EU regulators target “black box” ETFs

Spurred on by the recent UBS trading scandal, the European Securities and Markets Authority is holding a public meeting in Paris on Monday to discuss reforms based on a July consultation paper that suggested regulators are ready to rewrite the rules governing ETFs and structured UCITS.

“Retail investors need to understand the differences between traditional ETFs and more risky synthetic ETFs so they can make informed decisions. We can take a sledgehammer to this market or we can try to do this right,” said Syed Kamall, a British Conservative MEP.

ETF providers see the regulatory push as misguided. “Regulatory intervention should happen only where there is a clear market failure, but we see no evidence of this,” said Julie Patterson, director of the UK Investment Management Association.

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