Question

As it pertains to ETFs, the role of the custodial bank is to:

a. physically hold the securities in a fund

b. break up a creation unit into individual ETF shares

c. record the fund’s investment objective

d. both a & b

Answer 1

The correct answer of the above question is 'd'. The role of custodian bank, with regards to ETF is to physically hold the securities and it also acts on the redemption requests raised by the holders as and when necessary, thus it has the power to break up the creation unit into individual ETF shares as well. Custodian bank's primary role is to safeguard the ETF assets in an effective manner, it also provide various other services like trade processing, settlement etc.