IMF echoes super-regulator's ETF concerns

The IMF's warnings, made in its latest Global Financial Stability paper, centre on the risks involved with synthetic replication and securities lending. They echo similar comments made recently by the FSB and the FSA. The report acknowledges these "enhancements" reduce costs, but increase counterparty and liquidity risks. Part of the IMF's unease stems from the size of the synthetic ETF market in Europe, which it argues increases the potential for contagion. The report says: "The gross exposures of these funds raises some concerns on whether current restrictions on derivative co...