Insights into Canadian ETFs

Article Excerpt

What is the legal structure of ETFs? Does it provide investor protection? In Canada, most exchange-traded funds, or ETFs, are structured as open-ended mutual fund trusts. As listed instruments, the usual stock market listing, trading and settlement rules apply. Investors should, therefore, receive regular disclosure about an ETF, its investment objectives, structure and operations. Regular financial reporting is also required. Similar arrangements apply to U.S.-listed ETFs. While the onus is on the manager to provide prompt, accurate and full disclosures, the market risk remains with the investor. What is the difference between the ETF Price and the Net Asset Value (NAV)? The price is determined by trading between buyers and sellers on the open market while the NAV is the calculated value of all assets minus liabilities per unit. The NAV is published regularly during the trading day and is called an intraday NAV. The market price of the ETF will fluctuate around the intraday NAV. Issuers also publish end of trading…

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