FAQ

“ETF” stands for Exchange Traded Fund, which, like a regular mutual fund, may invest in an underlying basket of assets such as stocks, bonds, currencies, options or commodities. Unlike regular mutual funds, however, the units of ETFs trade on a stock exchange just like common stock. This means that pricing is transparent and ETF units can be bought and sold throughout the regular trading day.

ETFs are flexible investment tools designed to be used by both individual and institutional investors. As a basket of investments, ETFs offer the diversification of mutual funds, but typically at a fraction of their cost.

Similar to mutual funds, ETFs are typically structured as an open-ended investment trust, meaning that new units of the ETF can be created (or redeemed) to meet demand as required. The liquidity of the ETF unit on the stock exchange is heavily dependent on the liquidity of the underlying holdings in the ETF portfolio. There are two important market mechanisms to ensure ETFs have adequate liquidity:

1. They are listed on an exchange; this provides a market for them to be traded in a transparent manner.

2. Each ETF has a designated broker obligated to create and redeem its units. In addition, there are other institutional traders known as Market Makers which also participate in the market to provide units on the exchange. This enables an investor to buy and sell units of the ETF at a price that is close to the NAV, excluding any brokerage fees.

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Units of Global X’s ETFs trade on the Toronto Stock Exchange (TSX). Units can be bought and sold throughout the normal trading day, using an online, discount or full-service brokerage account.

All ETFs have two end-of-day “values”. They have a closing market price per unit, as determined on the exchange, (the trading session’s last trade), and a net asset value per unit (NAV), as determined by the ETF’s independent fund accountant after the market closes.

The closing price is typically the last transaction price of the ETF recorded by the Toronto Stock Exchange, whereas the NAV per unit is an independent calculation created by the ETF’s fund accountant, which calculates the market value of each unit based on the underlying value of the securities held by the ETF net of all its liabilities.

Since there may be a lag between the last time the ETF traded and changes in the underlying value of the ETF’s holdings, the NAV per unit would generally be considered a more accurate representation of the market value of the ETF.

A premium or discount to an ETF’s NAV per unit occurs when the market price of an ETF is above or below that NAV per unit.

The importance of understanding a premium and a discount is relevant when considering investing in an ETF. The level or size of premiums and discounts is generally greater when:
• the underlying assets of the ETF trade at different hours from the ETF (i.e. commodities)
• the underlying assets trade infrequently (i.e. bonds)
• the markets are in a greater state of instability or flux (i.e. at the Open and Close of a trading day)

Yes, all ETFs offered by Global X are eligible to be held within all accounts.

Global X’s ETFs are listed on the Toronto Stock Exchange pursuant to prospectuses filed with Canadian regulators, in accordance with Canadian securities laws and regulations. None of the exchange traded funds managed by Global X Investments Canada Inc. are regulated by nor registered with the U.S. Securities and Exchange Commission (SEC), or with any other foreign regulatory body. Generally, non-residents of Canada, including U.S. residents, may invest through a local broker in their jurisdiction that has facilities for directly or indirectly executing orders on the Toronto Stock Exchange.

However, at no time may non-residents of Canada be the beneficial owners of a majority of the Units of any one of our ETFs. If at any point the Manager expects or believes that more than 40% of the Units of an ETF are beneficially held by non-residents, the Manager may elect to send notice to one or more such non-resident holders requiring them to sell all or a portion of their units of such ETF within a stated period of time. If such Units have not been sold within the stated period of time, the Manager will suspend the voting and distribution rights associated with those Units and sell the Units on the holders behalf. The rights of affected holders in such instance are limited to receiving the net proceeds of the sale of such Units.

To find out more about Global X, please contact your advisor or contact us directly at 1-866-641-5739 toll free or [email protected].

An electronic copy of the prospectus can be downloaded from the Global X website’s ETF product page.

To receive a print copy at no charge, please contact us at 1-866-641-5739 toll free or [email protected].

Although infrequent, ETFs (like regular mutual funds) can be closed, usually as a result of extremely low investor interest.  Global X is required by law to make a public disclosure of its intent to de-list and close an ETF.

