Spider (SPDR)

What it is:

A spider (SPDR) is an exchange-traded fund (ETF) that tracks the Standard & Poor's 500 Index. SPDR stands for S&P Depository Receipts. However, the term can also refer to any ETF that tracks the S&P 500. The original SPDR ETF is managed by State Street Global Advisors.

How it works/Example:

A SPDR is valued at one-tenth the S&P 500 Index and trades on the American Stock Exchange at about 10% of the dollar value level of the S&P 500. Each SPDR represents a unit of ownership in a trust that holds a portfolio of stocks that track the performance and dividend yield of an index.

SPDRs trade like stocks, and like stocks, they can be shorted, purchased on margin, and pay regular dividends.

Why it Matters:

SPDRs are a way for investors and institutions to invest in the broad U.S. market and bet on its direction. Like most ETFs, SPDRs offer tax advantages over actual index mutual funds in that investors have more control over capital gains distributions.

Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.