Answer: For greater tax efficiency, ETF portfolio managers select high-basis holdings for redemptions

## Explanation **Option B is correct** because ETF portfolio managers strategically select high-basis holdings for redemptions to improve tax efficiency. This allows them to realize capital gains at lower tax rates and maintain lower-basis securities in the portfolio. **Option A is incorrect** because the daily list of securities that an ETF wants to own is actually called the "creation basket," not the redemption basket. The redemption basket refers to the securities that will be delivered when shares are redeemed. **Option C is incorrect** because authorized participants (APs) do not absorb the costs of transacting securities for the ETF's portfolio. These costs are typically borne by the ETF itself or passed through to investors via the fund's expense ratio.

Author: LeetQuiz Editorial Team