Gordon Rose, ETF analyst at Morningstar: “The big regulatory shock that many awaited has not happened. In particular, ESMA has not issued any recommendations in the way of classifying ETFs between complex and non-complex products, something that would have had implications for all funds regulated under the Undertakings for Collective Investment in Transferable Securities Directive and not just ETFs.”
The guidelines, outlined in a consultation paper, come amid a row in the industry over the complexity and risk of some ETF structures, which market participants claim carry counterparty exposure that is not transparent to the end investor. Some ETF providers have argued that synthetic ETFs, which use an over-the-counter derivative or swap to guarantee the return on the underlying product, expose investors to the swap counterparty.
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