The Securities and Exchange Commission is conducting a broad review of exchange traded funds, the SEC’s director of the division of investment management said Wednesday.

The SEC is “currently engaged in a general review of exchange traded products, which includes gathering and analyzing detailed information about specific products,” Eileen Rominger said at a Senate subcommittee hearing Wednesday on ETFs.

The regulator is examining “adequacy of investor disclosure, liquidity levels and transparency of underlying instruments in which ETPs invest, fair valuations, efficiency in the arbitrage process and the relationship between market volatility and ETPs.”

At the hearing, some market experts refuted claims that ETFs are contributing to market volatility and rising correlations. [Nasdaq Exec Says ETFs ‘Tempting Target’ for Market Volatility]

Also, one investment manager said leveraged and inverse funds that hold derivatives shouldn’t be labeled as ETFs. [ProShares Blasts BlackRock’s ETF Classification System]

Last year, the SEC put on hold new ETFs designed to make significant investments in derivatives.

“This action was taken in light of concerns raised generally about the use of derivatives by all registered investment companies, including ETFs,” Rominger said Wednesday. “While staff recognized that the use of derivatives is not a new phenomenon, the staff determined that the increasing complexity of derivatives and their growing use by funds made it the right time to reevaluate the Commission’s regulatory protections.”

This summer, the SEC issued a concept release seeking public comment on funds’ use of derivatives, which ends on Nov. 7.

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