I got to wondering, how do ETFs work behind the scenes when I buy shares in one?
Am I just sending money to the company that set it up to buy more shares in their holdings, or am I actually buying shares from another individual?
Is there a set number of shares that are available to by purchased, meaning their may be some price inflation due to scarcity or does the share price truly reflect the value of the underlying investments?
What got me wondering about this is Fidelity asked me if I wanted to make my investments available for loan. Most of my investments are ETFs so was wondering why someone needed to borrow my holdings. Even when loaned, I still earned dividends so not sure what the advantage of borrowing would be, unless the borrower also got dividends which then means dividends were paid twice for the same shares.
Any enlightenment would be appreciated.