Exchange Traded Funds

Exchange Traded Funds (ETFs) are open investment funds which replicate an index and offer investors the same kind of flexibility and liquidity as shares. They can give institutional investors in particular the ability to respond quickly to market movements.

In essence, ETFs consist of passively managed baskets of shares with specific weightings that closely track the performance, price and yield trends of a given benchmark, usually an index.

Benefits of ETFs

ETFs allow investors to:

• Diversify their investments with simplicity and flexibility
• Participate in the price movements of an entire market or index with a single investment
• Position themselves in a "reference portfolio" of blue chips
• Sell an ETF short in the market
• Benefit from instruments with attractive risk/return profiles
• Receive regular dividend payments
• Invest in a tax-efficient manner.

Trading ETFs on SWX Europe

The characteristics of trading ETFs on SWX Europe are as follows:

• The trading schedule follows the existing trading schedule for blue chip equities traded on SWX Europe
• Trading takes place on the central order book and includes market makers who provide liquidity
• The SWX Europe Rules establish the market making obligations
• Best bid and offer prices are formed by the market makers' two-way orders, specifying price and size on the order book. Other members are also able to post limit orders
• All existing order types are eligible for the SWX Europe ETF market
• There is no stop trading functionality in the SWX Europe ETF market.