Weekly roundup: SEC and Hong Kong SFC have derivatives-based ETFs on their radars

The ETFM roundup brings you news of some of this week's activity in the ETF and indexing market.

The US Securities and Exchange Commission (SEC) is seeking public comments on the use of derivatives by mutual funds and other investment companies, including ETFs.

In a statement it said: "The Commission will use the comments received in response to this concept release to help determine whether regulatory initiatives or guidance is needed."

The approval of new ETFs using derivatives was temporarily suspended last year after the SEC announced that it was reviewing their use in funds regulated under the Investment Company Act of 1940.

Although most ETFs in the US market are physically-backed, some non-traditional funds such as leveraged and inverse ETFs use derivatives.

The temporary halt on new swap-based ETFs has lead to criticism from some providers. They say it has created an uneven playing field between those who already have swap-based ETFs and new issuers who may want to list them but currently cannot.

Hong Kong's Securities and Futures Commission (SFC) announced on Monday that it will enhance requirements for collateral and transparency in domestic synthetic ETFs.

Synthetic ETF managers will be required to top-up the collateral on domestic ETFs to at least 100%. The aim is to ensure there is no uncollateralised counterparty risk exposure to derivative counterparties.

Where collateral is in the form of equity securities, the market value of that collateral must be at least 120% of the related counterparty risk exposure.

These changes must be in place by 31 October and ETF managers are required to publish collateral levels and information about the collateral used on their websites.

The Vienna Stock Exchange has launched sector indices for the ATX (Austrian Traded Index) and the CEESEG, the index of the CEE Stock Exchange Group, which has trading venues in Budapest, Ljubljana, Prague and Vienna.

The sector indices cover stocks from basic industries, consumer products and services, financials, and industrial goods and services. They are designed to be used as benchmarks for the relevant sectors but also as underlyings for products such as ETFs.

BlackRock has filed with the US Securities and Exchange Commission to launch its first batch of actively managed ETFs. The funds will be managed by BlackRock Fund Advisors and will invest in US stocks.

Unlike traditional, passive ETFs, the fund holdings will not be available to view on a daily basis. The ETFs will instead follow the disclosure rules required of other open-end investment companies such as mutual funds