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What is an ETF?

An ETF is a passively managed investment fund or SICAV whose main features are:
  • it is traded on the Stock Exchange like a share;
  • it tracks the reference index (benchmark) through a totally passive management.

An ETF summarizes the typical features of a fund and a share, enabling the investors to exploit the strength of both instruments:

  • diversification and reduction of the risk typical of funds,
  • flexibility and transparency of information typical of shares listed in real time.



What advantages do ETFs bring to investors?

  • ETFs provide opportunities for investors to achieve instant, efficient exposure to different asset classes with one single purchase transaction;
  • ETFs allow to obtain a performance corresponds to that of the benchmark index through a “totally passive management”;
  • With just one transaction, investors can obtain a broad diversification;
  • ETFs are passively managed, which means they have relatively low management fees reducing the costs of one’s own portfolio;
  • ETFs are listed on the exchange, so they can be bought and sold on the exchange at any time during a trading day and at current market prices;
  • ETFs have no expiry date;
  • Most ETFs pay out regular dividends.



Why invest in an index?

An index is a barometer of the financial situation in a region, a country or a specific sector, and it includes the most representative and most actively traded shares in that particular market or sector.




What are the costs of ETFs?

ETFs are subject to a low total annual commission (TER) applied automatically in proportion to the holding period, whilst the investor is charged no “Entry”, “Exit” and “Performance” fees. The investor must only take into consideration the fees applied by his own bank/broker for the purchase and sale on the market.



How can ETFs be traded?

You can buy ETFs through your bank or broker, which will put your order through to Borsa Italiana ETFplus market. The continuous trading of ETFs and structured ETFs takes place non-stop from 9.00 am to 5.25 pm. Following the migration to Millennium platform, a closing aucion phase from 5:25:00 pm to 5:30:00 plus a variable interval of up to one minute, determined automatically on a random basis by the trading system, has been introduced. Clearing of contracts is managed in Monte Titoli (the company for the centralized administration, clearing and settlement of the Borsa Italiana – London Stock Exchange Group) on the second open market day after the execution of contracts, whose final settlement is guaranteed by the Central Counterparty (Cassa di Compensazione e Garanzia).




Is there a minimum investment requirement?

The minimum order size is one ETF.



Are ETFs liquid?

The creation and redemption process requires the authorised participants to buy and sell the securities making up the benchmark index in order to create or redeem the ETF shares/units. Consequently there is a liquidity match between the ETF and the reference market, thus the spreads and the countervalue of the orders displayed on the trading book have the same conditions you might face buying or selling directly the index components.
However, in order to guarantee the maximum liquidity, it is required that for each ETFs a specialist displays on continuously basis bid and ask orders for a minimum quantity and a maximum spread as established by Borsa Italiana. Go to the specialist and liquidity provider section.




Do ETFs pay dividends?

The dividends or interests that an ETF collects in relation to the shares/bonds included in its assets (as well as the proceeds from the re-investment of these) may be re-distributed periodically to the investors or permanently capitalized in the assets of the ETF. In both cases, the beneficiary is only the investor. Go to ETFs dividend section.










Are ETF subject to insolvency risks?

The ETFs listed on ETFplus are, depending on the instrument, Mutual Investment Funds or Sicav (UCITS). It is a known fact that UCITS have segregated assets with respect to those of the companies, which take care of their creation, management, administration and marketing activities. Therefore, ETFs are not subject to the insolvency risk in the event of default of the above-mentioned companies.




Last update:  October 31 2014 - 11:17


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