An ETF that uses 'Synthetic Replication' typically holds a basket of collateral and enters into a swap agreement. What is the primary role of the counterparty in this arrangement?

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In synthetic replication, the counterparty (usually a bank) swaps the return of the index with the ETF in exchange for the return on the fund's collateral.

An ETF that uses 'Synthetic Replication' typically holds a basket of collateral and enters into a swap agreement. What is the primary role of the counterparty in this arrangement?

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