u s listed companies from the u k but due to local and european regulations you re not allowed to purchase u s listed exchange traded funds etfs in the u k 12 there are u k based etfs that track u s markets as long as it has the ucits moniker in the name this means the fund is fully regulated in the u k and allowed to track u s investments 13for broad based exposure to u k equities there are several ucits etfs that track the ftse 100 index which consists of the 100 largest publicly listed companies in the country the hsbc ftse ucits etf is listed on the london stock exchange and trades under the ticker symbol hukx the etf has an ongoing charge of 0 07 and a dividend yield of 3 62 as of january 2024 14