Keeping ETFs on Track
After an ETF is up and running on the exchange, it’s a matter of keeping things running smoothly. Dallmer says what is primarily being looked at is whether an ETF’s NAV (net asset value) is being provided each day and that the basket of holdings as stated in the prospectus is being transparently provided. The exchange also looks at how the ETF is structured under the terms of the 40 Act. (Why ETFs beat mutual funds).
If there is a failure on the transparency front, the exchange reaches out to the issuer, and in some cases ceases secondary trading until the issue is resolved.
“We’re not managing the portfolio management process, but we monitor the interaction with respect to what’s articulated on transparent data for the purposes of trading,” Dallmer says.
For other would-be ETF issuers out there, Dallmer has a few ideas for success because, as she puts it, “We’re at a point where the marketplace is becoming more mature than it used to be.”
The first step is knowing your audience. “It’s very important for issuers to understand what investors want. Do they know what types of investors they’re targeting? Do they have the expertise to reach that investor?”
It’s also important, she says, to consider the current landscape and how they can best distinguish their message from that of their competitors.
Looking to the Future
In 2010, Dallmer foresees more ETFs aimed at closing gaps in exposure. “We’re moving to a level where we’re packaging a whole investment idea – equities and fixed income – in a packaged solution. We’ll see more of that in Europe and the U.S.”
Dallmer, who first worked in fixed income and credit derivatives, is happy to be at the forefront of the evolution of ETFs. “I enjoy watching the growth of our business. I value the interactions with our issuers, index partners and participating in the packaging of so many creative investment ideas.”
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