Basket creation of ETF
Creating an ETF that holds a basket of securities involves a few layers of screening. It first starts with an objective and an index will be constructed or selected based on that. The objectives may include choosing equities as the asset class, picking a geographical location and deciding on a factor of selection such as big cap or dividend yield. The index is then constructed based on these factors and finally the ETF will replicate at its best the index holdings of securities. The figure below summarises the basket creation of an ETF.