Mohammad Mufazzal
Dhaka Stock Exchange (DSE) has taken initiatives to issue Exchange Traded Fund (ETF), by December this year, officials said.
ETF is similar to an open-end mutual fund (MF). The move of the premier bourse comes as part of its initiatives to introduce new products in the country's capital market for the sake of its diversifications. The DSE has also submitted its formal proposal of issuing the ETF to the securities regulator.
An Exchange Traded Fund (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.
The ETFs may be index-based or actively managed or may pursue their investment objectives using physical or synthetic investment strategy.
The DSE officials said they have planned to introduce the index-based ETF setting a relation with the DSE-30 and Shariah Index.
When asked, the DSE managing director Dr. Swapan Kumar Bala said the ETF will be operated under the regulation of the CIS.
"The regulations of the existing CIS cover only the property related investments. We will be able to issue the ETF by bringing amendment to the regulations of the CIS," Mr. Bala told the FE.
In case of offloading the MF, a portion of the fund is raised through the public offering. But, in case of the ETF no fund raised is 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 purchasers will be allowed to buy the units of the ETF on the basis of availability." Mr. Bala said.
He said an Asset Management Company (AMC) will be the issuer of the ETF. "The regulations of the ETF will be formulated considering the matter of risk minimisation," the DSE managing director said.
Another senior DSE official said the ETF will be listed with the exchange despite having the characteristics of the open-end MF.
"As a result, the regulations will also include the provision so that the ETF can be listed," the official said.
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