db x-trackers is to offer clients the ability to trade at the official net asset value (NAV) for all 59 of its exchange-traded funds listed on the London Stock Exchange.

Trading at NAV allows investors to deal at a single, transparent price, according to the ETF issuer. The option to place orders to buy and sell ETFs at the official, end-of-day NAV is already widely used by institutional investors, since it can reduce trading costs. Trading at the fund's NAV avoids exposure to the premiums and discounts that can arise when an ETF is quoted at a price different to its indicative net asset value during the trading day. NAV trading also eliminates bid-offer spreads. 

Its most important impact, however, may be as a way to level the playing field between smaller, less-established ETFs and large, more liquid alternatives. Often, investors hesitate to buy ETFs with relatively low assets and trading volumes for fear of illiquidity. They are concerned that they will pay too high a spread, or that a large order will impact the price of the ETF, or that they will be unable to exit an ETF during a down market. With NAV-based trading, they will at least be assured a certain level of price accuracy.

There is one potential drawback: When an investor places an order to trade at the closing NAV, he becomes exposed to the relevant market's price movements from the time the order is placed to the end of the trading day, when the official NAV is calculated. As such, the new db x-trackers facility is likely to appeal more to cost-sensitive investors who want a cheap way to enter and exit their ETF investments, rather than to more-frequent traders, who are sensitive to market levels.

db x-trackers is offering the facility to trade at NAV in a minimum order size of one share, and subject to a transaction fee ranging from 0.03% (for developed markets) to 0.30% (for emerging markets). Trades will need to be routed via a bank or broker that is a client of Deutsche Bank Global Markets.