BlackRock plead more time over ETFs from ESMA
02 April 2012 London
Image: Shutterstock
BlackRock argued that ESMA’s new guidelines overly focus on securities lending, and is asking the regulatory body to delay their 30 March deadline.
The asset management firm stated it is unjust that a synthetic ETF provider would have to pay for a swap when entering a derivative agreement due to costs being beneficial for its investment banking parent. BlackRock estimated that about 40 percent of European ETFs are synthetic.
"If you have a single counterparty that is your affiliate there is not really the same incentive to ensure that the swap spread is competitive, and that represents a potential conflict of interest," said Tim Lubans, director of legal and compliance at BlackRock.
BlackRock asserts that regulators such as ESMA should restrict ETF providers from only using one counterparty that is affiliated to a parent company, and instead should be forced to use multiple counterparties.
ESMA also stated in their draft guidelines that ETF providers must guarantee any received collateral from non-lent assets must fulfill UCITS diversification criteria.
“Good credit quality and liquidity of the collateral are much more important than diversification in the context of the objective that collateral rules have,” responded Stefan Kaiser, director at iShares.
BlackRock concluded by suggesting an extra 12 months to put any proposed changes into effect.
The asset management firm stated it is unjust that a synthetic ETF provider would have to pay for a swap when entering a derivative agreement due to costs being beneficial for its investment banking parent. BlackRock estimated that about 40 percent of European ETFs are synthetic.
"If you have a single counterparty that is your affiliate there is not really the same incentive to ensure that the swap spread is competitive, and that represents a potential conflict of interest," said Tim Lubans, director of legal and compliance at BlackRock.
BlackRock asserts that regulators such as ESMA should restrict ETF providers from only using one counterparty that is affiliated to a parent company, and instead should be forced to use multiple counterparties.
ESMA also stated in their draft guidelines that ETF providers must guarantee any received collateral from non-lent assets must fulfill UCITS diversification criteria.
“Good credit quality and liquidity of the collateral are much more important than diversification in the context of the objective that collateral rules have,” responded Stefan Kaiser, director at iShares.
BlackRock concluded by suggesting an extra 12 months to put any proposed changes into effect.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
