Importance One of Russian economy's priorities is to develop the stock market and provide for high concentration of financial resources to reallocate them to industries that experience funding shortage. Therefore, it is essential to consider possibilities to attract new investment resources to the stock market by increasing the range of available financial instruments that meet investor requirements under high volatility and uncertainty of the financial market. Objectives The study aims to address the nature and specifics of Exchange Traded Funds as a financial instrument, to classify them into different categories and compare with mutual funds, to review the ETF evolution in foreign countries and assess development prospects for ETF in Russia. Methods The study employs the systems approach to consider the concept of Exchange Traded Fund, and the comparative analysis of mutual funds and exchange traded funds. Results The dynamics of the number of Exchange Traded Funds and their total asset value in developed economies exceeds significantly the growth rate of other segments of the financial market. At present, there are no Exchange Traded Funds created in Russia, as there are no legislative and institutional conditions for adequate ETF creation. Conclusions and Relevance The ETF segment has a strong potential in Russia. To develop this instrument, it is necessary to elaborate the regulatory framework and enhance the liquidity of the Russian securities market.
Keywords: Exchange Traded Fund, mutual fund, institutional investor, pooled investment
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