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FAQs about ETFs


What are Exchange Traded Funds?

Exchange Traded Funds are mutual funds that track the performance of an entire index or basket of securities. The ETF participation is traded in real time on an exchange electronic market subject to the same conditions as any other security stock.


How do ETFs differ from traditional investment funds?

The main difference is that ETFs are listed on the exchange and can be bought and sold throughout the trading day. In traditional investment funds the trading takes place once a day, at the closing of the market, and at the available net asset value.

ETFs are highly transparent products. Being passive management investment funds, the composition of the portfolio is known all the time.


How do ETFs differ from individual shares?

Through an ETF you invest in a diversified portfolio in a single transaction, portfolio which is that of the referential index.


Are ETF suitable products for any kind of investor?

Given the wide range of investment strategies ETFs allow, they are products both suitable for institutional and individual investors. Although being a passive management product, ETFs are frequently used at the same time as individual shares or investment funds. They are used for both for a long-term and short-term investment strategies. It is important, like in any investment strategy, to be cautious enough: "How to Invest"


What are the risks of investing in ETFs?

Investing in ETFs involves the same risks as investing in shares. But the risk may be minimised by the diversification that a single participation displays.


How to buy and sell ETFs´ participations?

ETFs are bought and sold like ordinary shares through financial intermediaries which are members of the exchange (Brokers, Broker-dealers and Financial entities)


What are the differences among the ETFs that track the same index?

Differences among ETFs that track the same index will be defined by those issuing each ETF. All specifications in terms of commissions, dividend policy and ratio of the index represented are included in the ETFs´ Prospectus.


Which are the costs of investing in ETFs?

The costs will be those corresponding to Exchange Trading Commissions.


Do ETFs pay dividend?

The fund manager gets information on the dividends paid by all companies of the portfolio. The dividend policy for each ETF is specified on the Prospectus.


What information is available on the market on a daily basis? Where can you find that information?

Transparency is an essential feature of the ETF market. Information on prices, trading volumes, daily composition of the fund and the basket of securities, net asset value and indicative net asset value is available throughout the session. This information is available on the web-site of the exchange and through all other information-dissemination channels.


How is the ETF price formed?

The price is formed, like in the case of shares, according to the bid and ask positions in the market.

Being an investor, should I pay attention to the net asset value of the fund or to the price of my ETF participation?

The net asset value is set once a day. The price of the ETF will be the market price at any moment. The evolution of prices of all securities in the portfolio will settle the indicative net asset value through the session and the net asset value at the closing of the market session.


What is the role of specialists?

The presence and performance of specialists is essential in the ETF segment in order to foster liquidity and to ease the dissemination of information and the price formation process. Keeping a maximum spread of prices for a specific volume, specialists allow negotiations on the secondary market at prices in line with the indicative net asset value of the ETF. Additionally, while acting on the primary market, specialist provide an adequate number of ETF participations in the market.


What is the minimum size purchase of an exchange traded fund?

Investors can purchase as little as one share.


Is the price of an exchange traded fund equivalent to the value of the underlying index?

Not necessarily. The price of the exchange traded fund accumulates dividends paid by all securities of the portfolio, what increases the price of the ETF with reference to the underlying index.


What is the net asset value?

Price of the ETFs participation which is calculated with reference to the performance of the fund underlying index. The fund managing entity sets the net asset value at the closing of the trading session, dividing the shareholders´ equity between the number of units in circulation.


Is the indicative net asset value available at any time of the session?

Yes it is. The indicative net asset value is calculated by assigning the daily variations of the underlying index to the official net asset value communicated daily by the investment fund managing entity. There is also the possibility to make a comparison between the above mentioned indicative net asset value and the price of the ETF participation.


Are there Special Operations on the ETF segment?

Yes there are. The trading of Special Operations on the ETFs segment is similar to the trading of Special Operations for individual shares. ETFs trading is both possible in the block trading and the Special Operations segment.


Where can I get a prospectus?

The ETF prospectus is available both on this website  and on the website of the Spanish Security Exchange Commission. (CNMV).

It is important that investors read the prospectus carefully before investing and get all specific information on the product.


Do ETFs have an expiry date?

No, they do not. You can keep ETFs as long as you want.


What is the tax regime for ETFs in Spain?

Capital Gains are taxed according to the following scheme:


20% on the first 6.000 €
22% until 50.000 €
24% on the rest

 *current tax  year 2015

As opposed to the investment funds, any kind of withholding is applied on the capital gains produced from the repayment or transmission of the ETFs.

Under the collective investment entities regulation, the ETFs will not be able to apply the tax deferral for transfer. That is to say, the capital gains or losses raised as a result of a transfer of the ETF participations to another collective investment entity, or vice versa, will not be able to earn the tax relief for transfer foreseen for the rest of the funds.


What is the TER of an Investment fund?

The initials correspond to "Total Expense Ratio", and indicates the percentage of expenses supported by the Fund in relation with its average assets, from the beginning of the natural year up to the date. The total expenses include the commissions of management and depositary services, the external services and other operating expenses.

It is important to consider that, except in December, this figure does not reflect annual data.

The composition of this concept comes established in the Annex of Circular 3/1997, on obligations of information to partners and unit holders of IIC of financial character.



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