A comprehensive cross-section of Qatari financial industry participants, including brokers, custodians and asset managers, attended an ETF Liquidity Provision workshop hosted by the Qatar Stock Exchange.
The workshop was presented by David Murtagh, former head of European ETF trading desk at Susquehanna International Group (SIG). The topics included in his presentation were an introduction to ETF products, the creation and redemption process for ETF's, the management of ETF positions and the arbitrage opportunities for liquidity providers.
The interactive workshop included active participation from the attendees who also discussed ETF products for the Qatari market and the benefits brought by being being able to diversify holdings and access new investment opportunities.
Liquidity provision (LP) is critical for exchange traded funds (ETFs). LPs do not only provide liquidity allowing investors to buy and sell, but are also instrumental in the creation and redemption of units, which allows the ETF to grow, whilst ensuring that unit pricing is adequately balanced against the value of the fund (the so called net asset value or NAV).
ETFs provide investors with the ability to buy and sell individual units, just like shares, of a fund which is designed to mimic a particular asset class or market sector. This allows investors to enjoy the benefits of asset diversification, without the associated costs of building the portfolio themselves. Examples of these ETFs are those which track an index, or those that track the price of a specific asset. ETFs are widely used by institutional investors and increasingly by financial advisors and retail investors to achieve passive exposure according to preferred investment strategies, allow investors big and small to build institutional-caliber portfolios, and gain convenient access to markets that would otherwise be difficult to invest in.