Exchange traded products: Admission guidelines
This information sheet (INFO 230) sets out good practices to help licensed Australian exchanges that admit or are considering admitting exchange traded products (ETPs) to ensure their admission and monitoring standards continue to support fair, orderly and transparent markets. Exchange traded products include certain managed funds, exchange traded funds (ETFs) and structured products.
These admission guidelines, which largely reflect current market practice, cover:
- approving ETP issuers
- pricing of underlying assets of ETPs
- exposure to derivatives
- disclosure of portfolio holdings
- liquidity provision and market making
- securities lending
- ongoing supervision of ETPs and issuers
- product-naming considerations, and
- other types of ETPs
Some of the good practices outlined in this information sheet may need to change over time as the market continues to grow and innovate.
For each new product application received, irrespective of whether an issuer has previously issued other products, licensed exchanges will need to assess whether the issuer will be able to fulfil its obligations (see below) in relation to that product. As gatekeepers for Australian financial markets, licensed exchanges have responsibility to set and monitor continuing compliance with admission requirements for ETP issuers to ensure that their ETP market is fair, orderly and transparent. In doing so, licensed exchanges should assess whether an issuer has adequate expertise, procedures, risk management, and human, technological and financial resources for the ongoing quotation of a particular product. This includes:
- confirming that the issuer holds and complies with all relevant licence authorisations and obligations under Chapter 7 of the Corporations Act 2001 (Corporations Act), including the relevant financial requirements
- reviewing the issuer's business, including:
- the countries it operates in
- information about funds managed (including over-the-counter (OTC) and exchange traded, number of ETPs, value of funds under management, number of investors), and
- information about the parent company
- confirming that the issuer has:
- registry, portfolio calculation agent, market-making and custodian agreements in place with third-party service providers
- technology systems appropriately implemented, and
- procedures and policies established
If the issuer seeks to perform any of these functions itself, it should have the resources and systems to enable it to reliably do so without conflict
- assessing the skills and experience of key personnel (including the CEO, CFO, CIO, portfolio manager), number of staff and identity of third-party providers like investment managers
- reviewing the financial position of the issuer to ensure that financial resources are sufficient to support the product upon admission and on an ongoing basis. The licensed exchange should require the issuer to notify it if this situation changes, and
- assessing the level of exposure and any counterparty risk that a product with derivative exposure (both OTC and exchange traded) may contain or an issuer is exposed to.
In assessing new ETP applications with unique or new attributes for the Australian market, licensed exchanges should discuss these with ASIC before an admission decision is made, but after having given detailed consideration of these features and their application to the current regulatory framework.
While this information sheet seeks to provide guidance around certain novel or unique features of ETPs recently admitted to quotation, there will undoubtedly be other novel features or products (not currently captured) as the market continues to evolve. Licensed exchanges should also take into account the existing regulatory framework and any other ASIC guidance that may be relevant to issuers of ETPs in order to assess the appropriateness of their admission and monitoring standards for their ETP market.
Licensed exchanges should ensure that the underlying assets of ETPs have robust and transparent pricing mechanisms. This supports market liquidity, and gives retail investors confidence that they can transact in the ETP units at a price at, or closely resembling, the net asset value (NAV) of the underlying investment portfolio.
Where products have more complex or less liquid constituents, licensed exchanges should be satisfied and be able to demonstrate that there is a robust and transparent pricing mechanism in a range of market conditions, including those with a degree of market stress. If this pricing mechanism is compromised then the price may not be correct, leading to a lack of confidence in pricing which undermines orderly trading in the product. We would also expect licensed exchanges to consider whether any additional retail investor protections are appropriate where the underlying assets are considered illiquid, high risk or complex.
Where the underlying securities are fixed income instruments (e.g. debentures and bonds), they should generally be constituents of an index that is widely regarded by industry and that also has robust and transparent governance arrangements (such as the eligibility criteria for inclusion and transparent methodology for construction and maintenance of the index). Licensed exchanges should also be satisfied that the authorised participants in these products have access to sufficient information to reliably (and in a timely manner) determine the price at which the relevant debentures or bonds can be bought or sold.
Licensed exchanges should also consider the robustness and transparency of the index where the ETP relies on an index, particularly in the case of a related party index provider. Licensed exchanges should ensure where necessary (e.g. by way of attestation from the issuer) that their arrangements with the benchmark/index administrator comply with recognised index selection principles such as the IOSCO principles for financial benchmarks (PDF 388 KB), the EU Benchmarks Regulation or other internationally recognised index selection principles for any index relied on by the ETP. These principles relate to governance, quality of the benchmark and methodology, and accountability.
