22

Question 1

‘in-kind’ creation

Answer 1

when market maker exchanges a basket of stocks for a block of ETF shares

Question 2

inverse ETF

Answer 2

inverse ETF increases in value when the reference index falls in value.

Question 3

is liquidity of an ETF based on ETF units or underlying securities?

Answer 3

The liquidity of an ETF does not rest on the liquidity of the ETF units themselves but rather on the liquidity of the underlying securities that make up the ETF. The volume of the underlying securities is the true indication of the ETF’s liquidity.

Question 4

standard ETF

Answer 4

Standard ETFs are able to either replicate an index in full, or use sampling to construct an index.

Question 5

Rules-based ETF

Answer 5

Rules-based ETFs do not follow an index.

Question 6

Active ETF

Answer 6

Active ETF investments vary according to the management style, trading when market conditions and opportunities permit, unlike a standard ETF that passively follows an index.

Question 7

Inverse ETF

Answer 7

Inverse ETFs rely on derivatives to achieve the inverse effects that they seek.