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Recent attention given to the embedded risks of synthetic replication exchange traded funds (ETFs) has raised awareness on the importance of understanding the structures, features and risks of a product for informed investment decisions.
To make it easier for investors to differentiate between direct replication ETFs and synthetic replication ETFs, representing the two broad structures of ETFs, the Exchange has arranged for the trading name of all synthetic replication ETFs to be tagged with an ‘X’, which appears next to the ‘@’ used to mark Specified Investment Products (SIPs). This improves visibility of all the synthetic replication ETFs on trading screens and the SGX live prices website.
The latest measure is part of our overall effort aimed at equipping investors with the requisite knowledge to bring about informed investment decision. In July, the Exchange introduced two online initiatives, “Customer Account Review Module” and “SGX Online Education programme”, to support retail investors in their understanding and trading of SIPs listed on SGX. SGX began working on these initiatives last year, in response to the Monetary Authority of Singapore’s (MAS) proposal to enhance safeguards for retail investors for SIPs. Retail investors can only trade SIPs (which includes ETFs) only after they are assessed by the broking firms as having the relevant knowledge and experience to understand the risks and features of SIPs. The SGX Online Education Programme, in particular, also dedicates a module to educating investors on ETFs.
Investors can learn more about the two broad types of ETFs, classification of each ETF and the associated risks of the different ETFs on SGX’s website (www.sgx.com/etf_risk). Investors also can access information on ETFs such as listing documents, product brochures and information on the underlying at the websites of the issuers. These websites are constantly being updated with new or additional information. In addition, ETF issuers work with the Exchange to provide ETF education through seminars and publications. Information on such seminars is found at the SGX website (www.sgx.com/academy).