Issuers of ETPs with underlying holdings including derivatives should satisfy the licensed exchange that they are able to reliably measure the value of these derivative positions daily on a mark-to-market basis.
Where an issuer seeks to admit a product with a strategy that would rely on the use of derivatives (both exchange traded and OTC) on an ongoing basis for more than an immaterial extent (i.e. more than 5% of the NAV but excluding derivatives used solely to hedge foreign exchange risk, other than in exceptional circumstances), the licensed exchange should impose regular disclosure obligations (at least monthly) to the market in relation to the total percentage of notional derivative exposure to the ETP’s NAV.
Where an issuer intends to rely on using derivatives for less than 5% of the NAV, the licensed exchange should ensure that the issuer notifies the market as soon as practicable when exceptional circumstances occur resulting in the use of derivatives exceeding 5% of the NAV.
Where an issuer seeks to admit a product with a strategy that would rely on the use of OTC derivatives on an ongoing basis for more than an immaterial extent (other than in exceptional circumstances), the licensed exchange should impose additional requirements on the issuer in relation to:
- acceptable counterparties
- acceptable collateral
- direct access to collateral in the event of a counterparty default, and
- regular disclosure obligations (at least monthly) to the market in relation to:
- the maximum percentage of OTC derivative exposure relative to the ETP’s NAV on a mark-to-market basis
- breakdown of collateral by security type, country, sector, currency and credit-rating, and
- swap costs.
This disclosure should include any reduction in the NAV of the ETP attributable to discounting the OTC derivative, reflecting any concerns the issuer has around the ability to recover the value of the OTC derivative.
We expect that licensed exchanges will generally require ETFs and managed funds to publish on a daily basis the full portfolio of the ETP’s holdings (or a creation/redemption basket which should generally closely reflect the portfolio of the ETP’s holdings) along with the NAV per unit at the end of the trading day.
This portfolio transparency provides market makers and authorised participants with the ability to create and redeem units in the ETP to maintain liquidity. When there is increased demand relative to supply, the authorised participants apply to the issuer for units (called creation units) which can be settled by delivering a basket of securities or cash. Redemptions occur via a similar process. This process provides an arbitrage mechanism to help bring the value of the units back in line with the NAV under normal market conditions.
This portfolio holdings disclosure also allows retail investors and other market participants to assess the price of the units relative to the NAV.
If an issuer is relying on the equal treatment relief in Class Order [CO 13/721], it must publicly disclose its portfolio holdings or creation/redemption baskets before the commencement of the trading day after the day on which the disclosure was made to authorised participants and provide an indicative NAV (iNAV) regularly (at least every 15 minutes) throughout the trading day.
Where an iNAV is provided, it is important that licensed exchanges are satisfied that it is calculated through systems that can be independently verified or by an independent third party with reasonably reliable and robust systems. For underlying assets that are traded during Australian trading hours, the iNAV should be updated to reflect live market prices. Where the assets underlying the ETP are not traded during Australian trading hours, the iNAV should be based on the closing price adjusted for foreign exchange movements, with an additional adjustment for after-hours trading conditions where appropriate (e.g. by looking at moves in derivative markets, if they provide a reasonable proxy). In some circumstances, licensed exchanges may form the view that investors’ interests are better served by not requiring the publication of an iNAV where it is unable to consistently and accurately reflect the ETP’s fair value.
In some circumstances, licensed exchanges may permit managed funds that have an active strategy and seek to use the expertise of the investment manager to outperform a relevant benchmark to delay disclosure of their portfolio holdings. Licensed exchanges should assess the need for and extent of delayed disclosure that is applicable in each case. For example, licensed exchanges may form the view that delayed disclosure is appropriate for an ETP that has a concentrated portfolio and where there is a risk that others will replicate the ETP’s intellectual property to the ETP’s detriment. However, in these circumstances full portfolio holdings disclosure should be made as soon as possible and an iNAV should be provided at least every 15 minutes throughout the trading day so that investors can assess the quoted unit price available with an iNAV per unit.
Further, it is good practice for licensed exchanges to expect the portfolio composition file to be updated intraday where there are material changes to the portfolio to enable the iNAV to be calculated as accurately as possible. The issuer should be expected to monitor the iNAV during local trading hours.
