Deutsche Bank - ETF closure in few markets

[CityFarmer]

This sounds scary, I think most of us who bought ETF would not have considered the possibility of them being delisted. Can they just delist without the ETF holders' approval?

Would the chances of delisting be lower if the ETF and the component shares are in listed in the same exchange?

I reckon ETFs operate similarly as mutual fund. 

The mutual fund manager can make decision to wind up the fund without subscriber approval, by giving sufficient notice period. The typical practice is either to move to other similar fund, or to refund. The fund manager should make the suggestion. In the above case, may be option was provided to move to other ETF with similar mandate.

[Shrivathsa]

Hi Shrivathsa, thanks for sharing about this.
This is one risk of investing in ETFs that I have not thought of.

Just made my first ETF purchase a week back. (STI ETF)

Hi Gzbkel,

You are welcome.

On the STI ETF, I think you need not worry about this risk.

There are a few reasons for that.

a) There is adequate liquidity for STI ETF in Singapore (especially, if you compare it to the volumes back in 2004, for example in October 1, 2004, the average volume was just 9,800 shares a day being traded, on October 1 of 2015, the volume is 313,500 shares, that is roughly a 30 times increase in liquidity)
b) It is the first ETF in Singapore (In its earlier avatar as streettracks STI ETF and the SGX is very keen to ensure that it is succesful, so chances are it will have a competitive listing fee structure)
c) It has relatively low spreads which means that the investor has low entry / exit costs
d) The SGX is waiving ETF clearance fees, likely to increase the attractiveness to issuers.

Cheers

Full Disclosure : I do hold the STI ETF, so there may be some bias in my perception in this regard

[Shrivathsa]

This sounds scary, I think most of us who bought ETF would not have considered the possibility of them being delisted. Can they just delist without the ETF holders' approval?

Would the chances of delisting be lower if the ETF and the component shares are in listed in the same exchange?

Hi Touzi,

Yes, they can delist without the ETF holder approval, because they are a collective investment trust, the decision is in the hands of the ETF sponsor.

On the second point, well, it should be lower, (which is why I bought the DB ETF listed in paris, as it holds the underlying CAC 40 shares) but in this case, they still are going to de-list in Paris, but retain listing in XETRA (!!).

So, here the answer could be that when buying the ETF, try to buy the ETF in the country of the main sponsor, so, for example, if you are Deutsche Bank ETF, buy it on XETRA, if Lyxor ETF buy on NYSE Euronext Paris, if buying Think ETF, buy on NYSE Euronext Amsterdam etc.

Cheers

[Shrivathsa]

This sounds scary, I think most of us who bought ETF would not have considered the possibility of them being delisted. Can they just delist without the ETF holders' approval?

Would the chances of delisting be lower if the ETF and the component shares are in listed in the same exchange?

I reckon ETFs operate similarly as mutual fund. 

The mutual fund manager can make decision to wind up the fund without subscriber approval, by giving sufficient notice period. The typical practice is either to move to other similar fund, or to refund. The fund manager should make the suggestion. In the above case, may be option was provided to move to other ETF with similar mandate.

Hi Cityfarmer,

In this case, the decision of the ETF manager is that if your ETF / ETC is being terminated, after the assets are sold, you will be refunded all the money that is due.

If it is just being delisted, say for example, the CAC 40 delisted in Paris, but is still listed in Xetra, you can continue to trade in Xetra.

Chances are you will have to talk to your broker to transfer the name and ticker in your statement to an Xetra holding and ticker, so, likely to take time and till then it will be a 'dead' investment

Cheers

[CityFarmer]

This sounds scary, I think most of us who bought ETF would not have considered the possibility of them being delisted. Can they just delist without the ETF holders' approval?

Would the chances of delisting be lower if the ETF and the component shares are in listed in the same exchange?

I reckon ETFs operate similarly as mutual fund. 

The mutual fund manager can make decision to wind up the fund without subscriber approval, by giving sufficient notice period. The typical practice is either to move to other similar fund, or to refund. The fund manager should make the suggestion. In the above case, may be option was provided to move to other ETF with similar mandate.

Hi Cityfarmer,

In this case, the decision of the ETF manager is that if your ETF / ETC is being terminated, after the assets are sold, you will be refunded all the money that is due.

If it is just being delisted, say for example, the CAC 40 delisted in Paris, but is still listed in Xetra, you can continue to trade in Xetra.

Chances are you will have to talk to your broker to transfer the name and ticker in your statement to an Xetra holding and ticker, so, likely to take time and till then it will be a 'dead' investment

Cheers

Thank for the illustration. I didn't invest in ETF, but I have a bit of experience in mutual fund investment, which may be useful, hopefully. Thanks for the sharing so far. 

[corydorus]

I remember STI ETF regularly announces NTA. Shouldn't that be the reference value if ETF closes ?

[Art or Science]

Termination of Fund:
The commercial success of the Fund is dependent on attracting assets under management significantly larger than a traditional unit
trust. In the event that the size of the Fund falls below S$100,000,000 on any day falling 2 years or more after the date of the Deed, the Manager may terminate the Fund. Please see paragraph 12 of this Prospectus for full details as to the circumstances under which the Fund may be terminated.

Source: http://www.spdrs.com.sg/etf/fund/ref_doc...s_STTF.pdf

(For SPDR)