Debate on ETF regulation continues; FTSE expands index data services

Over-the-counter provides news and views of who is doing what in the ETF market.

The debate on future regulation of the ETF market has taken another turn and providers are divided on how best to move forward.

BlackRock - which owns ETF provider iShares - put out a notice last week, calling for greater transparency and consistent regulation in the global ETF market.

Responses have varied. European provider Source has supported BlackRock's call. US ETF provider Russell, meanwhile, has said that the US market is already heavily regulated and it does not need further rules for ETFs.

Most of the recent calls for tougher regulation have centred on the European market and it is the European Securities and Markets Authority (Esma) which has pressed ahead with releasing a discussion on future regulation.

European providers, while agreeing that greater transparency would be good for the industry, always argues that it is already highly regulated.

Russell Investments points to the fact that in the US, most ETFs are physically-backed so the structural debate is not a factor. But there were warnings a couple of years ago from Finra about retail use of leveraged and inverse ETFs, which do use derivatives.

The SEC has put a temporary halt on new 1940 Act funds (including ETFs) which make use of derivatives.

Most ETF investors in Europe (around 80%) are institutions and swaps are often used to provide vanilla exposures, whereas in the US (where the split is roughly 50/50) concerns about synthetic ETFs have centred on retail use of more complex, leveraged or inverse ETFs.

Which comes back to another argument put forward by other members of the ETF industry; ETFs are just a wrapper, it is the strategy they track which can be complex.

This may be reflected in European regulations if under Mifid II, certain exposures offered by Ucits funds are no longer classed as automatically non-complex.

The revised Mifid proposals are expected next week.

FTSE has introduced online access to its All-World Index Series Monthly Reviews as part of an expansion of it index data services.

The reviews are designed to provide institutional investors with comprehensive month-end data on the index series, which tracks more than 2,800 large and mid-cap stocks from developed and emerging markets. This represents more than 95% of the world's total equity market capitalisation, according to FTSE.

The reviews include data on historical performance, index performance, regional and country stock levels and dividend data. They are now available online for professional investors.