Global securities regulators are proposing a new set of principles for regulating exchange-traded funds.
The technical committee of the International Organization of Securities Commissions Wednesday published a new paper for consultation, which examines the key regulatory issues regarding ETFs, and proposes 15 regulatory principles for dealing with those issues.
“The aim of this report is to outline principles against which both the industry and regulators can assess the quality of regulation and industry practices concerning ETFs. Generally, these principles reflect a level of common approach and are a practical guide for regulators and industry practitioners,” it says.
IOSCO notes that substantial growth in ETF assets has drawn the attention of regulators who are concerned about the potential impact of ETFs on investors and the marketplace. To address these concerns, its report proposes principles that deal with ETF classification and disclosure, the marketing and sale of ETF shares, and the structuring of ETFs.
The report also examines the potential broader risks to financial stability arising from ETFs, including the risks arising on secondary markets (the risk of shock transmission), and market integrity (the risk of misconduct); and it proposes a principle that addresses the risk of liquidity shocks and transmission across correlated markets.