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BlackRock Position Paper on ETFs

BlackRock has recently issued a paper calling for greater transparency and consistent regulation of ETFs.  The paper summarizes recent concerns that have been raised about ETFs, including their use of synthetic strategies, their lack of transparency on holdings and fees and their exposure to counterparty risk. BlackRock also suggests regulatory and market reforms aimed at improving the marketplace for ETFs, including:

  • Establishing a global standard classification system with clear labels to differentiate between products. The recommended classifications would be Exchange Traded Fund, Exchange Traded Note, Exchange Traded Commodity and Exchange Traded Instrument. Funds with daily leverage and inverse strategies would not be permitted to use the ETF label;
  • Requiring frequent and timely disclosure for all ETF holdings and financial exposures;
  • Establishing clear standards for diversifying counterparties and quality of collateral in an ETF portfolio;
  • Requiring disclosure of all fees and costs paid by an ETF, including those to counterparties; and
  • Establishing universal and global trade reporting for all equity trades, including ETFs.