As the exchange traded fund universe continues to expand, the Securities and Exchange Commission is preparing for a meticulous review of the industry in response to concerns that the increased interest in ETFs may have exacerbated market volatility.
U.S.-listed ETFs now have $2.4 trillion in assets under management, accounting for 30% of the value of all U.S. shares traded, and the global ETF industry manages $3.3 trillion in assets, the Financial Times reports.
Concerns over ETFs and market volatility heightened following the so-called mini flash crash in August 2015 when more than 1,000 securities were suspended from trading in response to sharp moves, with some ETFs sharply diverging from their net asset values, highlighting the interrelationship between ETFs and the underlying assets.
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Consequently, regulators are expected to go through the industry and the consequences of its growth with a fine comb. The SEC could look into the implications of a growing share of the U.S. stock market dictated by ETF flows, along with structural concerns around funds that track bonds.