Kuwait Opens the Door to ETFs: A Practical Roadmap for Asset Managers and Issuers

On Thursday 18 June 2026, the Capital Markets Authority (CMA) issued Resolution No. 80 of 2026, approving a regulatory and legislative framework for exchange-traded funds (ETFs). The resolution amends the Executive Regulations of Law No. 7 of 2010, including Book 13 (Collective Investment Systems) and the Book 12 listing rules — and is accompanied by changes to the Boursa Kuwait and Central Depository rules, paving the way for the first ETF listings on Boursa Kuwait. Coming just two months after the launch of bonds and sukuk trading in April 2026, the decision marks the next milestone in the third phase of the exchange's Market Development Programme, and a genuine first-mover opportunity for Kuwaiti asset managers.

Why this matters

ETFs combine the diversification of a fund with the intraday tradability of a listed share. For investors, that means lower-cost, transparent access to baskets of equities, bonds or commodities. For Kuwait's market, ETFs deepen liquidity, attract passive and foreign flows, and round out a product shelf that — until recently — was dominated by direct equities and conventional mutual funds. For asset managers, the firms that list credible, well-structured products first will capture brand, distribution and scale advantages that are difficult to dislodge later.

The legal architecture of an ETF — what is new

An ETF is deceptively simple on screen and genuinely complex underneath. Standing up a compliant product in Kuwait will engage several workstreams at once:

• Fund formation and authorisation — establishing the fund vehicle and securing CMA authorisation of the fund and its manager under the amended executive regulations.

• Listing-rule compliance — meeting Boursa Kuwait's forthcoming rulebook amendments for the listing and continuing obligations of ETF units.

• Creation / redemption mechanics — documenting the in-kind (or cash) creation and redemption process that keeps an ETF's market price tethered to its net asset value (NAV).

• Authorised participants and market makers — appointing and contracting the APs and liquidity providers that arbitrage premium/discount and maintain an orderly secondary market.

• Custody, clearing and settlement — aligning custodian arrangements with Kuwait Clearing Company's settlement cycle.

• Index licensing and IP — for index-tracking ETFs, licensing the benchmark from the index provider and managing tracking-error and data-use obligations.

• Shariah governance — for Islamic ETFs, appointing a Shariah board and agreeing the screening methodology and purification mechanics.

• Disclosure — a compliant prospectus plus an ongoing NAV, holdings and corporate-action disclosure regime.

Resolution No. 80/2026 also sets concrete operating parameters worth noting at the design stage: net asset value (NAV) per unit is published on the Boursa website at least 15 minutes before the next session, with an indicative NAV (iNAV) disseminated every 15 seconds intraday; the tracked index must be a Boursa Kuwait index or come from an Index Industry Association member that follows the EU benchmark rules; securities lending is permitted up to 25% of the fund's NAV; and non-Kuwaiti and feeder ETFs may be listed under defined conditions (Book 12, Article 3-1).

A first-mover roadmap

For an asset manager weighing a launch, a disciplined sequence reduces time-to-market and regulatory friction:

• 1. Decide the product thesis — index vs active, conventional vs Islamic, the asset class and the target investor base.

• 2. Map the amended executive regulations and the new Boursa rulebook against your operating model; identify gaps early.

• 3. Select the vehicle and service providers — manager, custodian, administrator, auditor and (for index products) the index licensor.

• 4. Negotiate AP and market-making agreements — these determine real-world liquidity and are commercially sensitive.

• 5. Build the creation/redemption and NAV operating manual — the operational heart of the product.

• 6. Prepare the prospectus and CMA authorisation file; engage the regulator early on any novel features.

• 7. Complete Boursa listing and exchange testing, then launch with a market-making and investor-education plan.

Key considerations and risks

First movers should plan for tracking error and liquidity risk, ensure the creation/redemption mechanism is robust under stress, and confirm the tax and cross-border treatment of any foreign-listed underlyings — a point that now intersects with Kuwait's accession to the OECD BEPS Multilateral Instrument (Decree-Law No. 62 of 2026, gazetted 7 June 2026). Governance, the management of conflicts between the manager and APs, and clear investor disclosure will all draw regulatory scrutiny during this formative period.

How WEFAQ helps

WEFAQ's capital markets team advises fund sponsors, managers and issuers across the full ETF lifecycle — from product structuring and CMA authorisation to listing-rule compliance, AP and market-making contracts, index licensing, Shariah governance and ongoing disclosure. As Kuwait's ETF market takes shape, early and well-advised entrants will set the standard for those that follow.

Disclaimer: This article is provided for general information only and does not constitute legal advice. For advice specific to your circumstances, please contact WEFAQ Law Firm.