Licensed exchanges should consider whether there is likely to be investor demand for a new product. They should also ensure that product issuers have an obligation to provide adequate product liquidity in their ETP so that investors can consistently trade at a price that is close to the NAV of the ETP. Product issuers can choose to appoint a lead market maker or, in very specific circumstances, product issuers may adopt the role themselves. In addition, other market makers may be encouraged to provide liquidity by fee rebates offered by licensed exchanges.
Irrespective of the method adopted by product issuers, licensed exchanges should proactively monitor product liquidity on a regular basis (ideally daily) to satisfy themselves that:
- they have mechanisms in place to alert them when there are concerns that investors are unable to consistently trade at a price close to the NAV (whether there is a market maker or not and whether a market maker participated in the trade or not). For example, licensed exchanges should be monitoring whether spreads are reasonable in comparison to the transaction costs and making inquiries where any difference in price relative to the NAV significantly exceeds the likely transaction costs for buying or selling the underlying assets, and
- the agreed liquidity/spreads are being complied with by market makers.
If either of these factors is not being achieved, licensed exchanges will need to consider what action may be appropriate (e.g. suspension of trading, delisting or additional market-making obligations).
Market makers appointed by product issuers
Product issuers generally appoint an independent third party that is a market participant to act as lead market maker in order to fulfil their own liquidity obligations.
A lead market maker’s role is to provide liquidity in secondary trading volumes and to quote within agreed spreads. Licensed exchanges should ensure that product issuers:
- enter into appropriate contractual arrangements to ensure their lead market maker is obliged to provide quotes that are tight and two-sided, sufficiently large in order size and available for most of the trading day, and
- monitor their lead market maker’s quoting performance on an ongoing basis.
Market makers earn their revenue from trading, and competition is a strong motivation to maintain tight bid-offer spreads that should then produce close alignment to the NAV and consequently to the iNAV. Ensuring that investors can trade at a price close to the NAV is critical to investor confidence in the market. The licensed exchange should closely monitor whether this is achieved consistently.
Internal market making
In very specific circumstances, licensed exchanges may allow the issuer to adopt the role of market maker (i.e. an internal market-making arrangement) rather than using an independent third-party trading participant. This should only be considered in exceptional cases when the licensed exchange and issuer have tight controls in place to monitor this.
Under one version of an internal market-making arrangement, the issuer appoints a trading participant to act as agent to provide bids and offers in the ETP units throughout the day on behalf of the ETP. Under this arrangement, at the end of the trading day any profit or loss based on the market-making activity is attributed to the ETP and a net creation or redemption in the units is performed by the ETP. It is important that under an internal market-making arrangement, the bid-offer spread, minimum order size and time in market each trading day are maintained at a level that helps ensure current investors and new investors are consistently transacting at or close to the NAV.
We consider that not all issuers will have the level of expertise, resources and controls required to adopt the role of market maker. Therefore, where an issuer is seeking to use an internal market-making arrangement, the licensed exchange should satisfy itself that the issuer is competent and has the appropriate resources, skills, processes and procedures to do so.
While we acknowledge there are concerns for some issuers arising from daily portfolio disclosure, timely transparency is important and we expect this to be the normal practice. As stated above, in the exceptional circumstances where licensed exchanges are satisfied that delayed portfolio disclosure is warranted, full portfolio holdings disclosure is expected to be made as soon as possible. Given that internal market-making arrangements may be less transparent, it is important for licensed exchanges to ensure that such issuers have robust procedures to manage potential conflicts of interest, there is no market manipulation and liquidity for the product is adequate.
