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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Scheme Related Information

Which of the following is true of an Exchange Traded Fund (ETF)?

ETF units are listed on stock exchanges and held in demat form, so small investors buy and sell them at market prices during trading hours. Only large investors or authorised participants deal directly with the AMC in creation-unit sizes at NAV-based terms.

  1. AUnits are created and redeemed directly with the AMC only in large creation-unit sizes, while small investors trade on the exchangeCorrect
  2. BUnits can be bought only at the end-of-day NAV from the AMC by all investors
  3. CETFs cannot track an index
  4. DETF units cannot be held in demat form

Explanation

ETFs are listed and trade on stock exchanges at market prices through demat accounts. Authorised participants and large investors deal directly with the AMC in creation units, while small investors buy and sell on the exchange. ETFs typically track an index or an asset such as gold.

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