When the fund has a premium in the secondary market, investors can use the difference between its net value and the net value of OTC funds for arbitrage. For example, when the etf price in the market is greater than the net value, investors will buy a basket of stocks from the secondary market, then convert them into etf fund shares in the primary market according to the net value, and then sell ETFs at high prices in the secondary market to complete arbitrage.
It should be noted that the premium rate should at least cover the transaction cost, so that arbitrage can be profitable. Transaction costs include the buying cost of a basket of stocks (commission, transfer fees, etc. ), etf subscription cost, etf selling cost (commission, etf selling excluding stamp duty and transfer fees). Generally speaking, commissions and subscription fees can be relatively low prices for large investors.