Exchange traded funds (ETFs) are mutual funds traded on equity-exchanges, which are based on an index and aim to reflect the performance of its base index to the investors.
ETFs are issued based on an index, and invest in the securities on its base index in proportion to their weight in the index. Therefore, for example, an investor willing to invest in BIST-30 index invests in an ETF rather than purchasing the equities of the index separately, and has the opportunity to invest in that index, and benefits from the proceeds of the index.
Exchange traded funds are portfolios created by authorized intermediary institutions through the purchase of securities on the base index using the cash collected from investors. ETFs reflect the returns on the equities or other instruments (gold, bond, foreign exchange, etc.) on the base index.
The basic characteristic of ETFs is that their participation certificates can be traded on Borsa İstanbul just like equities. Exchange traded fund shares can be traded on the Borsa İstanbul Fund Market through intermediary institutions like equities.
Investing in ETFs
Exchange Traded Funds (ETFs) have become more popular recently, thanks to their high liquidity and ease of trading, as well as facilities such as risk diversification, and allowing investors to make use of the revenues in the market.
The indicator portfolio composition announced at the end of every day provides investors the opportunity to monitor the content of their investments in a transparent manner on a daily basis. Therefore, the investor is able to monitor the composition of the exchange traded fund. ETFs are traded during the session easily, in the same way as equities.
Fund Market Basics
Trading on ETF participation certificates, deemed suitable for being traded on the Exchange, is carried out with a feature code (F) on the Fund Market of the Equity Market during the trading hours of the market where the securities forming the underlying index of ETF are traded.
The base price is determined by rounding the weighted average of the transactions of the previous session to the nearest price tick as in the case of equities. In the first trading session and the session following the session in which price has not been formed in the Equity Market, base price is announced over the fund unit share price announced before the respective session by the founder and/or authorized participant.
Lot size is 1 participating share. The maximum amount of orders that can be submitted to the system at any time is determined by the Equity Market.
Unit share price of ETFs to be traded on the Equity Market is minimum TL 1.
On the ETF Market, the price margin applicable in the National Market is applied.
Special order transactions are performed as per the present rules in the Equity Market.
Price ticks applied on the ETF Market are different from those of equities.
Settlement of the fund transactions is realized on the second business day following the transaction day (T+2). Fund Share Formation and Repurchase Transactions are performed via Takasbank. Principles of these transactions are set by Takasbank and notified to the members.
All other transaction and default rules are the same as the Equity Market trading rules.
Exchange Traded Funds keep all their assets in Takasbank as in the other investment funds.
