Consultant

What Are SPDR ETFs?

June 6, 2025

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A Standard & Poor’s Depositary Receipt (SPDR) is a type of exchange traded fund that began trading on the American Stock Exchange (AMEX) in 1993 when State Street Global Advisors’ investment management group first issued shares of the SPDR 500 Trust (SPY). Sometimes called “spiders,” SPY is an ETF based on the S&P 500 Index, and each share represents an ownership interest in the 500 stocks in the S&P 500. Today, there are a number of other SPDR funds available to investors; while some track stocks based on market value, others are focused on specific market sectors.

Key Takeaways

SPDR exchange traded funds are issued by State Street Global Advisors and are designed to track indexes or benchmarks.
SPDR 500 Trust, sometimes called spiders, holds the same stocks as the S&P 500 Index.
ETFs differ from mutual funds in that shares are traded on the exchanges like shares of stock.
SPDR ETFs that focus on a specific market capitalization—small, mid, and large—also exist and some have been created to track specific market sectors like technology, utilities, or financials.
Selling SPDRs short or buying put options can add an element of hedging to a portfolio.

SPY vs. Mutual Funds

SPDR funds differ from mutual funds because shares of SPDR funds are not created for investors at the time of their investment. Instead, SPDRs have a fixed number of shares that are bought and sold on the open market and these shares trade on the exchanges like stock. Mutual fund shares, on the other hand, are created and redeemed by a mutual fund company.

The value of each unit in any SPDR exchange traded fund at any given time reflects the movement of the underlying index. Trading under the symbol SPY, the SPDR 500 Trust, for example, is designed to trade at approximately one-tenth of the level of the S&P 500. If the S&P 500 is at 1,800, the ETF shares will trade at roughly $180, but the relationship is not precise.

S&P Capitalization

SPDR ETFs have been created to specialize on market capitalization and industry sectors within the S&P 500. In terms of market value, examples include SPDR Portfolio S&P 400 Mid-Cap ETF and SPDR Portfolio S&P 600 Small Cap ETF. On Jan. 24, 2020, State Street Global Advisors announced index and name changes to some of these ETFs:

Courtesy SSGA.

SPDR Options, Futures, and Hedging

Since SPDR ETFs trade like stocks, shares can also be sold short. Many ETFs also have options tied to their respective performance, which can be used to hedge. When an investor has a long position in the S&P 500 SPDR ETF or to the stock market in general, for example, that investor will make money if the S&P 500 Index goes up. If the index goes down, the investor will begin to lose money on their investments. However, if that same investor hedges their bets by also shorting the SPDR or buying put options, then some risks can be mitigated, which is a practice known as hedging the market.

Specific Types of SPDRs

Of the niche types of SPDRs, some of the more specific categories are:

Broad Market SPDRs: These aim to mirror the performance of large, diversified stock indexes. The most well-known is the SPDR S&P 500 ETF Trust. Broad market SPDRs provide a simple and cost-effective way to gain core market exposure with one investment.
Sector-Based SPDRs: Sector SPDRs focus on individual segments of the economy, such as financials (XLF), energy (XLE), healthcare (XLV), and technology (XLK). These funds hold only the S&P 500 stocks that fall within a particular sector.
Cap-Size-Focused SPDRs: These ETFs are designed to target companies based on market capitalization. Those were discussed in the prior section.
Thematic or Strategic Beta SPDRs: Thematic SPDRs go beyond traditional indexing by focusing on specific investment themes or using alternative weighting strategies. These might include factors like dividend yield, volatility, or ESG screens.
International or Regional SPDRs: These funds provide exposure to markets outside the United States, either globally or in specific regions like Europe, Asia, or emerging markets. Some international SPDRs track broad indexes, while others focus on sectors or themes within foreign markets.

Special Considerations

One of the key advantages of SPDR ETFs is their low expense ratios, especially when compared to traditional mutual funds. For instance, the SPDR S&P 500 ETF Trust (SPY) has an expense ratio of just 0.09%. Even compared to other ETF providers like Vanguard or iShares, SPDRs remain competitive on fees across most of their broad and sector offerings.

SPDR ETFs are also favored for their tax efficiency. One of the primary reasons is how ETFs are structured. Most ETFs, including SPDRs, use a mechanism called in-kind creation and redemption which allows them to manage inflows and outflows without triggering taxable capital gains. Dividends from SPDR ETFs are still taxable when paid out, just like those from stocks or mutual funds.

What Is a SPDR ETF?

A SPDR ETF is a type of exchange-traded fund issued by State Street Global Advisors that aims to track the performance of a specific index. The most well-known SPDR is the SPDR S&P 500 ETF Trust which mirrors the S&P 500 Index.

How Does the SPDR S&P 500 ETF Work?

SPY works by holding the same 500 stocks as the S&P 500 Index in the same proportions. When the S&P 500 rises or falls, SPY typically moves in sync, trading at roughly one-tenth of the index’s level.

Who Issues SPDR ETFs?

SPDR ETFs are issued and managed by State Street Global Advisors, one of the world’s largest asset managers. State Street launched the first SPDR ETF in 1993 and has since expanded the SPDR lineup to include hundreds of ETFs across various asset classes, market segments, and investment strategies.

How Do SPDR ETFs Compare to Mutual Funds?

Unlike mutual funds, which are bought and sold only at the end of the trading day at net asset value, SPDR ETFs trade on exchanges throughout the day like stocks. ETFs typically have lower expense ratios than mutual funds and offer greater tax efficiency due to their structure. However, mutual funds may provide more access to active management and automatic reinvestment options.

The Bottom Line

SPDR ETFs offer opportunities for individual investors. Shares can be bought to match the performance of a market or index. SPDRs also have the flexibility to give a depth of market exposure through one of the ETFs that tracks a broader index. Or an investor can make a concentrated bet by investing in one of the SPDRs that specializes in a sector or specific market capitalization. SPDRs also have the flexibility to be used as hedging instruments.

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