ETF Basic

Understanding the intricacies of the primary and secondary markets for exchange-traded Funds (ETFs) is crucial for investors to navigating the world of investments. Let’s delve into these markets to shed light on their unique roles with KIS Vietnam.

1. Primary Market for ETFs

• In the primary market, the creation and redemption of ETF shares take centre stage and are primarily traded by Authorized Participants (APs). These APs, often prominent brokerage firms and market makers, collaborate closely with ETF managers to play a pivotal role in the generation of new ETF shares. This process involves assembling a carefully curated basket of securities designed to mirror the composition of the ETF’s underlying index. 
• Target Participants: Institutions, companies, and professional investors. Underwriters, often investment banks, lend their expertise to assist in the issuance process. Creation Unit: An essential unit in the Vietnam primary market is equivalent to a minimum of 100,000 ETF shares.
• Notably, investors in the primary market don’t buy these units using cash but rather acquire them by investing in a structured securities portfolio that tracks the composition of the approved indexes or the established benchmark indices.
• Importantly, investors in the primary market do not acquire these units with cash but instead invest in a structured securities portfolio that tracks the composition of approved indexes or established benchmark indices. Participants in the primary market adhere to a sophisticated process to obtain ETF units, underscoring the significance of a well-structured securities portfolio aligned with recognized market indices.

2. Secondary market for ETFs.

• In contrast, the secondary market is where ETF shares actively trade. Here, individual investors participate in the buying and selling of ETFs on stock exchanges.
• The secondary market facilitates the trading of ETF shares on active trading days, providing investors with the opportunity to engage in transactions with ETFs. In Vietnam, ETFs are readily available for purchase on the HOSE stock exchanges.