ETF launching eludes investors

| Updated: December 03, 2017 11:23:21

Internet Photo Internet Photo

The stock exchanges are yet to launch the exchange traded fund (ETF) though nearly three years have already passed since the move was initiated.

The officials of the Bangladesh Securities and Exchange Commission (BSEC) said the ETF could not be launched within proposed deadlines as the stock exchanges are yet to formulate short selling regulation.

The ETF was supposed to be launched by December, 2014 and the securities regulator had already published the gazette notification on ETF rules on June 13 last.

According to BSEC officials, market maker rules and short selling regulations are required to launch the index-based ETF.

"We have completed the job from the regulatory end. But the stock exchanges have not yet finalised the short selling regulations. That's why the ETF is yet to be launched," a BSEC commissioner told the FE.

An ETF is an open-end Collective Investment Scheme (CIS) that continuously issues and redeems its shares of stock in creation of unit in exchange for basket and representing an index.

Asked, the managing director of Dhaka Stock Exchange (DSE) K. A. M. Majedur Rahman said the short selling regulation is likely to be finalised within second quarter of next year.

"There is a short selling regulation which remains suspended since 2006. After fine-tuning the existing regulation, the proposed ETF will be launched," Mr. Majedur told the FE.

He said the DSE is presently remains busy in modernising OTC (over-the-counter) market and introducing small cap board.

"Some technical issues are also related to ETF. After preparing required platform, the DSE will launch the proposed ETF," Majedur added.

The move of launching ETF came as part of the regulatory initiatives to introduce new products in the country's capital market for the sake of its diversifications.

In case of offloading the mutual fund, a portion of the fund is raised through the public offering. But, in case of the ETF no fund is raised through public offering as the authorised participants (APs) such as banks, broker dealers, professional trading houses and institutional firms contribute funds to create the ETF units and sell the units in the secondary market.

The BSEC officials said an Asset Management Company (AMC) will be the issuer of the ETFs. "The regulations of the ETF will be formulated considering the matter of risk minimisation," a BSEC official said.

The ETF will be listed with the exchange though having the characteristics of the open-end MF.

[email protected]


Share if you like