Lyxor ETF Charter: A commitment to transparency, efficiency and liquidity

The Lyxor ETF Charter addresses the important aspects of ETF investing and goes above and beyond some requirements of the European investment directive UCITS.
This charter consists of detailed commitments regarding asset management quality, index tracking, transparency, counterparty risk and trading on the primary and secondary markets.
Lyxor ETFs have always been transparent investment products, but now the firm goes one step further by committing to a series of quality indicators on key areas to all investors.

1. Asset Management quality
– Direct ownership by the fund of physical assets in the form of securities
– Securities held by the funds are in segregated accounts solely for the benefit of the fund
– No lending of such securities
– Application of best execution principles to derivatives transactions as required under the UCITS 4
– Independent calculation and publication of the index, no fee in the index

2. Index tracking
– Direct tracking of the index, without any statistical or sampling technique
– Tracking error, computed according to regulatory standards as the volatility of the difference of performances, aims to be below 100bps
– Publication of the effective tracking error in monthly client reports

3. Transparency
– Daily publication on the web site of all directly owned securities
– Daily publication on the web site of all counterparties to all derivatives entered into by the Lyxor ETF and daily disclosure of counterparty risk on each of them
– Daily publication on the web site of all securities held in the form of collateral of derivatives operations
– Publication in the KIID of all fees received by the asset manager
– Provision of Value At Risk reporting to institutional investors upon request
– Provision of VAG and solvency reporting to German institutional investors upon request

4. Counterparty risk
– Daily target of zero counterparty risk per ETF (well below the 10% limit set by UCITS regulations)

5. Primary market
– Access to liquidity through a wide network of Authorised Participants (currently 45 as of 17/10/2011)
– Dedicated website for Authorized Participants allowing electronic routing of creation and redemption orders
– Flexibility of creation and redemption process, through either delivery of cash (all ETFs asset classes) or securities (fixed income & equity ETFs) or index futures (equity ETFs)
– Daily liquidity for large subscription and redemption by APs, at NAV across all asset classes
– Full transparency on creation and redemption costs

6. Secondary market
– On-exchange liquidity currently provided by multiple market makers (15)
– Availability of multiple stock exchange listings (649 listings on 13 exchanges as of 17/10/2011)
– Continuous pricing across multiple listings and in different currencies under normal market conditions
– Providing clients with a choice in terms of trading venue and trading counterparty
– Delivering high levels of reported on-exchange liquidity to lower trading costs

* Source: Bloomberg, Lyxor. Trading volume for September 2011, unless otherwise stated all other data as of end of September 2011.

The products described within this document are not suitable for everyone. Investors’ capital is at risk. Investors should not deal in these products unless they understand their nature and the extent of their exposure to risk. The index tracked by a Lyxor ETF may be volatile.
Prior to any investment, investors should make their own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided by us in this page. We recommend that you consult your own independent professional advisers.