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Buying and selling ETFs

Trading ETFs and other ETPs is similar to trading shares – but there are also some important differences

Similarities

The basic process for buying and selling ETFs is the same as trading shares. Orders are entered during ASX trading hours via your broker and brokerage is payable. Settlement of the trade takes place two business days after the transaction (T+2). For a purchase, legal ownership of the ETF is transferred to you and for a sale, funds will deposited into your account. You receive a confirmation note from your broker and a CHESS holding statement, just as you do when you trade shares.

DIFFERENCES

Despite the similarities in the trading process, there are some additional considerations when you trade ETFs. These include:

  • the role of market makers, and
  • the best time during market hours to trade ETFs. 

Market maker arrangements

A market maker is a professional trader who is appointed by ASX or the product issuer to provide liquidity in the ETF or ETP by providing quotes throughout the ASX trading day and updating their prices to reflect changes in the underlying markets. Market makers also play an important role in ensuring that buyers and sellers of ETFs and other ETPs can transact at prices close to the net asset value of the ETF or ETP. 

What is the NAV and iNAV?

NAV

The NAV (Net asset value) is the value of assets less liabilities, often expressed as the value per unit or per share. For example, the net asset value per unit of an ETF would be calculated by subtracting the fund's liabilities from its assets, then dividing the result by the number of units on offer.

Available from your broker’s website, the NAV is an important reference point to consider before you buy or sell units in an ETF. 

iNAV

The indicative Net Asset Value (iNAV) is an estimate of the intraday value of an ETP based on the market values of its underlying net assets. An iNAV provides a reference point to investors during the day to help them understand whether they are purchasing or selling ETP units at or close to the NAV per unit.