Factors that licensed exchanges should consider in assessing internal market-making arrangements include, but are not limited to:
- processes and procedures around market making including reviewing the market-making agreement
- whether the trading participant appointed as market-making agent has relevant experience transacting in the relevant products or similar ETPs
- reviewing arrangements with the agency broker to execute transactions on behalf the ETP
- whether there are adequate policies and processes in place to manage inherent conflicts of interest (including those arising from a desire to discourage selling of units as this reduces the issuer’s fee revenue where this is calculated based on the amount of ETPs being managed)
- whether the ETP acts in the best interest of members at all times while avoiding market manipulation. Issuers should be encouraged to seek legal advice to ensure that their market-making arrangement does not breach section 1041A of the Corporations Act. Similarly, each transaction undertaken must not breach this section of the Act
- whether the scheme constitution provisions about withdrawal are compliant with section 601GA(4) of the Corporations Act. Licensed exchanges may wish to confirm this with the responsible entity
- processes to manage heightened volatility and liquidity events (such as maximum daily limits for creations, or controls for percentage movement in overseas markets, for example, where the underlying market is unavailable during the Australian trading day)
- whether an iNAV is independently calculated by multiple parties (e.g. the fund, calculation agent and market-making agent/participant) and robust processes and procedures have been put in place to validate any differences in the iNAV and the prices available on screen, and to quickly escalate the matter where there is a material deviation. The market-making agent should have the capability to use alternative price inputs when one is incorrect or unavailable
- that the market-making guidelines must not be changed by the market-making agent without approval from the responsible entity. The responsible entity should have regular dialogue with the market-making agent/trading participant around the execution of the market-making agreement
- that the issuer should balance the needs of its members and the liquidity of the product so that all members (existing, incoming and departing) are no worse off as a result of the issuer choosing to undertake internal market making. The responsible entity should have systems, processes and procedures which support this objective (e.g. ensuring that it quotes in appropriate spreads)
- continual monitoring of the liquidity provision to ensure the issuer is in compliance with the required parameters set by the licensed exchange and in accordance with the market-making agency agreement
- that products that have internal market making have the potential to trade at wider ‘buy-sell spreads’ (the difference between the prices at which you can buy and sell ETP units) than other ETPs due to the lack of competition from other market makers and the inability for market participants to create and redeem units in the primary market. Licensed exchanges should proactively monitor buy-sell spreads and take action where non-compliance occurs or where the traded price is not consistently at or close to the NAV. They should also provide investor education on the differences of these products to other ETPs and the potential risks, as well as make available average buy-sell spreads for all ETPs on a regular basis so investors can assess the cost of entering and exiting their investments
- that it is generally inappropriate to offer a market-making incentive scheme (e.g. trading fee rebates) for internal market makers given the conflicts of interest
- that issuers are not using the concept of ‘treasury stock’ (i.e. retaining an inventory of units in the ETP) – any units bought by the ETP should be cancelled before the next trading session, and
- whether there is adequate disclosure in the product disclosure statement (PDS) about the risks of the product:
- due to the potential lack of market liquidity, noting that the ETP may not always be able to make a market in times of uncertainty about values, given that they have duties to members and limitation to their market-making capabilities if a professional market maker is not used as an agent, and
- providing quantification of typical spreads (this applies equally to products with both internal and external market-making models).
In addition to these factors, licensed exchanges must particularly assess the capacity and risk management for internal market making during the initial stages of quotation, taking into account the following risks:
- there is more need for market making due to the small number of holders
- investors may have received an inducement to participate in the initial quotation and be keen to sell, and
- funds under management may be limited.
Other market makers operating under a licensed exchange’s fee rebate incentive scheme
Licensed exchanges may offer rebate agreements whereby market makers that are independent of the product issuer receive a rebate on trading fees where they meet the required metrics (maximum spread, minimum size and time in market) for the product type in order to further promote liquidity. Licensed exchanges need to ensure that any trading fee rebates do not exceed 100% of total trading fees (i.e. there cannot be a net payment for market makers to trade on a per transaction basis) and are designed to promote liquidity levels, while ensuring fair and orderly trading. Licensed exchanges may offer technology or technical services fee incentives to registered market makers. Note that market makers are able to qualify for trading fee rebates without providing liquidity for the full trading day, and traded prices may occur at unfavourable prices during periods when market makers are absent. Licensed exchanges should monitor the presence of market makers and overall quote quality on an ongoing basis.
Issuers of ETPs that engage in securities lending practices should disclose this to investors in the PDS. Licensed exchanges, as part of the admission process, should ensure that issuers have made adequate disclosures about:
- the reasons for the issuer engaging in securities lending
- the percentage of ETP assets that can be lent to third parties
- the potential risks to investors as a result of securities lending, including the potential impact on returns due to short selling by the borrower of those securities
- any fees earned by the issuer (or a related company of the issuer) from the securities lending arrangements. Where this applies, there should be relevant disclosures of any conflict of interest – in particular, there should be disclosure about how the revenues are shared between the issuer (acting as agent) and the ETP investors
- the types of collateral issuers will accept when undertaking securities lending, and
- the risk that collateralisation may not always prevent investors from losses.
