In Europe, synthetic products make up 40% of total ETF assets, whereas in the U.S., synthetic products cover leveraged and inverse products, along with some commodity-based ETFs. The Securities and Exchange Commission already suspended approvals for new derivative-based products in March 2010. [European ETF Transparency Push Raises Questions]
BlackRock recently proposed changing the way synthetic products are labeled to exchange traded instruments, or ETIs. Competing fund companies that offer synthetic ETFs say the proposal only serves to promote “its own agenda” since BlackRock mainly offers physically-based ETFs. [What’s in an ETF Name?]
Earlier this year, Morningstar argued that outflows from synthetic ETFs in Europe are not being driven solely by fears over synthetic products.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.