The ETF Arbitrage Loophole: Authorized Participants Manufacturing Phantom Equity Shares

The multi-trillion-dollar passive investing boom is built on a dangerous myth. The public believes that buying an ETF means purchasing a secure, fully collateralized slice of corporate America. The operational reality inside Wall Street's clearinghouses reveals a fundamentally decoupled derivative ecosystem sustained by synthetic supply. Financial investigator Warren Riggs exposes the mechanical engineering behind the modern index facade. This book deconstructs the elite oligopoly of Authorized Participants who exploit regulatory carve-outs to aggressively short-sell funds without securing borrows. The result is an uncollateralized shadow ledger running parallel to official corporate issuance. From the technical dynamics of Regulation SHO exemptions to the opaque negotiations of custom baskets, Riggs maps how temporal arbitrage systematically compromises market microstructure. Discover how rolling failures-to-deliver mask chronic imbalances, dilute corporate governance, and distort proxy voting metrics. "The ETF Arbitrage Loophole" is an urgent, forensically detailed autopsy of modern market plumbing. It details how the high-velocity generation of phantom shares artificially compresses realized volatility, forcing systemic inflation throughout the broader macroeconomy. This critical analysis is indispensable reading for institutional risk officers, quantitative analysts, and investors demanding the unvarnished truth behind passive indexing.