The Research About Introducing Exchange Traded Funds (ETF) Into China

By comparing with other funds, Exchange Traded Funds (ETF) has particular advantages. ETF combines the merits of both closed-end funds and open-end funds. It provides investors with more trading facility, flexible trading ways and lower trading cost; investors can apply it to various investments. Further more, ETF has particular advantages such as high transparency, which is convenient for market surveillance; meanwhile, it can lead the rational investment and improve the market liquidity. So, various participators accept ETF easily. ETF developed dramatically within 10 years since American Stock Exchange issued the first ETF-SPDR in 1993. And it is fashionable over the world. Besides the cradle land of ETF-US, most of the stock markets in Europe and Asia-pacific areas are introduced into ETF. It has become a more and more important part of global fund industry and it is the development direction for the fund industry as well.Based on researching the development and operation of ETF in foreign countries, This article uses the ETF as its object and analyzes the regulation and market problems and its operation system, summarizes the relative advantages of ETF by comparing with other indexing products or general mutual funds and the successful factors of ETF being popularized over the world. This article's main conclusion is that introducing ETF into China can make Chinese stock market's structure and investors' structure be perfected. Meanwhile, this article points out ETF will activate the trading of the index stocks and improve index funds' development. In a word, ETF will make a deep influence in Chinese stock market. Based on the above-mentioned academically research, this article also analyzes the feasibilities and possibilities of ETF being issued in China.Based on the fundamental research mentioned before, this article makes further research on the operation mechanism of ETF, such as the legal problems about introducing ETF into China, the register system of between investors and ETF, the investment goal of ETF, etc. Then makes the solution.At last, this article does the empirical work on SSE50 index for the critical technical problems of ETF. It forecasts the possible investment phenomena. Firstly, the absolute income of ETF will be less than index funds'. Secondly, when the index stocks are adjusted, the reaction of ETF will lag. Thirdly, ETF will be forced to holdsome iffy index stocks. Fourthly, At the process of setting up ETF, the radical investors have the opportunity of speculation profit. Fifthly, investors cannot make profits on ETF through the way of running up the large-cap index stock's price. At last, according to the current condition of capital market in China, we cannot maximize the functions of ETF. A good way of solving these problems is that we should choose the most right indexes. And when making the list of creation and redemption, some stocks should be instead by cash. Then ETF can remove the problem stocks initiatively. Of course, it will increase the cost of tracking error temporarily. The ETF's functions will be maximized along with the development of index derivatives. Hopeful, this work will satisfy investors in China and make financial market in China to develop steadily and healthily.