Exchange traded funds are know for their transparent nature, revealing underlying components for anyone to see. However, the issue of transparency remains contentious within the financial industry.

ETF transparency provides updated value of holdings, which help arbitrage opportunities to maintain liquidity and avoid price swings, reports Jackie Noblett for Ignites.

Exchange traded products, which include ETFs and exchange traded notes, disclose their holdings on a daily basis and provide estimates of their net asset value, or intraday indicative value or IIV, in 15 second intervals throughout the day.

However, some are questioning the need for daily transparency. For instance, Vanguard argues that its own ETFs have experienced tight exchange pricing with only periodic disclosure of portfolio holdings – since Vanguard ETFs are categorized as a separate share class of its mutual funds, the company does not disclose ETF holdings on a daily basis. [Why Vanguard Stock ETFs Are Slightly More Opaque]

“Years of market experience demonstrate that a well-constructed basket with performance that closely tracks the performance of an index promotes efficient arbitrage,” Vanguard said in a letter to the Securities and Exchange Commission, noting that traders have a number of tools, like the indicative intraday value and the ETF’s published basket or its last portfolio components list in its index and other data points, in order to identify arbitrage opportunities.

Moreover, some active fund managers have argued that full transparency can hurt shareholders as other market players can try to front run a fund provider’s strategy before an ETF makes its changes, which would potentially increase prices an ETF pays for new allocations.