Licensed exchanges should satisfy themselves that the issuer has appropriate collateral standards governing what types of assets may be obtained by the issuer as collateral under a securities lending arrangement.
Licensed exchanges are required to monitor the ETPs and issuers admitted to their market on an ongoing basis to ensure:
- a fair, orderly and transparent market, and
- compliance with the operating rules.
The licensed exchange needs to ensure that its own capabilities remain adequate as the market and range of products evolve (e.g. experienced staff, IT systems).
This will include proactively monitoring that, on an ongoing basis:
- the continuous disclosure and other disclosure obligations are being met by issuers, including disclosure about tracking performance for ETPs that follow an index
- the agreed liquidity/spreads are being complied with by market makers. For example, licensed exchanges should engage with issuers and market makers where there is insufficient liquidity or spreads are becoming too wide
- the effectiveness of any incentive schemes (i.e. rebates or other incentives) for each product do not produce unnecessary intermediation
- issuers adhere to the ETP’s intended derivative limits. Licensed exchanges may impose conditions requiring issuers to notify them when derivative exposures exceed permitted levels. In such cases, the licensed exchange should monitor the frequency of the reporting and take appropriate action if the incidence is unreasonable or greater than anticipated
- there are adequate procedures for managing situations where it may not be possible to sell close to the NAV (e.g. low liquidity ETPs, orderly wind-downs of ETPs or fund suspensions), and
- the ETP market has sufficient integrity and is adequately protecting retail investors.
Licensed exchanges should not grant waivers from their operating rules to accommodate new ETP features on a case-by-case basis. There may be instances where minor technical issues do not require operating rule changes but may be dealt with by way of a waiver.
We recognise that there are significant innovations and global developments occurring in ETPs. Where licensed exchanges consider that their operating rules need to be amended for policy reasons to accommodate such innovations or developments, the licensed exchanges are encouraged to discuss these with ASIC.
Licensed exchanges should ensure that issuers adopt appropriate product naming and descriptions in marketing their ETPs to retail investors. Retail investors frequently trade ETPs through execution-only brokers and may not receive a PDS. As a result, appropriate labelling helps them to better understand key characteristics of these products. We consider that product names that more clearly reflect the nature of the product can assist in alerting retail investors to the type of product and associated risks.
Licensed exchanges should satisfy themselves that the product is true to label and support the naming conventions in their rules or conditions of admission: see Table 1. There may be complexities in the way a product operates, for example where a passive fund invests in an active fund from overseas. Where licensed exchanges become aware of an inconsistent labelling or marketing approach they should take action with the issuer.
Licensed exchanges should encourage naming that helps retail investors to clearly differentiate between the different types of risks associated with the different types of ETPs, in particular between:
- passive and active investment strategies
- index-based and non-index-based ETPs
- ETPs that have material exposure to derivatives, and
- ETPs that are structured as managed investment schemes and other ETPs.
The naming guidelines in Table 1 are to be applied in relation to the title of the ETP and descriptions in the PDS, and any marketing material.
Table 1: Product-naming guidelines
|Product-naming considerations||Factors to consider|
ETF can only be used as a standalone term in the title and descriptions in the PDS, and any other marketing material for collective investment vehicles (such as registered managed investment schemes) that have a passive investment strategy and seek to replicate or track the performance of an index, a specified combination of multiple indices, or other widely regarded/available benchmark (e.g. currency pair or commodity), the value of which is continuously disclosed or can be immediately determined.
The term ‘active ETF’ can be used in the title and descriptions in the PDS, and other marketing material for collective investment vehicles that buy and sell investments based on an active investment strategy or where they seek to outperform a particular benchmark. These funds must not be labelled ETFs without also including the word ‘active’ and should also include the words ‘managed fund’ (e.g. ABC Active ETF (Managed Fund)).
Where the label ‘active ETF’ is used, the fund must be marketed as having an active management investment strategy (i.e. the impression should not be given that it has a passive management investment strategy or that it aims to track a benchmark).
ETPs that meet the hedge fund criteria in Regulatory Guide 240 Hedge funds: Improving disclosure (RG 240) need to use the words ‘hedge fund’ in their name (e.g. ABC Fund (Hedge Fund) or ABC Hedge Fund). ETPs that would be regarded as a fund of hedge fund in RG 240 will need to use the words ‘hedge fund’ or ‘fund of hedge fund’ in their name (e.g. ABC Fund (Fund of Hedge Fund) or ABC Fund of Hedge Fund).
