Exchange-traded fund at bourses unlikely to be launched this year

Mostafizur Rahman | Published: 22:45, Sep 10,2017

 
 

A file photo shows a man monitoring movement of stock prices at a brokerage house in Dhaka. Exchange Traded Fund at the capital market is unlikely to be launched this year despite publishing of gazette notification on ETF rules by Bangladesh Securities and Exchange Commission. — New Age photo

Exchange Traded Fund at the capital market is unlikely to be launched this year despite publishing of gazette notification on ETF rules by Bangladesh Securities and Exchange Commission.
Brokers said that the delay in issuing ETF could hinder the prospect of the market and the aim of its diversification.
BSEC published gazette notification containing the ETF rules on June 13 this year.
Asked why the bourses were delaying in issuing the ETF, the DSE managing director KAM Majedur Rahman told New Age that the management was working on the matter.
He also said the policy regarding its launch might would be compiled at the end of December this year.
Another official of DSE said it would need time to start a new product in the market. DSE is trying to launce ETF by December this year.
Experts said that it took two years to finalise the rules and one year more year to publish the gazette notification. The slow pace of management activities could linger more than a year for the product to be launched.
BSEC executive director Saifur Rahman said the regulatory body approved the ETF rules and now it is the responsibility of the bourses to take the next move.
In October 2014, the country’s premier bourse proposed BSEC to allow the launch of ETF.
Apart from the bourse’s business plan, diversifying products was the primary reasons for the bourses’ move, DSE officials said.
An ETF is a marketable security that tracks an index, a commodity or a basket of assets like an index fund.
Unlike mutual funds, it trades like a stock on an exchange. ETFs undergo price changes throughout the day as they are bought and sold.
The ETFs may be index-based or actively-managed or may pursue their investment objectives using physical or synthetic investment strategy.
Actively managed funds, for example, have a fund manager who chooses investments to try and beat a specific benchmark.
According to the rules published by the BSEC, the ETF fund must be worth at least Tk 50 crore that could enlarge with the participation of the authorised participants.
For formation of an ETF, sponsor-directors will have to make at least 10 per cent initial investments of the targeted size in the form of stocks not in cash before applying to the commission.
Investment of the sponsor-directors in the fund will remain locked-in for a period of two years from the date of its enlistment with the stock exchanges, while sponsors will have to maintain at least two per cent holdings constantly even after three years of its enlistment.
Investors will get cash dividend instead of stock dividend from an exchange traded fund if they express their desire for such dividend to the fund’s asset manager.
There was no provision for issuing cash dividend in the draft Bangladesh Securities and Exchange Commission (Exchange Traded Fund) Rules 2016.
Units of an ETF will be traded around its net asset value per unit as authorised participants, who will turn into market makers for the fund, always remain active on the trading floor to keep prices of the units within a certain level. 

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