Press releases 2000

24 February 2000

EXCHANGE TO LAUNCH NEW MARKET FOR SPECIAL PRODUCTS

The London Stock Exchange today announced the creation of extraMARK, a new 'attribute' market providing a focus for innovative new products which will offer added benefits for both professional and private investors.

The first new product to be launched under the extraMARK umbrella will be exchange-traded funds (ETFs). ETFs offer investors easy access to the performance of an index by buying shares in a single fund.

Market professionals - fund managers or investment banks - will establish the fund to track the chosen index, and issue shares in the fund which can be bought and sold via a broker. These will be traded on the Exchange's electronic order book.

Advantages to investors include:

• Value: investors are able to gain cost-effective exposure to the dividend flows and capital gains of all equities in the index;

   

• Access: just like equity, ETFs are traded during market hours;

   

• Accurate pricing: because the fund is 'open-ended' - ETF shares can be redeemed for the underlying equities or created by swopping baskets of the underlying equities for ETF shares - the fund expands to meet demand so that the share price is closely linked to the value of the underlying equity.

   

The Exchange said: "extraMARK is the second of our attribute-based markets building on new admission criteria, our proven trading services, and the Exchange's research and development expertise.

"The flexibility of ETFs makes them an attractive option for all kinds of investor. Tracking an index helps to spread risk and exposes investors to a wider variety of companies, but can be difficult and expensive for most private investors to do on their own. By establishing ETFs, market professionals will overcome this difficulty."

FTSE International said: "We believe ETFs are an important development in the market for index-related products. They have proved extremely popular with both retail and institutional investors in the U.S. and extraMARK opens the door for similar products to be developed in the UK."