“You can’t manufacture demand for a product,” said John Hyland, chief investment officer at U.S. Commodity Funds. But that doesn’t mean that some newer products don’t have solid merit or shouldn’t exist, Morningstar’s Gabriel wrote.
The three main characteristics that the ETF industry strives for is to be cheaper, faster and reliable. Most of the time, it is only viable to achieve 2 of those 3 traits at a time. For example, recent regulations such as Reg NMS in 2005, for example, have led to cheaper and faster markets for investors. But, as a result, they became less reliable.
As the dependence on technology becomes heavier and providers begin to replace people with computers, the need for updated rules and regulations will be urgent. There will need to be updated safeguards in place to protect investors. Since ETFs are readily available to retail investors and more areas of the market are accessible, ETFs should have more updated structures and regulations in place. [Regulatory Concerns Hamper European ETF Growth]
Tisha Guerrero contributed to this article.