Full Transparency for ETFs May Encourage Frontrunning, Vanguard Chief Warns

According to a Financial Times report, Vanguard CEO Tim Buckley is concerned that speculators may front-run ETF providers who are forced by regulators to disclose their holdings on a daily basis. Buckley’s comments come as the industry waits for the SEC to release an ETF rule to replace the current system of exemptive relief for ETF launches. According to the report, Vanguard currently discloses its portfolio holdings with a one-month lag. Actively managed ETFs must disclose their holdings at the end of each trading day -- a condition for exemptive relief. There are several pending applications seeking relief for actively managed ETFs that will not require daily holdings disclosure and the SEC proposed a rule in 2008 that would have required all ETFs to publish all portfolio holdings daily. Buckley told media representatives that Vanguard does not want full transparency for ETFs, adding that publicizing an ETF’s daily holdings and required portfolio adjustments can increase opportunities for predatory behavior. In a separate interview with Bloomberg, Buckley discussed a range of topics including market risk, future volatility and the competitive atmosphere in active management.