Explanation

Statement 3 is correct: Both security lending and tracking error are implicit costs for ETF investors.

Analysis of Each Statement:

Statement 1 - INCORRECT

• For active short-term ETF investors, commission and spreads are actually MORE significant than management fees and tracking error
• Short-term traders frequently enter and exit positions, making transaction costs (commissions, bid-ask spreads) the primary cost consideration
• Management fees and tracking error matter more for long-term buy-and-hold investors

Statement 2 - INCORRECT

• An ETF's daily price is NOT set to its NAV - this is a fundamental misunderstanding
• ETF prices are determined by market supply and demand throughout the trading day
• While arbitrage keeps ETF prices close to NAV, they can and do trade at premiums or discounts

Statement 3 - CORRECT

• Security lending: ETF issuers can lend out portfolio securities to generate revenue, but this introduces counterparty risk and operational complexity
• Tracking error: The difference between ETF performance and its benchmark index represents an implicit cost to investors
• Both are implicit costs that investors bear without direct payment

Therefore, Statement 3 accurately identifies two important implicit costs of ETF ownership.