Launching of ETF as collective investment scheme suggested

A core committee has recommended for launching  Exchange Traded Fund (ETF) as a collective investment scheme under the existing Securities and Exchange Commission (Mutual Fund) Rules, 2001, officials said.
The three-member core committee headed by M. Hasan Mahmud, an executive director of the securities regulator, made the recommendation in its interim report submitted to the commission.
"It will be time consuming to formulate separate rules as most of the issues related to ETF are covered in mutual funds rules," the committee said taking into account the proposals of the sub-committees.
On December 23, 2014, the Bangladesh Securities and Exchange Commission (BSEC) formed a three-member body to submit a report on launching ETF following a proposal made by Dhaka Stock Exchange (DSE).
In this regard, two sub-committees were also formed to submit their observations.
An ETF is a pooled investment vehicle with units that can be bought or sold throughout the day on a stock exchange at a market determined price. Like a mutual fund, an ETF offers investors a proportionate share in a pool of stocks, bonds and other assets.   
Asked, the officials of the securities regulator have expressed their optimism on launching the ETF by July 16 next year.
Prof. Helal Uddin Nizami, a BSEC commissioner, said the concern committees have reviewed regulatory framework of ETF launched in different countries like India, Pakistan, the Philippines, USA and Australia.
"More than 80 per cent ETFs launched in other countries are being operated successfully. There are also some incidences of failure in operating ETF. That's why we will have to launch the proposed ETF adopting cautious policy," said Prof. Nizami.
"The committee members have lack of practical experience on the subject matter as well as operation process of ETF since it is a brand new product in the stock market," said the report.
In this regard, the committee recommended visiting different practicing countries to gather knowledge and practical experience on operation process of ETF to overcome limitations.
The committee also said that the role of market maker is a sine qua non for launching operations of ETF.
The parties which have involvement with operation of ETF are: stock exchanges, Asset Management Companies (AMCs), Sponsors, Trustee, Custodian, Central Depository Bangladesh Limited (CDBL), stock brokers and Authorised Participants (APs).
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