Page 274 - 2017-2018 NSE FACTBOOK.cdr

2017/2018 NSE FACT BOOK 2017/2018 NSE FACT BOOK
The Performance Documentary of Listed Nigerian Companies The Performance Documentary of Listed Nigerian Companies

51. What are Bonds and Debentures? 55. What is accrued interest? 60. What are the advantages of ETFs? Mutual Funds usually have a minimum investments and
minimum holding periods.
These are debt instruments issued by government, Most bonds pay interest semi-annually. The interest * ETFs provide a cost effec ve way of trading a basket of * ETFs trade like regular shares and can be bought or sold
government agency or a corpora on. It is basically an earned from holding the bond from the last interest shares through a single transac on throughout the trading day by placing an order with
“IOU” issued by one party to another. The issuer promises payment date (or the issue date) un l the disposal date is * ETFs offer a market related performance or return. your stockbroker. Mutual funds, on the other hand are
to payback a loan plus certain amount of interest over a called accrued interest. usually bought or sold based on closing prices for the
definite period of me. ______________________________________________ * Allows for diversified exposure through buying a single day, and the transac on occurs between the investor
______________________________________________ share and the fund.
56. When do bond trades se le?
52. What is the difference between bonds and * Provides an opportunity for investors to track a market * ETFs generally have lower expense ra os than mutual
stocks? All NSE traded bonds se le two (2) business days a er the ______________________________________________ funds. Most ETFs passively track an index without
date of trade (T+2). significant manager interven on, unlike many mutual
Bonds are debt instruments issued by a government or a ______________________________________________ 61. What are the disadvantages of ETFs? funds that are more ac vely managed by investment
company which represent a fixed sum of money that was managers. As a result, ETFs tend to have lower expense
borrowed (principal). The issuer (borrower) promises to 57. Are the trade prices of bonds traded on the * ETF prices are determined by market forces, so a buyer ra os than mutual funds.
pay the holder (lender) a specified amount of interest Exchange inclusive of accrued interest? might buy at a slight premium or discount versus the ______________________________________________
(usually stated as a percentage) over a specified period of Net Asset Value (NAV).
me, and to repay the principal at maturity. All bonds traded on the Exchange are bought and sold at a 65. What are the investor protec on steps taken by
clean price, meaning that the trade price is exclusive of * Some ETFs may not track widely accepted indices, the Nigerian Stock Exchange & CSCS?
Shareholders, on the other hand, are part owners of a accrued interest. which some mes result in higher costs and higher risks.
company, and may receive periodic dividend payments ______________________________________________ ______________________________________________ * Investors Protec on Fund (IPF)
from the company depending on its performance. A bond
holder is en tled to receive periodic interest payments at 58. What is an Exchange Traded Fund (ETF)? 62. What are the differences between Exchange * Dealing Member firms contribute N1,000,000.00 each
an interest rate that is declared at the me the bond is Traded Funds and Closed-End Funds? upon becoming a Dealing Member of The Exchange
issued. An Exchange Traded Fund (ETF) is an investment vehicle
______________________________________________ that tracks an index, a basket of assets, or a commodity, but * The price of an ETF trades very close to its Net Asset * Dealing Members are required by the IPF Rules to make
trades like regular shares on a stock exchange. Value (NAV), while that of a closed-end fund is other contribu ons to the IPF.
53. What benefits are there in inves ng in bonds? ______________________________________________ completely determined by valua on of the market.
The structure of ETFs allow market par cipants to * Has a separate Board of Trustees
* Low risk compared to equity 59. Why invest in ETFs? redeem shares from the basket of the fund's underlying
assets, while closed-end funds can only be redeemed * Compensates investors who suffer pecuniary losses
* Fixed and Regular Income- bondholders are paid upon liquida on of the fund arising from the revoca on or cancella on of the
* Low Cost: ETFs are less expensive to operate than
interest at a fixed rate un l the maturity date ac vely managed funds because ETFs have less registra on, insolvency, bankruptcy or negligence of a
frequent por olio changes * Clearing and Se lement cycle is T+3, and there are no Dealing Member firm as well as wrong doing
* Tax Savings - interest earned on bonds are tax exempt circuit breakers or price band limits commi ed by a Dealing Member firm or any of its
* Transparent: The performance and por olio ______________________________________________ directors, officers, employees or representa ves in
* Capital apprecia on like all instruments traded certain situa ons.
composi on of an ETF reflect the underlying index or
commodity, as the holdings of an ETF closely mirror the 63. What risks are associated with ETFs?
* Predictability - bond holders know how much interest underlying index or commodity it tracks Investment * X-Alert
they will be paid, when they will be paid and when the * This includes general market risks, interest rate risks,
principal will be repaid * Diversifica on: An ETF is a direct and inexpensive way liquidity risks, infla onary risks, and legal and For investors whose phone contact are provided - it
______________________________________________ regulatory risks. provides details of trading ac vi es in the investor's
to a ain diversified exposure to an index, commodity,
account as they occur
sector, region, while remaining in the capital market
54. What is Retail Bond Trading? * An investment in ETFs may increase or decrease in
* Tradability: Investors can buy and sell ETFs like shares value as the market changes. * Trade Guarantee Fund
Retail Bond Trading is a new product offering by The through a stockbroker. ETFs can be bought and sold on ______________________________________________
Nigerian Stock Exchange (NSE) which will afford retail and The Nigerian Stock Exchange throughout the day based * Dealing Member firms contribute N100,000 each
other investors the opportunity to buy and sell bonds on market prices, which are determined by demand 64. What are the differences between Exchange
through the NSE. and supply Traded Funds and Mutual Funds? * Managed by Se lement Banks on quarterly basis

* To ensure that each trade se les. Overtrading is
2017/2018 NSE FACTBOOK * No minimum investment, minimum holding period, or expected to be se led from the Trade Guarantee Fund 2017/2018 NSE FACTBOOK

early withdrawal fees are associated with ETFs, but

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