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PowerShares ETF becomes the first listing for NEO Exchange

Rudy Luukko 31 March, 2016 | 5:00PM
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PowerShares DWA Global Momentum Index, an exchange-traded fund, has become the first security to be listed on the Aequitas NEO Exchange, a year-old rival to the dominant Toronto Stock Exchange.

Chris Doll, vice-president, product and business strategy for PowerShares Canada, told a promotional event today that trading in the new ETF (symbol DWG) has gone "flawlessly" since opening day on March 22. He said PowerShares Canada, which is part of Invesco Canada Ltd., "is pleased with the early level of liquidity and investor interest."

The new PowerShares ETF, a tactical balanced mandate, is designed to replicate the performance, before fees, of the Dorsey Wright Global Technical Leaders Index. Maintained by Richmond, Virginia-based Dorsey, Wright & Associates, LLC (DWA), the index is based on a relative-strength methodology.

The index is comprised of up to four U.S.-listed PowerShares DWA Momentum portfolios targeting different segments of the global equity market. They are: PowerShares DWA Momentum Portfolio (PDP), PowerShares DWA SmallCap Momentum Portfolio (DWAS), PowerShares DWA Developed Markets Momentum Portfolio (PIZ) and PowerShares DWA Emerging Markets Momentum Portfolio (PIE).

The index ranks the relative strength of the four component PowerShares ETFs on a weekly basis. The top-ranked ETF receives a 50% weighting, with the remaining 50% divided equally among any ETFs that rank above U.S. Treasury bills.

U.S. T-bills serve as a cash proxy. If they are ranked second on relative strength, the index will allocate 50% to the first-ranked ETF and 50% to U.S. T-bills. If T-bills are ranked first, the index will allocate 100% of its weighting to T-bills.

The new ETF's management fee is variable, and will vary between 0.15% and 1%, depending on the portfolio allocation. However, this fee is in addition to the management fees charged by the U.S.-listed PowerShares ETFs.

Along with being NEO Exchange's first listing customer, Invesco Canada Ltd. is among the shareholders of the exchange's parent, Aequitas Innovations Inc. Other financial-services heavyweights that are also Aequitas shareholders include CI Investments Inc., IGM Financial Inc., OMERS Capital Markets and RBC Dominion Securities Inc. Among the 65 dealer members of NEO Exchange, which opened for business in March 2015, are all of Canada's largest brokerages.

Invesco Canada executives say the company chose to list the ETF on NEO Exchange to promote competition. NEO's much lower listing fees than the TSX are one plus, though there would be little or no direct impact on ETF investors. Other benefits include rules that NEO has imposed on designated market makers to counter predatory high-frequency trading and make the trading process fair and transparent for all investors.

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About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

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