Exchange traded funds are all the rage these days, and regulators have quickly realized that oversight hasn’t kept up with the explosion.
Not only do regulators want to ensure that investors aren’t getting screwed, they’re also worried about the effects ETFs have on marketplace stability. The Bank of England recently pointed out that the complexity, opacity and interconnectedness of ETFs can “amplify propagate stress across markets.” In layman’s terms: they can really mess things up.
Some of this behavior was observed during the "Flash Crash".
The underlying document Principles for the Regulation of Exchange Traded Funds for those that like to understand the details.
Some of the concerns and issues have been discussed in various topics on FWF.