Principles for the Regulation of Exchange Traded Funds

Discuss your favourite picks, broker, and trading or investment style.
Post Reply
User avatar
Peculiar_Investor
Gold Ring
Gold Ring
Posts: 6992
Joined: 01 Mar 2005 14:52
Location: Calgary
Contact:

Principles for the Regulation of Exchange Traded Funds

Post by Peculiar_Investor » 14 Mar 2012 14:46

A tip of the hat to Regulators starting to tighten leash on ETFs - The Globe and Mail
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.
Imagefiniki, the Canadian financial wiki New editors wanted and welcomed, please help collaborate and improve the wiki.

Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams

User avatar
ghariton
Diamond Ring
Diamond Ring
Posts: 11803
Joined: 18 Feb 2005 18:59
Location: Ottawa

Re: Principles for the Regulation of Exchange Traded Funds

Post by ghariton » 15 Mar 2012 01:28

Thank you for that, and especially the link. I thought it was a particularly clear exposition of the potential risks of ETFs and proposed remedies.

I note that so far we only have a consultation paper by IOSCO. We still need (1) a final report by IOSCO and (2) implementation by various member countries. Not a slam dunk.

George
The plural of anecdote is NOT data.

User avatar
Bylo Selhi
Diamond Ring
Diamond Ring
Posts: 24699
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

Re: Principles for the Regulation of Exchange Traded Funds

Post by Bylo Selhi » 15 Mar 2012 08:27

ghariton wrote:Thank you for that
Ditto. You should post this on Bogleheads if you haven't already.
I thought it was a particularly clear exposition of the potential risks of ETFs and proposed remedies.
TFA, "Regulators want to ensure that investors aren’t getting screwed"

Not sure if I should clap or cry :roll: (Call me a cynic but in my experience that concern for investors gets expressed only after regulators have catered to industry interests.)

TFA, "some industry members back the regulators, with BlackRock suggesting that only the simplest products should be classified as ETFs."

I'm not sure why regulators should get involved in that, but I laud the sentiment. Do we really need ETFs that invest in esoteric sectors or that have inherently risky structures?
We still need (1) a final report by IOSCO and (2) implementation by various member countries. Not a slam dunk.
(3) adoption by 13 provincial regulators?
Sedulously eschew obfuscatory hyperverbosity and prolixity.

Post Reply