After the public disclosure of an ETF closure is made, subscription activity is immediately halted.  Investors can sell their ETF units at any point up until the end of the de-listing day.

Similar to all ETFs, there are designated brokers ensuring the ETF price remains close to NAV (minus a small spread), however where an ETF is being terminated, the bid will remain tightly correlated to the NAV per unit of the ETF while the offer will widen since no new units can be subscribed for. Market Makers will typically only buy units in the market, which means investors will typically only be able to sell their units in the market.

If a unitholder sells their units of the ETF on the exchange before the de-listing date, they will get the cash proceeds from the sale after the settlement period.  If they did not sell prior to the delisting of the ETF, they will typically receive the cash proceeds approximately 7 days after the de-listed date.

An ETF’s market price is not necessarily the same as its net asset value (NAV) per share. All ETFs have two end-of-day “values”. One is a closing market price, which is determined by trading activity in the ETF’s shares on the stock exchange (usually the price at which the shares last traded during a trading session).

The second is the net asset value (NAV) per share, which is calculated by the ETF’s independent fund accountant after the market closes. The ETF’s NAV is the weighted average price of each of its underlying assets, plus income and cash, minus liabilities such as management fees and expenses.

An ETF’s market price and NAV per share are typically close to each other but they may differ, especially in times of heightened market volatility.

A premium or discount to NAV per share occurs when the market price of an ETF trades on the exchange above or below the NAV per share of its underlying basket of securities. For example, an ETF may trade at a premium or discount when:

ETFs generally have three sources of liquidity:

The answer is yes, many of the BetaPro ETFs are available for options trading. View the list of applicable ETFs on the TMX website where investors can also view their real-time option chains.

Effective January of 2018, the expanded MiFID II – Markets in Financial Instruments Directive (“MiFID II”) and Packaged Retail and Insurance-based Investment Products (“PRIIP”) regulations within the European Union (‘EU’) were implemented to regulate EU investment managers and broker-dealers, and enhance disclosure for the buy and sell-side regarding investment products.

Global X Investments Canada Inc. (“Global X”) does not carry on business activities in the EU and is not subject to these disclosure requirements. However, we note that, generally speaking, our Fact Sheet (found on the landing page of each ETF) and the Regulatory ETF Facts document (found in our Regulatory section, and also through each ETFs landing page), combined, provide comparable relevant information about each ETF. These documents, combined with all other disclosure contained on our site (such as each product’s Legal Entity Identifier (“LEI”) number, found on each product page), should provide sufficient information to any EU distributor in order for them to comply with regulations.

Further, while we note that Global X does not typically engage in broker-commission soft dollar arrangements, the Financial Statements of each ETF will identify the value of any such arrangements.

Mutual funds in Canada (which includes ETFs) are typically set up using either a trust or corporate structure. First established in 1987, mutual fund corporations are structured similarly to traditional corporations. Under one corporate structure, many different investment fund mandates (series) can exist. In the case of ETFs, the different ETFs are all held within the corporate structure, where each ETF is a separate class or series.

Within a Canadian mutual fund corporation structure, only Canadian capital gains and dividends can be distributed to investors. From a tax perspective, any income and foreign dividends generated within any one series of the corporation can potentially be offset by losses and expenses incurred in other series (from a tax perspective), which generally makes the corporate class structure more tax-efficient than a traditional mutual fund trust.

According to Strategic Insight, more than $157 billion is invested in corporate class mutual funds in Canada. It is a widely used structure used by advisors and end-investors primarily for taxable accounts.

The synthetic derivatives structure of these ETFs, which utilize swap agreements with major Canadian Schedule 1 Banks, are designed to reduce the likelihood of taxable distributions being paid to unitholders. Instead, the value of any income or dividends generated by the underlying index securities are generally reflected in the net asset value of the ETF (NAV). Under the new corporate structure, nothing about this arrangement will change. However, the TRI ETFs will have the added benefit of being able to aggregate future realized income and capital losses and expenses to offset any potential realized income and capital gains that could result from the settlement or partial settlement of swap contracts.

