ETFs and corporate actions - Trading the un-tradable.

So

Say a large cap goes into a trading halt

For some announcement / corporate action

And various index futures, and ETFs it's included in are still trading

...

Any one who knows what I mean - feel free to share war stories.

Fortunes made & lost etc

 

The ETF stops tracking it's underlying because no one can arb the creation units. No free lunch.

 

Uh
I've seen / been involved in situations where we/they would still make block prices and lay it off with futures temporarily, taking on the synthetic delta of the halted leg.

Im looking for recent stories / disasters.

 

you do not need the entire constituent basket to create/redeem.

 

Talking "vs close" cash creates?

 

You certainly do for most, can you point out an exception?

 

I see it a lot in biotechs. Stock halted for drug announcement and etfs are stil trading in after hours and regular session "implying" a price for the halted stock

 

Yep. Get close prices. Back out those legs. Get an implied for the halted.

I reckon there's got to be a reasonable trade there from time to time. Trade the halted stock via the etf, minus other legs.

 

there's a component "cash in lieu" of delivering shares. also, your broker most likely will give a large haircut if you 95% balanced

 

But they're not going to allow "cash in lieu" for a component that isn't trading at the time, since there isn't a way for them to determine what the amount should be.