The Irish Stock Exchange (ISE) is currently working with three other entities on launching an exchange-traded fund (ETF), which will comprise of a basket of fifteen of the most liquid equities traded on the Irish market.
ETFs have proven to be some of the most liquid instruments for retail investors, and they represent an opportunity for retail investors to hold a representative portfolio of securities comprising the underlying assets of the fund.
According to Brian Healy, director of trading/regulation on the Exchange, this product differs from tracker and other investment funds in that there is entirely transparent price formation in the securities of the ETF itself. The ETF is traded in exactly the same way as other highly liquid securities on the market with market depth visible to participants and which is published via information providers such as Reuters, Bloomberg etc.
The product will also offer foreign institutional investors a way of diversifying into Irish stocks.
While the Exchange is focusing on launching the initial ETF, Healy says that the overall market offers huge potential, pointing to the recent launch of an ETF based on gold in continental Europe, and other ETFs, which have been packaged on corporate bonds.
Ahead of the launch, the Exchange is currently in discussions with the Department of Finance and the Revenue Commissioners over the issue of stamp duty. As the fund will be structured as a UCITS, investors buying into the fund will not incur stamp duty, but when the fund buys the underlying shares it will have to pay the duty. As a result, extra costs will be incurred which the Exchange is hoping to avoid.
The development of this new market could see additional members join the Exchange. |
