The Qatar Stock Exchange (QSE) yesterday said it is ready to launch three live exchange-traded funds (ETFs) any time but awaiting final clearance from the regulator.
“QSE offers a platform for ETFs and is working on three live projects. However, we are waiting on the runway for clearance from the control tower (the regulator) to take off and launch ETFs,” the bourse’s chief executive Rashid bin Ali al-Mansoori told ‘Qatar ETF Symposium 2015’ held in collaboration with iShares.
Highlighting the investment opportunities in ETFs; Mohsin Mujtaba, director of products and market development, QSE, said ETFs provide investors with the ability to buy the index through a single trade on the exchange and also ETFs offer exposure to a diversified portfolio of stocks with a single execution. They can also can be used to provide exposure to non-domestic markets using the local currency. ETFs globally have $3tn of assets under management.
“Therefore ETFs can be attractive as investments because they give investors (particularly retail investors) the chance to add or lessen exposure to broad market segments in various countries or sectors at a cost that often is lower than building a portfolio of such individual stocks or other non-exchange traded investment vehicles, and thus can help improve overall market liquidity,” he said. The three ETF projects intended to be launched in Qatar, after obtaining regulatory approval, are an ETF based on government fixed income risk from an Asian borrower, an ETF based on a representative Qatar-country index and a Shariah-compliant product.
If an investor wants the returns equivalent to QSE 20 Index or Al Rayyan Islamic Index, she/he has to buy the ETFs that track these indices buy placing just one order to their broker, Mujtaba explained.
Today, in the absence of ETFs in Qatari market, replicating the index means placing at least entering 20 orders with correct proportions and it presents its own difficulty of making sure the all 20 orders are executed at the right prices, he said, adding this is not easy for individual investors.
“This is why, ETF fund managers appoint professional liquidity providers who make sure that the investors will be able to buy the ETF at the fair value of the index,” he said.
Liquidity providers play a crucial role in ensuring that the ETFs trade at fair value. They need to have efficient price hedging mechanisms in place by the exchanges, depository and regulators to make sure investors get the best execution price, according to the panellists.