Which statement accurately describes the ETF sponsor?

• A. The custodian holds the underlying assets
• B. The market maker ensures liquidity
• C. The entity that creates and manages the ETF
• D. Authorized participants create or redeem ETF shares

Answer: (C)

The ETF sponsor is the issuer behind the fund—the entity that creates the ETF, defines its objective and structure, and oversees its ongoing management (often coordinating with the fund manager). That’s why describing it as the entity that creates and manages the ETF is the best fit. The custodian’s role is simply safekeeping the underlying assets, not creating or running the fund. Market makers provide liquidity for trading, while authorized participants handle the creation and redemption of ETF shares with the sponsor, but they are not the sponsor themselves.