Giving ETFs a voice

BlackRock/iShares has been vocal in its recommendations for the ETP market over the past few weeks. First it called for greater transparency and consistent regulation across the global ETF market, then it turned its focus to the European market, launching a due diligence campaign which it hopes to discuss with regulators. Finally, it told a US Senate meeting that certain ETFs should be renamed.

In discussions iShares has said that as the market leader it feels it is ideally placed to make these calls.

It seems to have taken it upon itself to be a market voice. In Europe this is needed in what can otherwise be a market of mixed messages, particularly as physical versus synthetic battle rages and each provider separately states its own message to the market.

Lyxor recently decided to make its own commitments to investors to make it clear to them what it offers after much fuss over ETF structures this year.

This was not designed to be a message to the broader market, however, Simon Klein, Lyxor’s head of ETFs Europe commented that an ETF association would have dealt with matters such as this. In the absence of one, it has decided to make its own commitments and it expects others to follow.

This was the thinking behind the failed attempt to launch an industry body for the European ETF market; that the market needed an independent voice to fight its corner and clear up confusions.

The need for this has been particularly acute over the past few months as ETFs have become subject to much criticism, regulatory examination and perhaps, ultimately, more guidelines, depending on what Esma decides.

The initiative to form an industry association collapsed after iShares pulled out, saying that Efama was best placed to maintain a dialogue with the regulators. But various people in the European ETF industry still say there is a need for a dedicated body, saying that Efama is not shouting loud enough in the face of some of the mis-communications about ETFs.

Some still think an industry body will eventually be formed but without the support of the biggest provider, it may be hard pressed to gain legitimacy among those it needs to.

Over the past few months ETFM has delved into some of the areas which have gained regulator interest, such as securities lending and trading. As part of that, this month we take a look at synthetic ETFs, the risks they involve and how that is managed (click here to read). We also take a look at the facts behind some of the recent criticisms of ETFs and how the instruments stand up when compared to other investments (click here to read).



Clare Dickinson, Editor