Home Articles - Market News ASIC releases exchange traded funds report
ASIC releases exchange traded funds report PDF Print E-mail

ASIC ASIC released a report on ETFs today which outlines how this growing industry is regulated in Australia and the impact of proposed international principles to address concerns by overseas regulators.

Report 282 Regulation of Exchange Traded Funds ( REP 282), explains ASIC’s current understanding about the operation of exchange traded funds (ETFs) and ongoing work in this area.

ETFs can provide a convenient and low-cost way for investors to diversify and receive returns close to the performance of market indexes or other assets, often with lower fees than traditional managed funds. But while standard, ‘physical’ ETFs generally invest in the underlying investments they are designed to track, ‘synthetic’ ETFs also use derivatives, such as swap agreements, to achieve similar outcomes. Benefits to investors of synthetic ETFs may include access to new and varied asset classes and low performance ‘tracking error’. Downsides include increased complexity and counterparty risk.

ASIC Commissioner Greg Tanzer said: ‘Identifying the regulatory risks arising from potentially complex financial products, such as ETFs, is part of ASIC’s role to promote confident and informed investors and fair and efficient financial markets. ASIC has a range of regulatory powers relating to ETFs that help to promote these objectives.’

The ETF industry attracts significant funds. As at 2012, approximately $4.3 billion, based on ASX data, is invested in ETFs in Australia, with a high level of retail participation (50-75% across most types of ETFs). The ETF industry continues to expand at a rapid rate in Australia, with new types of ETFs and new issuers continuing to emerge.

ASIC has been monitoring the ETF industry closely, which is consistent with the approach taken by regulators in other key jurisdictions. The report explains how the domestic regulatory framework covers proposed principles that the International Organisation of Securities Commissions (IOSCO) has issued for consultation.

ASIC works closely with its international counterparts on issues such as ETFs and has recently engaged with international consideration of complex retail investment products more broadly, with ASIC Chairman Greg Medcraft co-chairing the newly established IOSCO Task Force on Unregulated Markets and Products’ Working Group on Retail Structured Products.

‘The regulation of ETFs in Australia is in line with proposed international standards and reflects consideration of the issues identified in IOSCO’s consultation. Our view is supported by surveillance of current ETF issuers in Australia and discussions with industry participants,’ Mr Tanzer said.

‘In developing this report and considering how to use our powers, we have been involved in ongoing consultation with the ETF industry and will continue to liaise with the industry in the future, including with the ASX in relation to their rules on ETFs.

‘In addition we conducted surveillance visits on the current ETF issuers, and will continue to watch this area closely to help reduce some of the complex regulatory risks that continue to emerge.’

The report is intended for stakeholders in the ETF industry. Retail investors who are considering buying into ETFs can access ASIC’s comprehensive information on the MoneySmart website. This information about the risks of ETFs and what investors need to know before they invest is one of MoneySmart’s most popular pages about complex investments.

 

 
More articles :

» Trading Life - Stuart McPhee

Stuart McPhee shares his trading life.Stuart McPhee is a private trader. He has written a best-selling trading book, 'Trading in a Nutshell, 4th Edition' (www.tradinginanutshell.com) and presented at the New York, Los Angeles and LasVegas Traders Expos, at Traders Expos around Australia, and...

» Trading Tax - Nov/Dec 2012

Resident tax expert Adrian Raftery, aka ‘Mr Taxman’, answers readers’ most pressing trading tax questions.Q. I am completing my income tax return via eTax and am not sure whether foreign exchange trading losses are deductible against assessable income, or whether they fall under capital...

» Trading Life - Stephen Byrne

Stephen Byrne shares his trading life.Like many people, I left school not knowing what to do with myself. At that stage, the term ‘foreign exchange’ might have described the semester visits to our high school by French students. University was the next step, but two weeks of a law course made...

» Short-term trading strategies

Stephen Hogan shares his strategies for trading short-term opportunities in the current environment.For investing, I generally have a medium- to long-term mindset. That is important, because most of the accounts I manage are self-managed super funds. However, in the current environment, with a...

» Trading Tax Q&A - Sep/Oct 2012

Resident tax expert Adrian Raftery, aka ‘Mr Taxman’, answers readers’ most pressing trading tax questions.Q. I am starting professional trading and am wondering if it is more beneficial for tax purposes to have the trading account under a company name or my name? A. If you are planning on...

» Trading Life - Jessica Peletier

Jessica Peletier shares her trading life.I have to say, the timing for my grand entry to the world of trading could have used a little tweaking.  It was June 2008; and after being ‘educated’ by a wealth-creation home-study course, I decided the stock market was going to be my ticket to wealth,...

Add comment


Security code
Refresh

Home Articles - Market News ASIC releases exchange traded funds report

Readership Survey

Traders and investors, here's your chance to participate in the 2014 YTE Readership Survey.
The purpose of this survey is to learn more about the YTE readership and how we can improve the magazine. Click here to take part.

YTE Magazine Newsletter

Trial YTE for Free

Trial YTE for Free Click Here

Polls

Which financial products do you trade?
 

Internet Policy | Copyright 21st Century Media 2014 | Home | Make YTE my Homepage | Help | Site map

RocketTheme Joomla Templates