Although the festive season of good cheer is upon us, there is a fair bit of scrooge-like negativity against ETFs arising. Rather than acknowledging the many merits of these still relatively new funds, a few Ebenezers are saying "Bah! Humbug!" and are condemning ETFs as the cause of market instability.
A report recently released by the Kauffman Foundation claims ETFs hinder initial public offerings, are changing the markets by setting stock prices and pose systemic risk which could spark another “flash crash.” However, the report’s scattergun approach to blaming ETFs for an incoherent range of issues is inherently flawed. Many industry experts, including market makers and product providers, state that the report is fundamentally incorrect in its description of the creation-redemption process – as well as in a number of other areas – undermining the basis of its argument. One of the ...
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