Certificates vs ETFs

ETFs are funds listed on the stock market, the purpose of which is to faithfully reproduce movements in a reference index.  Like pure indexation certificates, which have the same purpose, they are traded like shares and have a dedicated segment within NYSE Euronext’s regulated markets. However, they differ from certificates in several respects:

  • Legal form. ETFs are variable capital investment funds. Their assets vary as investors subscribe to and withdraw from them.  Certificates are issued in limited numbers, which can influence their valuation.
  • Maturity. ETFs have an unlimited life. Certificates can have an expiration date.
  • Distribution. ETFs can distribute dividends. This is not always the case for certificates.
  • Diversity of underlying assets. Certificates offer a wide range of underlying assets. ETFs, which are subject to stricter investment rules, focus on reproducing indices, which are themselves invested over a broad group of underlying assets.
  • Liquidity. Generally speaking, the issuer of a certificate is also the counterparty for transactions in it. The secondary ETF market is ensured by marketmakers independent of the issuer.