Even the exchange traded fund business finds itself at the mercy of “headline risk” in this volatile market.

ETFs have taken a reputation hit following news that a rogue trader at UBS caused losses of more than $2.3 billion, writers MarketWatch’s Chuck Jaffe, who monitored a panel at the recent Morningstar ETF Invest Conference in Chicago.

Recent trading scandals at UBS and Societe Generale have involved traders at so-called Delta One desks, which trade equity swaps, futures and ETFs. [UBS Rogue Trader]

A former Goldman Sachs trader was accused by U.S. regulators of making illegal trades based on confidential information related to the firm’s ETFs, Jaffe points out. Yet he argues the abuses are the fault of people, not the product.

The ETF industry has had a similar response, arguing the rogue trading scandals resulted from breakdowns in compliance rather than a problem inherent in ETFs.

Jaffe also notes that ETFs have been unfairly blamed for the 2010 flash crash. [ETFs Draw Scrutiny]

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.