In Europe, regulators are examining complex “synthetic” ETFs that hold derivatives to determine if the products are fully understood by investors. [European ETFs Face Scrutiny]
ETFs have also been in the spotlight amid claims they boost market volatility, while recent rogue trading scandals have involved ETF trading desks. [ETFs Under Fire]
The industry has defended itself by saying the improper trades were due to compliance failures, not a problem specific to ETFs. [ETFs and Rogue Traders]
BlackRock recommended five specific reforms for ETFs:
- Clear labeling of product structure and investment objectives
- Frequent and timely disclosure for all holdings and financial exposures
- Clear standards for diversifying counterparties and quality of collateral
- Disclosure of all fees and costs paid, including those to counterparties
- Universal trade reporting for all equity trades, including ETFs