One industry executive, Robert Kurucza of Goodwin Procter LLP, says, “To regulate these products intelligently, you need to understand them and the way they are used. Otherwise, in the current environment there will be a tendency to overregulate what isn’t understood. That will stifle competition and eventually work to the detriment of the financial markets. We risk throwing the baby out with the bath water.”
On the other hand, Todd Rosenbluth of Standard & Poor’s Financial Services LLC, says the lack of transparency in derivatives and how funds are using them is something the SEC should address. He notes that even when funds fully disclose their investment strategies, investors may not understand them. For example, there are some cases where investors will lose money on oil or gas ETFs, even while the price of the commodity is going up.
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Sumin Kim contributed to this article.