Irish exchange-traded funds worth €287bn

The value of exchange-traded funds (ETFs) regulated in Ireland was more than €287bn by the end of last year and could grow to an estimated €732bn in the coming years, the Central Bank has said.

It comes as the regulator has sought the views via a discussion paper of market participants about the best ways of regulating the burgeoning industry to protect investors.

“The Central Bank believes it is essential that it is well placed to contribute to these kinds of discussions in a meaningful and impactful way,” the regulator said.

“Information and opinions gathered from respondents to this discussion paper will also support the Central Bank in continuing to authorise and effectively supervise ETFs in both the current environment and as the ETF industry develops further.”

It has established that the 688 of the Irish-based traded funds were worth more than €287bn and is the largest single concentration in Europe.

ETFs have exploded in popularity since the financial crisis.

There were now $3.4trn (€3.1trn) in ETF assets around the world, of which more than $542bn were regulated, including in Ireland.

“The first focus is on the unique primary dealing and secondary trading arrangements which are an inherent part of the design of ETFs,” the Central Bank said. “The discussion paper elaborates on a number of potential discussion points relating to this key feature of ETFs. It discusses the extent to which reliance can be placed on disclosure of facts concerning the ETFs’ arrangements to provide appropriate degrees of protection for investors and discusses how these dealing and trading arrangements are likely to operate in stressed market conditions.

“The second focus in on pushing forward the discussion on the assessment of the risks inherent in the ETF structure. The discussion paper looks at connectedness between authorised participants and other interested parties. It also looks at synthetic ETFs and, in particular at counterparty and collateral risk issues. As ETFs grow in popularity, the range of different types of ETFs is growing.

“The third focus of the paper is on some of these types of ETFs, notably leveraged and inverse ETFs, and active ETFs. The discussion of active ETFs highlights the debate on how to achieve the right level of transparency in relation to active ETFs.”


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