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Bourse explains rules for exchange-traded funds

Update: May, 21/2014 - 08:20

For listing, an exchange-traded fund (ETF) should have a minimum chartered capital of VND50 billion (US$2.4 million), at least two authorised participants with one or both of them being a broker or dealer (at HOSE), according to proposed regulations. — Photo vnexpress

HCM CITY (VNS) — Foreign investors will be able to own up to 100 per cent of exchange-traded funds, participants heard at a seminar held by the HCM Stock Exchange (HOSE) on Tuesday.

For listing, an exchange-traded fund (ETF) should have a minimum chartered capital of VND50 billion (US$2.4 million), at least two authorised participants with one or both of them being a broker or dealer (at HOSE), according to proposed regulations.

ETFs must be licensed for by the State Securities Commission, and HOSE has to reply to the listing application within 10 days.

ETF is an investment fund traded on stock exchanges. It holds assets such as stocks and bonds and trades close to its net asset value (NAV). Most ETFs track indexes like stock and bond indexes and are an attractive investment because of their low costs and stock-like features.

The listing will be cancelled if there is a tracking error — a measure of how closely a portfolio follows the index to which it is benchmarked — of more than 10 per cent for three months straight or the fund is liquidated.

ETFs can list up or down 20 per cent on the first trading day and fluctuate by 7 percent subsequently.

A fund's indicative net asset value (iNAV) will be calculated in real time during trading hours.

This iNAV will be listed on the websites of HOSE, the fund management company, and securities companies. The first ETF is expected to list on HOSE in the third quarter. — VNS

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