BlackRock Iberia head urges greater regulation for ETFs
Exchange-traded funds (ETFs) should be more transparent and more strictly regulated to improve market safety, according to Armando Senra, managing director at BlackRock Iberia.
Lack of clarity and information about ETFs are serious problems for investors that need to be addressed, said Senra, cited by Spanish online news service Funds People. Various listed products are included within ETFs and the differences between these instruments should always be explained clearly as not all are fit for every investor.
Earlier this month, BlackRock urged international regulators to tighten regulation covering the ETF market. When first introduced, ETFs brought investors new levels of transparency and disclosure among other benefits , but increasingly complex ETFs and related products have sometimes failed to maintain that standard and have introduced new risks, BlackRock said in a market note.
Senra said the company has proposed a series of reforms and policy recommendations to improve the flow of information and transparency in the ETF market. Blackrock welcomes the regulators current focus on ETFs and supports the adoption of uniform standards on labelling, transparency, disclosure as these would reduce systemic risk, improve investor protection and help ensure that investors understand precisely the risks and attributes of the instruments they are purchasing.
“CDO structured products in 2005 were understandable, but they have turned into something incomprehensible,” Senra said.
Regulation should ensure that the information about what is included in a quoted fund is clear and understandable for investors. “In many cases, a client does not understand what an inverse product is”, he said. Regulation should require clarity and continuous information on all the positions included in a fund’s portfolios.