The major difference between these ETFs and other corporate class funds is that these products will use a synthetic derivatives structure as the portfolio, whereas most other corporate class mandates in Canada utilize a traditional physical strategy, where they own the physical securities of a portfolio.

By using the synthetic derivatives structure, our ETFs will typically only realize income gains and losses from downsizing the derivative contracts and will continue to have additional performance advantages, which include low-tracking error relative to other physically replicated index strategies, as well as similar tax benefits to when they were in a trust structure, since these ETFs are not expected to make regular income distributions.

While we don’t expect these ETFs to pay any distributions, there is always the possibility that distributions could be required to be paid. However, we would expect their size and frequency to be much smaller than other types of physically replicated strategies. All distributions from a mutual fund corporation are in the form of Canadian capital gains and dividends.

No. There is no plan to create a T-class of these ETFs, since they are not expected to pay any taxable distributions, which negates most of the need to create a T-class structure at this time.

The determination of whether or not an investor should invest in one of these Total Return Index (“TRI”) ETFs should be made after careful consideration of the client’s risk/return objectives. Investors should also always read the ETF’s prospectus before investing. In the case of ETFs from the Total Return Index (TRI) product line-up, these typically generate optimal results when held in taxable, i.e. non-registered accounts where income and dividend distributions would be taxed as earned. That said, all of these ETFs are eligible for registered accounts, including RRSP, RRIFs and TFSAs.

There are numerous risks associated with investing. Each of the individual ETFs have risk ratings associated with the inherent historical market risk of their respective investment objectives, and their prospectuses detail other risks associated with investing in them as well. However, in terms of risk associated with the corporate structure, we view there to be limited risk relative to traditional mutual fund trusts.

One key risk associated with a corporate structure relative to a traditional mutual fund trust is the fact that any income earned within the corporate structure cannot be distributed to end unitholders and is generally taxed at the corporate rate, which can be higher than an individual investor’s marginal tax rate. However, since the new mutual fund corporation is not expected to have net taxable income, we believe this risk is not significant. Since the corporation is not expected to have net taxable income, we do not expect any of the ETFs to have distributions, similar to how they operate now.

All of Global X’s Corporate Class ETFs are TSX-listed ETFs and can be purchased or sold through an advisor or in your self-directed brokerage account.

As its name implies, a unit split is when an ETF increases the number of outstanding units of the ETF at a particular ratio (such as 2 for 1), and decreases the net asset per unit of the ETF, by the inverse ratio. In a unit split, there is an increase in the number of units issued accompanied by a proportional decrease in the unit price (Net Asset Value), such that the value of holdings remains the same after the split.

Here’s an example:

If on Friday, May 3, 2024, at the end of the trading day for the TSX, it was announced that units of the following ETF would be split on the basis of the ratio (the “Split Ratio”) set out below, and began trading on a split adjusted basis on Monday, May 6, 2024. The split becomes effective on May 8, 2024, for unitholders of record on that date:

A 4:1 unit split means each unit will be split into four units. After the split, you will have four times the number of HND shares you had previously. Additionally, the price of HND will be divided by a factor of four. Mathematically, this will not impact the value of your investment in HND. For example, if you had 100 shares worth $2,000 prior to the split, you now have 400 shares that are still worth $2,000 post-split.

Pre-split:
Shares 100
NAV $20 (per share)
Value $2,000

Post-split on a 4:1 basis:
Shares 400 (100 x 4)
NAV $5 (per share) ($20 ÷ 4)
Value $2,000

As a general rule of thumb, the decision to split units of an ETF would occur with unit values greater than or equal to $40. The split makes it easier for an investor to afford and trade 100 share “board lots.” Without the split, lower trading volumes may occur.

A unit consolidation is the opposite of a unit split, where there is a reduction in the number of units and an accompanying increase in the unit price or net asset value (NAV), such that the value of holdings remains the same after the consolidation.

