Providers respond to BlackRock proposals

ETF providers in Europe and the US have responded to BlackRock's call for greater transparency and consistent regulation in the ETF market but opinions are divided.

UK-based ETP provider Source supports BlackRock's stance. Michael John Lytle, managing director at the company says: "Source strongly supports BlackRock's call for codification of the high standards currently being delivered by the ETF community."

He adds that "European investors deserve coherent and consistent diclosure that allows them to compare and contrast different investment products - not just ETFs. For example, not all exchange-traded products operate in the highly controlled Ucits regulatory framework that governs all European exchange traded funds. Providing a framework which clearly distinguishes regulated investment products from others is critical for investor protection."

Source also supports calls for a consolidated tape in the European market, on which all ETF transactions are reported.

However, BlackRock's call is for global standardisation in the ETF market and US ETF provider Russell Investments disagrees that this is needed.

"I would say that in the US market ETFs are more regulated than any mass market financial product that I am aware of and we don't allow many of the structures which are used in Europe," says Mark Roberts, director of research and development for Russell ETFs.

"ETFs [in the US] are generally prohibited from holding any kind of derivative. When somebody says we need more regulation I would be cautious to say that is true in the US." However, he supports BlackRock's call for greater transparency.

Roberts questions how cross-market standards would be possible when each market has its own different characteristics. "Ucits is the closest we have seen globally to a uniform set of regulations across sovereign nations," he says.

"Many markets in Asia will also validate Ucits as an important regulatory construct but they all maintain a sovereign trump card on Ucits. If it is at odds with any local regulation, the local regulation takes precedence. Fund structures are locally regulated entities."

iShares notes that each country has its own nuances and says that it plans to release recommendations specifically for the European market in the next couple of weeks.