BlackRock's Deborah Fuhr has called for greater scrutiny of the different exchange-traded products coming to market, following a number of regulator warnings.
Over the last two weeks, the Financial Stability Board, the International Monetary Fund and the Board of International Settlements have all warned of the increasing complexity of ETPs and the speed of new products being issued.
The reports highlight swap-based funds, the use of securities lending, and potential liquidity risks.
Fuhr, Blackrock's global head of ETF research and implementation strategy, said: "A greater concern for me is the practice of many to call products that are not funds, ETFs."
She said the growing array of notes, partnerships, grantor trusts and commodity pools, variously termed ETNs, ETCs, ETVs and ETPs, are often confused with ETFs despite carrying very different counterparty and tax implications.
With regards to the regulators, Fuhr said their concern is the systemic risks posed by in-house synthetic ETFs, where an investment bank acts as both issuer and derivative counterparty, and "to a lesser extent securities lending".
Fuhr said the move to synthetic ETFs has changed the level of transparency on both costs and holdings in the products.
She claimed the number of brokers who are authorised to create and redeem the products is typically much fewer than with physically-backed ETFs.
Fuhr also demanded greater transparency around ETF trading, arguing that the second instalment of Mifid should require all ETF trades to be reported and provide for a consolidated tape.
She said: "This will provide a greater level of price discovery, tighter spreads and give investors better transparency into the real secondary liquidity in ETFs."
Open Banking and budgeting tools
Senior Managers & Certification Regime
DWP white paper - reaction
Fourth anniversary of pension freedom