For example, if it was announced on July 5, 2024, after the TSX closed for trading on Thursday, July 18, 2024, the units of the following exchange traded fund would be consolidated on the basis of the ratio (the “Consolidation Ratio”) set out below, and begin trading on a consolidated basis on Friday, July 19, 2024, the effective date of the consolidation:

Pre-consolidation:
Shares 1,000
NAV $2
Value $2,000

Post-consolidation:
Shares 100 (1000 ÷ 10)
NAV $20 ($2 x 10)
Value $2,000

In a 1:10 consolidation, every 10 units would be consolidated into a single unit. This means you will have one-tenth the number of HNU shares and the price of HNU will be multiplied by a factor of 10. Mathematically, this event will not impact the value of your investment in HNU. For example, if you had 100 shares prior to the consolidation, you now have 10 shares, both worth $2,000.

As a general rule, a consolidation would occur with unit values at or lower than $4. Lower priced securities require a relatively higher number of shares to be traded to establish the same dollar value position. As a result, investors paying brokerage commissions on a per share basis would incur higher transaction costs. As well, brokerage firms typically will not allow securities trading at prices under $3 to be marginable.

Global X Investments Canada Inc. works very closely with reorganization departments at all the major brokerage firms to provide the complete and timely information required for these changes. However, in the normal course of business it may take 3-5 business days to update holdings for clients. Please call your brokerage firm with any questions and to confirm that your individual account has been updated.

The BetaPro ETFs track a number of key benchmarks across different asset classes. Please see the specific ETF’s website page on the Global X website to obtain the benchmark for any of the BetaPro ETFs.

Since these ETFs provide leverage, both gains and losses are magnified. Investors should anticipate a substantially higher standard deviation with these ETFs versus ETFs that do not use leverage. BetaPro ETFs are rebalanced on a daily basis, so unlike traditional leverage strategies, which tend to use lending mechanisms such as margin, BetaPro ETF unit holders will not lose more than their initial investment. These ETFs are designed to meet their investment objective only on a daily basis. Because these ETFs use leverage, gains and losses are magnified and, due to compounding, the performance over periods other than one day will likely differ in amount and possibly direction, from the reference index/commodity benchmark. Please read the prospectus and learn about all the risks associated with leveraged ETF investing.

Inverse and leveraged ETFs are tactical investment solutions that are primarily designed for the execution of a particular short-term investment strategy or perspective of the markets. These ETFs are designed to meet their investment objective only on a daily basis. They are not appropriate as a buy and hold investments if an investor is unable to closely monitor their performance. Because these ETFs use leverage, gains and losses are magnified and, due to compounding, the performance over periods other than one day will likely differ in amount and possibly direction, from the reference index/commodity benchmark. Please speak to an advisor or read the ETF’s prospectus before investing in them.

For the BetaPro ETFs whose objective is to realize a multiple of up to 2x or -2x the daily returns of a given benchmark index in particular, an investor’s investment will experience the effects of daily compounding.

For example, if $100 is invested in a BetaPro 2x Daily Bull ETF and the underlying index rises 1% on the next day, the investor would have $200 of exposure on day 1 and earn $2. On the following day, the investor would have $102 invested and $204 (i.e. 2x) of exposure. As such, as the ETF rises on consecutive days, the investor’s capital invested to realize the daily return of the underlying benchmark index will increase each day, reflecting the “compounding” effect.

Conversely, if $100 is invested in a BetaPro 2x Daily Bull ETF and the underlying index declines 1% on the next day, the investor would lose $2. On the following day, $98 will be invested to achieve the same investment objective. As such, as the ETF drops on consecutive days, the investor’s capital invested to realize the daily return of the underlying benchmark index will decrease each day, again reflecting the “compounding” effect.

This latter phenomena explains why the investment risk is limited to the initial cost invested. You are only potentially subject to losing your original investment because the BetaPro 2x Daily Bull, -2x Daily Bear, and Daily Inverse ETFs are rebalanced daily so you cannot lose more than you invested.

For more information please visit: An Introduction To Global X BetaPro ETFs

These ETFs may pay distributions annually. However, none of these ETFs have ever paid a distribution since their launch.