Entire Section

  • Exchange Traded Fund ("ETF")

    • CIR 3.1.12 CIR 3.1.12

      (1) A Fund is an Exchange Traded Fund ("ETF") if it:
      (a) is constituted as an Open-ended Public Fund;
      (b) has its Units available for trading throughout the day on an exchange that meets the criteria in (2); and
      (c) has at least one market maker (Authorised Participant) who:
      (i) purchases and redeems "creation Units" of the Fund from the Fund Manager; and
      (ii) is prepared to buy and sell Units of the Fund throughout the day on the relevant exchange.
      (2) An exchange meets the requirement in (1)(b) if it is:
      (a) operated by an Authorised Market Institution;
      (b) regulated by a Financial Services Regulator in a jurisdiction that is a signatory to the IOSCO Multilateral Memorandum of Understanding for sharing information; or
      (c) regulated by a Financial Services Regulator in a jurisdiction which has entered into a bilateral memorandum of understanding with the DFSA for sharing information.
      Derived from DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18]

      • CIR 3.1.12 Guidance

        1. CIR Rule 13.9.1 prohibits the use of the term Exchange Traded Fund or ETF unless a Fund meets the criteria in CIR Rule 3.1.12. A similar prohibition applies to Foreign Funds that offer Units in or from the DIFC—see CIR Rules 15.1.5(c) and 15.1.6(1)(c).
        2. ETFs are different to other exchange traded Open-ended Funds. ETFs generally do not sell or redeem their Units to and from retail investors directly at net asset value (NAV). Instead, an Authorised Participant ("AP") (i.e. a market maker appointed by the ETF Fund Manager) buys and redeems ETF Units, called creation Units, directly from the ETF Fund Manager. Generally, an AP that purchases a creation Unit of an ETF deposits with the ETF Fund Manager a 'purchase basket' of certain securities and cash and/or other assets identified by the ETF Manager that day, and then receives the creation Unit in return for those assets. The basket generally reflects a pro-rata portion of the ETF's underlying holdings. After purchasing a creation Unit, the AP may hold or sell some or all of the Unit in the basket on the relevant exchange.
        3. The redemption process is the reverse of the purchase process. The AP redeems the creation Unit from the ETF, in exchange for a 'redemption basket' of securities and/or cash and other assets (or all cash) received from the Fund Manager. The AP also offers to buy and sell ETF Units on the relevant exchange, where retail investors can buy and sell ETF Units at a price close to NAV.
        4. See further Guidance about ETFs under CIR Rule 13.9.6.
        Derived from DFSA RM218/2018 (Made 22nd February 2018) [VER23/12-18]