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What is the Creation and Redemption process of SPIcE units?

April 26, 2017creation process redemption spice units

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What is the Creation and Redemption process of SPIcE units?

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SPIcE units can be created in minimum creation size of 25000 units called the “Creation Units”. A Creation Unit is made up of two components: the Portfolio Deposit and the Cash Component. An Authorized Participant can exchange Portfolio Deposit and Cash Component for SPIcE Units with the AMC. This results in creation of SPIcE units. Similarly, SPIcE units are redeemed the same way but in reverse. An Authorized Participant buys enough SPIcE units from the market to make a creation unit. He then exchanges with the Fund the creation unit for a basket of shares and cash. In such a case, such SPIcE units are destroyed and the underlying stocks are delivered out of the trust.