Zakat of exchange traded funds

The paper explores the economic structures of the exchange traded funds (etfs) that have been launched recently in the saudi capital market,in order to examine the type of zakat payable by the trader of etf units.the paper concluded that etfs are a special type of investment funds characterized by passive management,which evidently impact the fiqh ruling regarding their zakat. the passive management excludes both the intent for trading and the trading itself by the fund manager. as such,zakat ruling will depend on the intent and action of the trader of etf units and on whether the zakat of fund assets already paid or not. if (1) the trader intends to purchase etf units for investment,(2) he do not trade them contrary to this intention and (3) the zakat of fund assets is already paid,then the etf trader do not need to pay zakat on all etf unites owned by him. otherwise,if the zakat of fund assets is not already paid,the etf trader need to pay the zakat and the amount of zakat will depend in this case on the type of fund assets. the paper shows that this fiqh ruling encourages the financial investment in etfs compared to the prevailing fiqh opinion that dose not differentiate between etfs and other mutual fund in term of zakat.