Boursa: Building an active and sustainable market for exchange-traded index funds

As part of its ongoing efforts to develop the Kuwaiti capital market, diversify investment products, and enhance trading efficiency, the Kuwait Stock Exchange hosted a virtual seminar titled “Building an Exchange-Traded Funds (ETF) Ecosystem: From Regulatory Framework to Market Growth,” in collaboration with the CFA Institute and its Kuwait Society, on Monday, August 24, 2026.

The seminar comes at a new stage in the development of ETFs in Kuwait, where efforts have shifted from completing regulatory frameworks and operational infrastructure to examining the prerequisites for market growth and the sustainability of trading activities. The event saw the participation of more than 120 representatives from asset management firms, brokerage houses, investment institutions, and regulatory bodies. It discussed the practical requirements for building an active and efficient market, alongside an overview of international best practices and experiences in this field.

Anthony Sassine, Founder and CEO of OCEANE Invest, delivered a presentation covering the integrated ecosystem of ETFs and the roles of key participants, including regulators, stock exchanges, fund managers, authorized participants, market makers, custodians, and brokers. He also outlined the global evolution of ETFs and prominent sector trends, as well as the mechanism of these funds through creation and redemption processes in primary and secondary markets, and their role in supporting pricing efficiency and narrowing the gap between the trading price of units and the net asset value.

The session discussed key factors affecting ETF liquidity, emphasizing that trading volume alone does not necessarily reflect liquidity quality. Indicators such as bid-ask spreads and market depth provide more accurate insights into trade execution ease and pricing efficiency. Furthermore, effective market making contributes to sustaining trading activity and reducing price spreads.

Discussions underscored that market efficiency relies on the integration of various participants’ roles, ensuring easy access to products and efficient trade execution, alongside providing effective distribution channels for investors. The seminar also explored the future development of ETFs, including Sharia-compliant funds, active funds, and cross-listed funds, as well as opportunities to develop products targeting specific sectors or asset classes. This aims to broaden available investment options and enhance market diversification in accordance with prevailing regulatory frameworks.

Discussions also highlighted the importance of selecting appropriate benchmark indices and tracking efficiency, as well as managing the deviation between fund performance and the benchmark index, known as “tracking error.” Tracking error was identified as a key element in evaluating product quality and investor appeal, alongside liquidity, pricing efficiency, and costs.

Commenting on this, Nasser Al-Sanousi, Head of Marketing and Corporate Communications at the Kuwait Stock Exchange, stated: “Financial and investment education is an integral part of the Kuwait Stock Exchange’s approach to market development, not a separate activity. As available investment tools evolve, it becomes increasingly important to enable participants to understand product characteristics, pricing mechanisms, and trading processes, thereby supporting more informed and efficient investment decisions.

“The success of ETFs is not measured solely by the number of listed products, but by their ability to support sustainable activity, provide a trading environment characterized by liquidity and efficiency, and expand the investor base. From this perspective, the Kuwait Stock Exchange continues to work with various stakeholders in the market ecosystem to transition from product readiness to building a market capable of growth and sustainability, while keeping pace with global best practices.”

For his part, Anthony Sassine said: “Kuwait possesses the necessary foundations to build an active ETF market, particularly following the establishment of appropriate regulatory frameworks for these instruments. The next phase involves strengthening the prerequisites for activity, including developing market making, expanding distribution channels, and raising investor awareness. This will contribute to enhancing trading efficiency and enabling investors to enter and exit the market easily and at fair prices.”

Al-Sanousi added: “The Kuwait Stock Exchange is proud of its partnership with the CFA Institute, which combines our expertise in the local market with the global professional standards represented by the Institute. Through this seminar, we aimed to provide participants with specialized international expertise and discuss practical aspects of developing an ETF ecosystem capable of growth, thereby enhancing the readiness of the Kuwaiti market and keeping pace with global developments in the asset management industry.”

On her part, Sara Abdul Samad, Head of the CFA Institute Kuwait Society, said: “We value the collaboration with the Kuwait Stock Exchange on this educational initiative, which contributes to enhancing market participants’ knowledge of ETFs and their operational mechanisms. This cooperation aligns with the Institute’s mission to disseminate financial knowledge and elevate professional practices, thereby supporting the development of the Kuwaiti capital market and establishing higher levels of efficiency and maturity.”