ETF

Introduction on Exchange Traded Funds (ETF)

Exchange Traded Fund:

Exchange Traded Fund is a security that tracks an index, a commodity or a sector like an index fund or a sectoral fund but trades like a stock on an exchange. It is similar to a close-ended mutual fund listed on stock exchanges. ETF's experience price changes throughout the day as they are bought and sold.

Procedure of creation of ETFs:

Type of ETFs:

Equity ETF's :
Equity ETF is a basket of stocks that reflects the composition of an Index, like S&P CNX Nifty or BSE Sensex. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Think of it as a Mutual Fund that you can buy and sell in real-time at a price that changes throughout the day. Currently there are eleven equity ETF's which can be traded in BSE.
Liquid ETF's :
Liquid ETF's are the money market ETF's, the investment objective of which is to provide money market returns. Liquid BeES launched by benchmark mutual fund is the first money market ETF in the world. Liquid BeES will invest in a basket of call money, short-term government securities and money market instruments of short and medium maturities.
Gold ETF's:
Gold ETF is a special type of Exchange traded fund that tracks the price of gold. Currently there are six gold ETF's which can be traded in BSE.

ETF's Vs. Open Ended Funds Vs. Close Ended Funds

Parameter	Open Ended Fund	Closed Ended Fund	Exchange Traded Fund
Fund Size	Flexible	Fixed	Flexible
NAV	Daily	Daily	Real Time
Liquidity Provider	Fund itself	Stock Market	Stock Market / Fund itself
Sale Price	At NAV plus load, if any	Significant Premium / Discount to NAV	Very close to actual NAV of Scheme
Availability	Fund itself	Through Exchange where listed	Through Exchange where listed / Fund itself.
Portfolio Disclosure	Monthly	Monthly	Daily/Real-time
Uses	Equitising cash	Equitising cash	Equitising Cash, Hedging, Arbitrage
Intra-Day Trading	Not possible	Expensive	Possible at low cost