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Frequently Asked Questions

WHAT ARE EXCHANGE TRADED FUNDS (ETFS)?

ETFs are investment funds that track an index, and is divided into equal units that are traded on the exchange during official trading hours. ETFs enjoy advantages of both mutual funds and stocks at the same time.

WHAT ARE THE MAIN FEATUERS OF (ETFS)?

1. Flexibility: ETFs are traded like any listed security during official trading hours.
2. Transparency: Information on the basket of securities, and Indicative Net Asset Value (iNAV) is readily available.
3. Liquidity: Market Makers provide bid and ask quotes to enhance liquidity.

HOW ARE (ETFS) TRADED?

ETF units can be traded like any other security through Brokers during trading hours. Also, units can be created and redeemed through the Market Maker or any other authorized party.

HOW ARE (ETF) UNITS PRICED?

Market Makers provide bid and ask quotes for ETFs close to their Indicative Net Asset Value (iNAV).

HOW CAN ONE INVEST IN ETF’S?

Similar to investing in stocks, there are two ways to invest in ETF’s.
One: During the IPO stage (primary market).
Two: Through the financial market (secondary market).

 

WHAT ARE THE BENEFITS OF INVESTING IN (ETFS)?

From the expected  gain similar to equities.

WHO WILL BE THE PROVIDER OF (ETFS)?

Authorized persons licensed by the Capital Market Authority (CMA) in Asset Management.

ARE (ETFS) LIMITED TO STOCKS ONLY?

ETFs are not limited to stocks only, they may also include other instruments or commodities such as gold and silver.

ARE THERE ANY LIMITS TO THE OWNERSHIP OF (ETFS)?

No, it is subject to ETF available volume in the stock market.

IS THERE ANY UPPER OR LOWER LIMITS ON THE NUMBER OF (ETF) UNITS THAT AN INVESTOR CAN BUY OR SELL?

Minimum ETF units that an investor can purchase over the exchange is one unit, whereas creation of ETF units would be as per the ETF Terms and Conditions.

WHAT IS THE TOTAL TRADING COMMISSION OF ETFS?

The total trading commission of ETFs is the same as equities market, which is 15.5 bps on each trade with no minimum commission.

IS THE UNIT PRICE OF (ETFS) EQUAL TO THE STOCK PRICES OF THE UNDERLYING CONSTITUENT OF THE (ETF)?

The trading price of ETFs units is subject to supply and demand. While the total Net Asset Value (NAV) of the unit represents the market value of assets consisting of the ETFs unit. Trading of ETFs units happens at a price close to the Net Asset Value (NAV).

IS THERE A RELATION BETWEEN (ETFS) PERFORMANCE AND THE PERFORMANCE OF THE UNDERLYING STOCKS OF THE (ETF)?

The ETF performance is bound to the index that the ETF is tracking. Also, the pricing of the ETF units is based on the NAV not the price of its constituents.

WILL (ETFS) TERMS AND CONDITIONS BE PUBLICALLY AVAILABLE BEFORE THE ETF STARTS TRADING ON THE PRIMARY AND SECONDARY MARKETS?

Yes, the Fund Manager, as per Capital Market Authority (CMA) regulations, is obliged to provide the ETF Terms and conditions by an adequate period ahead of the ETF trading.

HOW ARE (ETF) UNITS PRICED IN THE SECONDARY MARKET?

The ETF will be priced at NAV upon listing on the secondary market, then going forward ETF unit price will be determined by the market forces (supply and demand).

DO (ETF) OWNERS HAVE THE RIGHT TO ATTEND ASSEMBLIES AND VOTE?

ETFs are managed completely and directly by the fund manager and subject to the Investment Fund Regulations issued by the Capital Market Authority (CMA), therefore no general assembly is arranged for these funds.

ARE ALL INVESTOR CATEGORIES AND NATIONALITIES ALLOWED TO INVEST IN (ETFS)?

Yes, ETFs will be available to all categories of investors who are authorized to trade in the Exchange.

WHAT ARE THE RISKS OF INVESTING IN (ETFS)?

The risks of investing in an ETF are the same as those of investing in its underlying assets.