Finance History | Exchange Tower, 9 March 1990 — The First ETF Put Thirty-Five Stocks into One Trade

On 9 March 1990, Toronto 35 Index Participation Units began trading at the Toronto Stock Exchange in Exchange Tower. Known as TIPs, the product became the prototype for the modern exchange-traded fund. The Toronto Stock Exchange had moved to the tower at 130 King Street West in 1983. Seven years later, its floor listed a security designed to follow the Toronto 35 Index rather than the fortunes of one company. The underlying fund held shares in the index's thirty-five constituent corporations in the same proportions represented in the benchmark. Each listed unit therefore gave an investor a transferable interest in a diversified basket through a single exchange transaction. That combined two financial structures that had usually been separate. An index fund offered broad, rules-based exposure, while an exchange listing allowed units to change hands during the trading day at market prices like ordinary shares. The convenience did not eliminate risk. TIPs still rose and fell with Canadian equities, and their market price could differ from the value of the shares held by the fund; the innovation was a more liquid wrapper for that exposure, not protection from losses. The structure also made portfolio decisions divisible. Investors could add or reduce broad-market exposure without placing and maintaining orders in thirty-five separate stocks, while dealers could compare the unit's price with the value of its underlying basket. Toronto's claim needs careful wording because earlier index-linked products had appeared in the United States. TMX describes TIPs as the world's first exchange-traded, index-linked product and the prototype of the modern ETF; SPY, launched in New York in 1993, was the first U.S.-listed ETF. In 2000, the Toronto 35 fund and a broader TSE 100 fund merged into an S&P/TSE 60 index fund. The lineage continues in the iShares S&P/TSX 60 Index ETF, traded under the symbol XIU. Exchange Tower thus records a quiet change in market architecture: a portfolio became a security of its own. That simple interface would expand far beyond Canadian large-cap shares into bonds, commodities, currencies, sectors, countries, and investment strategies traded around the world. The accompanying nighttime photograph of Exchange Tower is by Ken Lund, licensed CC BY-SA 2.0 via Wikimedia Commons. **Sources:** - TMX Group, thirtieth anniversary of the launch of the world's first ETF: https://investors.tmx.com/English/News--Events/news/news-details/2020/Toronto-Stock-Exchange-Celebrates-30-Years-of-ETFs-2020-3-9/default.aspx - TMX Group, historical timeline including the 1983 move and the 1990 Toronto 35 product: https://investors.tmx.com/English/About-Us/historical-timeline/ - British Columbia Securities Commission, regulatory description of the Toronto 35 Index Participation Fund's underlying assets and 2000 merger: https://www.bcsc.bc.ca/securities-law/law-and-policy/exemption-orders-prior-to-2002/2000/the-toronto-35-index-participation-fund-et-al-sec-123a--130b **Image:** Exchange Tower and Toronto's financial district at night by Ken Lund; CC BY-SA 2.0. https://commons.wikimedia.org/wiki/File:Exchange_Tower,_Toronto_Stock_Exchange,_Toronto,_Ontario_(21219467213).jpg