On secondary market, ETFs are traded like normal stock on stock exchanges as mentioned earlier. Therefore, ETFs can be bought and sold at any time during the day (unlike most Unit Trust ). Their price will fluctuate from moment to moment, just like any other stock's price. An investor will need a broker in order to purchase them, which means that investors will have to pay a commission . Investors can buy or sell ETFs through their remisiers or brokers or trade online during trading hours.
ETF units that are in circulations in the secondary market i.e. on Bursa Securities are created from primary market activities. For ETFs, creation and redemption of units are facilitated by Participating Dealers which act on behalf of i-VCAP as the issuer of the ETFs.
It is very much easier for you to buy from the secondary market as it is exactly the same as ordinary share trading on Bursa Securities, rather than from the issuer as with the primary market. At the primary market, you would need to have the basket of securities that mimic the Benchmark Index composition to exchange them with ETF units.
Unless you already have all the securities in your book, the process of accumulating the shares maybe onerous and defeat the purpose of ETF investing which is to provide quick and cheap exposure into the market that you want.
How liquid is the ETF in the secondary market? Sometimes I see the volume traded is zero. Unlike unit trust where we can always sell the units back to the managers when we want to.
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Posted by chaplang > 2014-02-27 10:07 | Report Abuse
how doses it work/