Issuers

Issuing company is the backbone of the ETN market. It plans and issues ETNs that are geared to meet the investor’s demand. Also, it involves marketing activities and makes payments equivalent to the return of underlying index to investors at the maturity or for early redemptions. In order to do the above activities, issuing company manages (and hedges) the assets, reports and discloses important issues to inform the investors. An ETN is an unsecured financial product and thusso the financial stability and the credit rating of the issuing company are the most important factors. Therefore, KRX applies strict criteria on the financial stability and the business suitability of issuing companies for the listing of ETNs.

Liquidity providers

For a securities market, especially for a newly established one, it is very important to ensure sufficient liquidity so that investors can easily buy or sell desired amount of securities whenever they want. In this sense, KRX introduced the liquidity provider scheme to its ETN market from the beginning. Securities companies, the issuers of ETNs, act as liquidity providers in the ETN market, submitting two-way quotations on a continuous basis in the market.

Index providers

ETNs are basically index-linked products and thus investors get the index return for their investment. Therefore, in order to list ETNs on an exchange, the issuers need to enter into agreements with index providers on the use of indices as underlying assets. The fluctuation of underlying index is the most important factor for an ETN investment since an investor obtains a return rate of the underlying index. Issuers can list ETNs by concluding a contract for index use with index providers or by self-indexing. Underlying indices shall be stably calculated, disseminated, and recognized as having an appropriate management system. In addition, if issuers use self-calculated indices, they shall be recognized as having internal control standards to prevent any conflict of interest between the calculation of underlying indices and the application of ETNs, etc.

Other market participants

Being entrusted by the issuers of ETNs, Korea Securities Depository (KSD) performs the management activities of ETNs. After the market closing, KSD calculates the indicative values of ETNs and discloses them through Korea Exchange and KOSCOM, and the indicative values becomes the base of real time indicative value that is calculated and published by KOSCOM on the following day. KSD also calculates the taxable base prices of ETNs every day