Industry bends ESMA's ear on ETFs - Morningstar
03 October 2011 London
Image: Shutterstock
The funds industry is weighing in on proposed guidelines for transparency by the European Securities and Markets Authority (ESMA) on ETF securities lending transactions, reports Morningstar.
ESMA have proposed guidelines for additional transparency on subjects such as collateral, index constituents and securities lending.
"On the topic of securities lending, it was argued that this is a very common practice within the financial industry and is not an ETF specific risk," reports Morningstar.
It added: "Stakeholders pointed out that mutual funds, like ETFs, also use derivatives and engage in securities lending. These funds tend to be far less transparent than most ETFs but no one is complaining about these practices, some [stakeholders] highlighted."
But securities lending markets are on the radar for regulatory scrutiny. In September, the Financial Stability Board (FSB) announced it would be looking into regulation of activities related to securities lending and repos, including possible measures on margins and haircuts. Policy recommendations are expected at the end of 2012.
The most pressing need expressed by the stakeholders present at the ESMA hearing, reports Morningstar, was clearer, more uniform definitions and regulations to help level the playing field for ETF providers and investors alike.
ESMA will now analyse feedback from the industry.
ESMA have proposed guidelines for additional transparency on subjects such as collateral, index constituents and securities lending.
"On the topic of securities lending, it was argued that this is a very common practice within the financial industry and is not an ETF specific risk," reports Morningstar.
It added: "Stakeholders pointed out that mutual funds, like ETFs, also use derivatives and engage in securities lending. These funds tend to be far less transparent than most ETFs but no one is complaining about these practices, some [stakeholders] highlighted."
But securities lending markets are on the radar for regulatory scrutiny. In September, the Financial Stability Board (FSB) announced it would be looking into regulation of activities related to securities lending and repos, including possible measures on margins and haircuts. Policy recommendations are expected at the end of 2012.
The most pressing need expressed by the stakeholders present at the ESMA hearing, reports Morningstar, was clearer, more uniform definitions and regulations to help level the playing field for ETF providers and investors alike.
ESMA will now analyse feedback from the industry.
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