BlackRock Response to G20 FSB Warning on ETFs | ETF Trends

The largest provider of exchange traded funds reportedly had a response to Tuesday’s warning note on ETFs from the Financial Stability Board.

According to FT Alphaville, Joe Linhares, Head of iShares EMEA, said iShares manager BlackRock “is in agreement that a number of recent developments within the ETF industry require closer scrutiny. iShares welcomes the Board’s call for disclosure, enhanced transparency and in particular disclosure of the frameworks that support collateralisation and securities lending programmes. ”

The iShares response further stated “ETFs are one of the most innovative financial products of the last two decades but we believe a number of recent developments within the ETF industry require closer scrutiny. It is encouraging that the FSB calls not just for transparency but also for providers to evidence to investors a demonstrable infrastructure to support transparency. In addition, iShares agrees with the concerns arising from potential conflicts of interest where swap-based ETFs and their derivative trading counterparts are within the same group and particularly notes the concern that risks increase if the bank considers the synthetic structure as a stable and inexpensive source of funding for illiquid securities.‟

BlackRock didn’t immediately return a request for comment on Wednesday.

Gregory A. Clay contributed to this article.

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