August 2008
Beginner
852 pages
46h 4m
English
Content preview from Handbook of Finance: Financial Markets and InstrumentsBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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Chapter 61. Exchange-Traded Funds
GARY L. GASTINEAU
Managing Director, ETF Consultants, LLC
Abstract: Exchange-traded funds are the most popular examples of a category of financial instrument that might be characterized as a "portfolio-in-a-single-share". In addition to open-end exchange-traded funds based on the SPDR structure, closed-end funds, HOLDRs, exchange-traded notes and even FOLIOs sometimes compete in the portfolio-as-a-share market. While the products all feature multiple instruments in a single transaction, these products and structures have distinct differences in tax treatment, trading costs and convenience. The open-end exchange-traded fund structure offers unique opportunities for increased shareholder efficiency and the delivery of actively managed portfolios in a tax-efficient format. The genesis of exchange-traded funds was in portfolio or program trading and its cousin, index arbitrage.
Keywords: exchange-traded funds (ETFs), mutual funds, portfolio trading, program trading, SPDRs, HOLDRs, exchange-traded notes (ETNs), exchange of futures for physicals (EFP), TIPs, WEBS, expense ratio, closed-end funds, open-end funds, FOLIOs, creation units, arbitrageur, creation, redemption, tax efficiency, shareholder accounting, Regulated Investment Company (RIC), grantor trust, structured product, special purpose vehicle (SPV), actively managed ETFs
Exchange-traded funds (ETFs) are the most important—and potentially the most versatile—financial instruments introduced since ...
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