BlackRock welcomes Esma ETF guidelines
BlackRock has welcomed new European guidance for exchange-traded fund (ETF) providers in spite of the potential regulatory burden the proposals may introduce.
he European Securities and Markets Association (Esma) has called for providers to clearly label ETFs that are compliant with Ucits rules for retail products, which means including the phrase “Ucits ETF” in the fund’s name.
ETF providers must also make it clear to investors when their products engage in securities lending, which involves loaning stocks to other traders for a fee, usually for the purposes of short selling.
In addition, any Ucits fund that tracks an index, including both ETFs and passively managed unit trusts, have to ensure the indices being tracked “respect strict criteria regarding, inter alia, the rebalancing frequency and their diversification”.
Joe Linhares, head of Europe, the Middle East and Africa at BlackRock’s ETF arm iShares, said: “These guidelines represent a positive step towards ensuring investors better understand the risks and attributes associated with exchange-traded products.
“We are committed to working with Esma, and its individual national regulators, to continually raise the standard of practices in place across the industry.”
However, Mr Linhares said Esma should also make investors aware of the risks, as well as the benefits, of securities lending to ETFs.
Steven Maijoor, chair of Esma, said the measures would “increase the level and the quality” of information available to investors.
ETFs have been under scrutiny by national and international regulators for the past three years amid concerns over whether investors and advisers fully understand how they work.