(June 1) – “The American Stock Exchange is planning a joint venture to allow its growing line of exchange-traded funds to be listed on the Singapore Exchange,” writes Aaron Lucchetti in today’s Wall Street Journal.
“In a deal to be announced Thursday, the New York unit of the National Association of Securities Dealers aims to list its approximately 40 tradable funds, known as ETFs, on the Asian exchange by the first quarter of 2001, as well as a wide variety of other structured products, said Salvatore F. Sodano, Amex’s chairman and chief executive officer.”
“‘This is a testament to the fact that ETFs have appeal around the world,’ Mr. Sodano said, adding that the linkage will help the exchange build its brand name globally.”
“The exchange-traded funds, while still little understood by many individual investors, have certainly breathed new life into the Amex, an 89-year-old stock exchange that fell behind larger rivals in its main stock business through most of the past three decades. ETFs on the Amex have grown to about $40 billion in assets in less than a decade, and more than a dozen new ones are expected to begin trading later this year.”
“The newfangled products are similar to index mutual funds in that they track an index and provide diversification for investors at a relatively low cost. But unlike traditional mutual funds, ETFs can be bought and sold at market prices throughout the day, just like a stock; traditional mutual funds can be bought only at the 4 p.m. Eastern-time closing price.”
“The new tradable funds are somewhat akin to closed-end funds, but they differ in one key respect: Closed-end funds issue a fixed number of shares, then begin trading, and the demand for those shares helps determine whether they trade at a premium or discount to the underlying net-asset value. Exchange-traded funds can continuously issue new shares, a process that keeps the share value close to the net-asset value.”
“Many details of the new Singapore agreement remain to be worked out. Among them: which investors outside Singapore will be able to buy and sell the Amex products on the Singapore exchange. For Mr. Sodano, the goal is to increase distribution of the exchange-traded funds in Asia as widely as possible. Ultimately, U.S. investors should be able to use the overseas products when the U.S. markets are closed, he said.”
“To complete a global link for U.S.-based exchange-traded funds, Mr. Sodano and other Amex officials are negotiating with exchanges in Europe about joint ventures there. ‘It’s a little more complicated’ to finalize a partnership in Europe because of continuing consolidation discussions among different European exchanges, he said.”