ETF - what is it? ETF on the Moscow stock exchange

Not all people know what ETF is? What it is? This abbreviation stands for Exchange Traded Fund. Now the popularity of these assets has grown so much that many investors have managed to assess their advantages. Given the "youth" of this phenomenon, this is an amazing breakthrough in modern market relations.

ETF - what does this mean?

ETFs are investment funds, which include a portfolio of exchange-traded assets. These include various stocks, currency pairs and bonds. And the investor can manage this portfolio himself. This reduces the costs of the person who decided to invest their money in the purchase of assets. The trader, who deals with transactions with ETF, actually trades in a basket of certain trading instruments.

How were ETFs created?

For the first time these funds appeared in the late eighties of the 20th century. At that time, the first ETF analogues were created. They were exchange-traded funds, which were traded on the American stock exchange and AMEX. In addition, transactions with ETF were also available in the stock markets of Philadelphia.

However, soon the trade in these instruments was canceled. This happened after the Chicago Mercantile Exchange filed a lawsuit against ETF-exchange funds. The essence of the claim was that the ETF did not comply with the rules of the regulator. But this did not stop the players, who were interested in new opportunities.

Further development

Thus, the idea itself has not lost its relevance, and has been appreciated. After that, a new financial instrument for trading appeared on the stock exchange in the city of Toronto. Stock funds successfully competed for the attention of investors. On the stock exchanges in other countries, rules were developed that met the requirements of the American regulator.

The most popular fund was SPY. It was a depositary receipt for the SP500 index . In addition, the popularity of the players began to use MDY. It included shares of companies with an average capitalization size.

ETF funds

What did this mean for further development? Market participants reacted positively to the idea of exchange-traded funds. Soon after, an opportunity appeared on the US stock exchange to trade in exchange funds. They were created specifically for each sector of the economy, which were part of the SP500 index. So, 9 new ETFs were formed. In the future, this list included the DIA - fund for the DJ30 index. In 1998, there was another financial tool - QQQ, designed for the Nasdaq100.

What are the features of ETF?

Unlike other tools, ETF-funds have several advantages:

1. They save the investor's money, since the ETF buyer does not need to pay for managing the portfolio of shares. As a result, the profit of the investor's owner is used more rationally.

2. When buying an investor invests in a ready-made portfolio. It contains the best securities, which are highly liquid. This reduces the risks of the investor.

3. Buyers are counting on making a profit for a long time. An investor does not have to deal with complicated financial calculations. It is enough to buy a ready-made ETF portfolio and receive a stable income. Moreover, liquid assets can be sold at any time.

Russian environment

ETF in Russia also takes place. In our market we trade only one company - FinEx, which has issued more than 10 different index securities (ETFs). The securities have been publicly available since early 2013 and fall under the Russian law of 1996 on the securities market.

Issue is provided by Irish issuers FinEx Physically Backed Funds Plc and Funds Plc. Management functions are performed by FinEx Capital Management LLP, which has a British legal registration. The Office for Supervision and Financial Regulation, the so-called listing, is implemented through the participation of the British FSA regulator. On the territory of the Russian Federation, a subsidiary company LLC UK Finex-PLUS, which holds a license of the Central Bank and has the status of a full-fledged market participant, was registered.

The Bank of New York Mellon is the administrative center, and Pricewaterhouse-Coopers is the auditor. The Bank of New York Mellon also provides depository services and preserves equity funds. As in domestic mutual funds, the property of the management company is separated from the property of the fund. Functions of regulation and supervision are carried out by the National Bank of Ireland.

The papers were provided to the cross-listing procedure with the goal of arranging ETF circulation on the Moscow stock exchange, as part of the funds are drawn on the Euro market. Liquidity of ETF is a very important feature. A special system of marketmaking serves to maintain demand in the exchange glass for sale and purchase. Persistently working to solve this problem, well-known financial companies, the main Russian market makers Jane Street Financial Limited, Goldenberg Hehmeyer, Bluefin Europe, working with ETF. What does this mean? Through the participation of the Russian broker Finam, these corporations can gain access to the Russian market.

Investors are also required to have information that ETF on the Moscow stock exchange, due to cross-listing, meets both the European and Russian requirements of the stock market. Today, the purchase assumes the availability of 13 types of funds from the company FinEx. Investments in ETF, as well as investments in mutual funds, require a detailed study of the work of the fund and its features.

What you need to know about investments

In the field of stock investment there is such an important concept as index replication, which is synthetic and physical. Physical replication involves the presence in the fund or its portfolio of shares or another type of property as a basic portfolio.

Synthetic replication means that there are various financial instruments in the portfolio, for example, options, forwards, futures. ETF-companies FinEx, which are based on gold, for example, are synthetic, because they use the futures contract for gold. Such index ETFs as FinEx CASH EQUIVALENTS UCITS ETF and FinEx Tradable Russian Corporate Bonds UCITS ETF (RUB) have a mixed stock structure. They use both basic tools and derivatives. An investor can have access to a complete structure of funds exclusively before a purchase transaction, and not be published on a permanent basis.

Currency requirements

Participation in the Moscow Stock Exchange implies the requirement to nominate securities in Russian rubles from the management company. ETF assets are calculated in euros, US dollars or British pounds. Thus, at the market rate, the dollar is recalculated in the currency market. This phenomenon has both pluses and minuses. The positive side can be manifested in the form of income generation due to the devaluation of the ruble, and the negative side can have its expression in the form of lowering the reserve currency rates. However, the currency dynamics of well-developed countries indicates that such currencies as the euro and the dollar have persistent long-term prospects. In the case of trade in other monetary units, it is also possible that the problems mentioned above arise.