BIS accuses ETFs of 'systemic risks'

The bank's Market structures and systemic risks of ETFs said the recent experience of structured finance markets, where complex products and liquidity risks prompted fire sales, shows how ETFs could cause systemic risks. Although the report said increased competition in the industry with the advent of ETFs is driving down prices and expanding choice for investors, it maintains there are significant downsides. It added: "These benefits may come at a cost, the cost being increased risk to financial market stability." BIS said synthetic structures are often employed to minimise tracki...