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"Do complex ETFs pose a systemic financial risk? In certain circumstances, they might. The biggest danger lies with synthetic ETFs. Use of derivatives can create extended chains of intermediation: Who would owe what to whom in various contingencies might not be obvious. Up to now, synthetic ETFs have been concentrated in Europe. International regulators have drawn attention to the problem but haven’t done much to address it. Innovation is good, but in finance, you can have too much of a good thing. ETFs should be high on regulators’ list of unfinished business."
"Do complex ETFs pose a systemic financial risk? In certain circumstances, they might. The biggest danger lies with synthetic ETFs. Use of derivatives can create extended chains of intermediation: Who would owe what to whom in various contingencies might not be obvious. Up to now, synthetic ETFs have been concentrated in Europe. International regulators have drawn attention to the problem but haven’t done much to address it. Innovation is good, but in finance, you can have too much of a good thing. ETFs should be high on regulators’ list of unfinished business."
by InformedTrades via InformedTrades
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