Hedge funds are a subcategory of managed funds which use alternative investment strategies that can expose investors to more diverse and complex risks than other types of managed funds.
A hedge fund is a registered managed investment scheme which is either promoted as a hedge fund or exhibits two or more of the characteristics described in RG 240 which include:
The labels ‘synthetic’ or ‘managed fund’ do not need to be used where the fund is labelled ‘hedge fund’.
Managed fund (quoted)
Collective investment vehicles that are not permitted to use the label ‘ETF’ or are not required to be named ‘hedge fund’, need to use the words ‘managed fund’ in their name (e.g. ABC Fund (Managed Fund) or ABC Managed Fund).
The purpose of this requirement is to distinguish these vehicles from those that aim to passively track an index.
An ETP admitted to trading status is to be considered synthetic where it is intended to use derivatives to achieve a material exposure to the underlying instruments described in its investment strategy. The ‘synthetic’ label has been used to help investors understand the method being used to replicate the underlying index or instrument.
An ETP must use the label ‘synthetic’ unless the PDS makes clear that the investment strategy would not permit it to hold notional derivative exposures that in aggregate relate to underlying assets valued at more than 10% of the NAV of the ETP apart from in exceptional circumstances (in which case the issuer will take action as soon as practicable to reduce the exposure below the limit). Derivatives used solely to hedge foreign exchange risk of the underlying assets can be excluded for the 10% limit.
The word ‘synthetic’ needs to be included in the ETP’s name (e.g. ABC Fund (Synthetic) or ABC Synthetic Fund).
A security or derivative which gives financial exposure to the performance of underlying instruments needs to use the words ‘structured product’ in its name (e.g. ABC (Structured Product) or ABC Structured Product).
Types of structured products include exchange traded commodities (ETCs), and exchange traded certificates and exchange traded notes (ETNs).
Structured products may be labelled ‘collateralised structured product’ where the relevant PDS makes clear that investors’ entitlements are enforceable and will at all times be adequately secured by a proprietary interest in physical holdings valued at 95% or more of the market value of the structured product.
A structured product must not use the label ‘ETF’, ‘active ETF’, ‘managed fund’ or ‘hedge fund’.
Single underlying asset
Where an ETP directly holds a single underlying security passively in trust to maturity or on an ongoing basis and does not actively manage or trade it, the product may not be described as an ETF or active ETF. These products may be, but are not required to be, labelled as a managed fund.
This does not apply to an ETP whose underlying asset is a collective investment vehicle (e.g. feeder fund). In these situations, a licensed exchange should adopt a ‘look through’ approach to the holdings of the underlying asset to determine appropriate naming.
Smart beta or rules-based products
Smart beta, factor, multi-asset and quantitative or rules-based ETPs are increasingly common and may seek to provide additional diversification or return enhancements relative to traditional market capitalisation benchmarks. These types of products can fall into a grey area, where the strategies are a hybrid between active and passive investment management.
If collective investment schemes do not meet the ETF labelling criteria, they must be labelled as ‘managed funds’ or ‘hedge funds’ and they may (where not misleading) be labelled as active ETFs. However, where such ETPs are not truly active and it may be misleading to use ‘active ETF’, they may use the label ‘managed fund’.
Where a collective investment vehicle seeks to outperform a benchmark and makes investment decisions on a discretionary basis, it may be appropriate to use the label ‘active ETF’.
Where the ETP uses one of these types of investment strategies but is not a collective investment vehicle, it should be labelled ‘structured product’.
The use of leveraged or inverse ETPs (1X, 2X, 3X) with daily resets has not currently been permitted given the inability for these products to exactly replicate the specified multiples of an index over more than one day (because of the compounding effect of the daily reset function) and concerns that retail investors fail to understand the implications of the product being held for a period longer than one day.
Other types of ETPs that provide material leveraged/inverse exposure to an underlying reference asset are able to be considered for admission where the target range for the leveraged/inverse performance of the ETP is clearly identified in its PDS. The exposure of these ETPs is reset where its exposure deviates from its prescribed range. These types of ETPs must be labelled ‘managed fund’, ‘hedge fund’, ‘synthetic managed fund’ or ‘structured product’ as appropriate.
Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice.
You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.
This is Information Sheet 230 (INFO 230), issued in December 2017. Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.