Exchange Traded Funds (ETF) and CDC’s role
An exchange-traded fund (ETF) is a collection of securities—such as stocks—that tracks an underlying index. An ETF can contain many types of investments including stocks, commodities, bonds, and a mixture of investment types. An ETF is a marketable security, meaning it has an associated price that allows it to be easily bought and sold.
The convenience provided by ETFs as well as the low-cost structure of these products are key benefits which have played a vital role in the popularity of ETFs globally during the last few years. The SECP has recently approved the necessary regulatory changes required in the PSX Rule book to facilitate the operations of the ETF product in Pakistan. As always, CDC is at the forefront of facilitating the Implementation of this important project and is working closely with all the stakeholders for the launching of ETFs for which it will provide both Depository and Trustee Services.
CDC’s role as a Depository will be to facilitate the smooth processing of ETFs in the Central Depository System (CDS), which include the following functions:
- Efficient and timely Induction of ETF Units in CDS as a Eligible Securities;
- Hassle free and automated Issuance and Redemption of ETF Units for investors;
- Facilitating market participants in converting underlying securities into ETF units and vice versa.
CDC’s role as a Trustee will largely be in-line with the trustee function that it performs while being a trustee of open-ended funds / schemes which include the following functions:
- Ensuring that the creation, issuance and redemption process of ETF units is accordance with Constitutive Documents;
- Smooth and efficient handling of all transactions initiated by AMCs,
- Providing sound and secure Custody of securities / assets under the control of trustee, on behalf of the Fund.
In line with its vision to play an active role in market development projects, CDC has ensured that it is completely ready on its part for both the Depository & Trustee Operations to facilitate the launch of ETFs by any AMC in Pakistan. This readiness is part of CDC’s commitment to continually strive for the creation of an efficiently functional market place by making a remarkable difference to how it operates while empowering the people and safekeeping their assets.