Exchange-traded funds (ETFs) have been at the heart of the growth seen in the broader Exchange-traded products (ETP) universe, by contributing to most investor demand, underlying asset growth and spurring innovation in ways previously unimagined. Having reached a mature state in Europe with over EUR 1.0 trillion of assets invested in January 2021, there is still ample room for ETF issuers to expand their offer to new strategies (active, factor) and asset classes (ESG, thematic, crypto-assets, to name a few).
From a regulatory perspective, the EU-wide adoption of a post-trade consolidated tape for equity-like products - such as ETFs - will be critical to further increase ETF liquidity, by overcoming the fragmented nature of European markets and by moving more trading onto “lit” venues. The integration of SFDR disclosure requirements and the integration of sustainability risk/principal adverse impact into the UCITS framework will have important repercussions for the launch of index products, while also redefining issuers’ relationships with index providers.
The industry welcomes the fact that IOSCO’s 2013 Principles remain relevant and appropriate and that no important gaps in the Principles have been identified. In the consultation report, we are pleased to see the resilience of the ETF structure being recognised, despite the severity of the March 2020 market correction and of more recent episodes, concluding that no ETF-specific structural issues have been identified as a cause for regulatory concern.
As the European trade association representing numerous ETF issuers, EFAMA welcomes the opportunity of this questionnaire to submit a few high-level considerations to the attention of Committee 5 member supervisors. Our inputs are intended to accompany the more detailed submissions of the several European ETF issuers our association represents, in view of informing the Committee’s future work around a possible review of IOSCO’s 2013 Principles for the Regulation of Exchange Traded Funds.
Our comment paper confutes the ECB study’s main findings by focusing on its two core areas, namely
liquidity and counterparty risks inherent to the structure and functioning of ETFs. A final section
considers the merits of further regulatory action addressed at the European ETF industry.
EFAMA has released today a new issue of its Market Insights series titled “UCITS ETFs: A growing market in volatile times”.
The industry welcomes the fact that IOSCO’s 2013 Principles remain relevant and appropriate and that no important gaps in the Principles have been identified. In the consultation report, we are pleased to see the resilience of the ETF structure being recognised, despite the severity of the March 2020 market correction and of more recent episodes, concluding that no ETF-specific structural issues have been identified as a cause for regulatory concern.
EFAMA has released its 2021 industry Fact Book.
The 2021 Fact Book provides an in-depth analysis of trends in the European fund industry, an extensive overview of the regulatory developments across 29 European countries and a wealth of data.
Through its ETF Task Force, EFAMA has produced an Investor Education Guide intended to draw out, in a simple form, the defining features for the three main types of ETPs (Exchange-traded products) listed across European markets. The association hopes this guide will primarily assist investors in having a clearer understanding of different ETPs and help investors appreciate the differences between them, especially from a risk and product complexity viewpoint.
