Australian Exchange Traded Funds (ETFs)

Conventional Exchange Traded Funds (ETFs)

Available over Australian indices were launched on ASX in 2001. The range of broad based Australian focussed ETFs now cover a series of market benchmark indices such as the S&P/ASX 200 index together with a specific outcome orientated ETFs such as the Russell High Dividend Yield Fund.

The range of conventional ETFs was expanded in 2010 to include a range of Australian sector ETFs. Sector ETFs can assist investors build their portfolios to allow for increased exposure to certain industries while still achieving a broad diversification across companies.

Conventional ETFs seek to deliver the return of the relevant index by investing directly in either all of the securities or a representative sample of the securities included in an index or benchmark. There are also synthetic ETFs that cover Australian indices and are different from conventional ETFs.

The current issuers of conventional broad based Australian, sector and specific outcome orientated Australian are Australian Index Investments (Aii), BetaShares,  iShares, Russell Investments, State Street Global Advisers and Vanguard Investments.

Synthetic Exchange Traded Funds (ETFs)

Synthetic-based ETFs available in Australia may also invest in shares and other assets (such as cash), although these assets do not necessarily match the composition of the index or benchmark being tracked.  In addition, synthetic ETFs enter into other financial instruments (generally swap agreements) with the aim of ensuring the ETF tracks the index as closely as possible. You should always carefully read the product disclosure statement which provides detailed information related to the ETF's investment objectives, principal investment strategies, risks and costs, before deciding to invest or not.

You can identify synthetic ETFs by looking at the ETF name, synthetic will appear in its name. More information on conventional and synthetic ETFs and the additional risks associated with synthetic ETFs is available.

 

Market Making

Market Makers provide an important role in ensuring that buyers and sellers of ETFs and ETCs can transact. They provide liquidity to the market by providing quotes through the trading day and update their prices to reflect changes in the underlying securities.

ASX offers a Market Making incentive scheme to further promote tighter spreads and more liquidity in the ETF (Exchange Traded Funds) and ETC (Exchange Traded Commodity) markets. Market Making Participants receive Trading and Clearing Fee incentives from ASX when achieving minimum quoting benchmarks on a monthly basis. Each ETF / ETC is assigned a spread and liquidity requirement.

The table found in the following PDF (82KB) shows the Market Makers (MM) that have signed incentive contracts with ASX and the relevant ETF/ETCs.