Kuwait Stock Exchange Leads Dialogue to Build an Active and Sustainable ETF Market
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 ETF Ecosystem: From Regulatory Framework to Market Growth” on Monday, in collaboration with the CFA Institute and its Kuwait Society.
The seminar comes at a new stage in the development of exchange-traded funds (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 showcasing international best practices and experiences in this field.
Sassine outlined the global development of ETFs and the key trends shaping the sector, 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.
Sassine stated, “Kuwait possesses the necessary prerequisites for building an active ETF market, especially following the establishment of appropriate regulatory frameworks for these instruments. The next phase involves strengthening the foundations of activity, including developing the market-making industry, expanding distribution channels, and raising investor awareness, all of which contribute to enhancing trading efficiency and enabling investors to enter and exit the market easily and at fair prices.”
The session discussed the key factors affecting the liquidity of ETFs, emphasizing that trading volume alone does not necessarily reflect liquidity quality. Indicators such as the bid-ask spread and market depth provide more accurate insights into the ease of trade execution and pricing efficiency. Additionally, effective market making supports continuous trading and reduces price spreads.
The seminar also addressed the prospects for the 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, thereby broadening the range of available investment options and enhancing 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,” which is considered a key element in evaluating product quality and its attractiveness to investors, alongside liquidity, pricing efficiency, and cost.
Commenting on this, Nasser Al-Sanousi, Head of Marketing and Corporate Communications at the Kuwait Stock Exchange, said, “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 empower participants to understand product characteristics, pricing mechanisms, and trading processes, thereby supporting more informed and efficient investment decisions.”
He added, “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.”
This symposium extends the ongoing partnership between the Kuwait Stock Exchange and the CFA Institute, reflecting both parties’ commitment to advancing professional knowledge in the Kuwaiti capital market by combining local expertise with global best practices and professional standards.
Al-Sanousi added, “The Kuwait Stock Exchange is proud of its partnership with the CFA Institute, which brings together our market expertise and the global professional standards represented by the Institute. Through this symposium, we have sought to provide participants with specialized international expertise and discuss practical aspects of developing a growth-oriented exchange-traded funds (ETF) ecosystem, thereby enhancing the readiness of the Kuwaiti market and keeping pace with global developments in the asset management industry.”
The partnership between the Kuwait Stock Exchange and the CFA Institute dates back to 2018, when both parties signed a memorandum of understanding aimed at providing specialized educational content on investment fundamentals through the Exchange Academy, alongside collaborating on organizing training programs, workshops, and awareness initiatives.
For her part, Sarah Abdul Samad, Head of the CFA Institute Kuwait Society, said, “We value our collaboration with the Kuwait Stock Exchange on this educational initiative, which contributes to enhancing participants’ understanding of exchange-traded index funds 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.”
The CFA Institute Kuwait Society comprises a group of investment sector specialists and has served CFA charterholders and candidates in Kuwait since 2008.
In collaboration with the market ecosystem led by the Capital Markets Authority, the Kuwait Stock Exchange has developed an integrated regulatory and operational framework covering the entire lifecycle of exchange-traded funds, from listing to daily trading. It has also designated an independent trading board for funds, tailored to their nature, providing an organized and transparent trading environment.
With these foundations in place, the priority shifts to enhancing the actual activity of these instruments by activating the role of accredited participants, deepening distribution channels, and boosting investor participation. Together, these elements form the basis for building a market capable of supporting product growth and sustaining activity in the long term.
Exchange-traded funds are part of broader efforts to develop the Kuwaiti capital market and diversify investment tools available to investors. As new products and services are developed, including fixed-income instruments, efforts continue to build a multi-asset market that is more efficient and diversified, aligning with the needs of local and international investors and global best practices.
These efforts reflect the Kuwait Stock Exchange’s commitment to its role as an operator and developer of the Kuwaiti capital market, working with various ecosystem stakeholders to enhance the market’s attractiveness, efficiency, and competitiveness, in line with the broader objectives of “Kuwait Vision 2035,” which aims to develop the financial sector, strengthen the role of the private sector, and build a more diversified and competitive economy.
These initiatives also align with several of the United Nations Sustainable Development Goals, particularly those related to quality education, economic growth, innovation and infrastructure, and partnerships, by enhancing investment knowledge, developing market infrastructure, and supporting professional collaborations.
