ETFs: creator of risk or choice?

Author: | Published: 22 Feb 2016

High-frequency trading (HFT) firms could spare a little empathy for the exchange-traded fund (ETF) world. In 2014, those overseeing the major finance centres targeted the clandestine world of HFT, concerned that the algorithms essentially rigged markets against other investors. Two months in, and it seems 2016 could be characterised by the battle between those who do and don't understand the nuances of this year's hottest product – ETFs.

A decade after Wall Street popularised them as a way to stimulate liquidity in slow markets, ETFs are becoming a worldwide smash. As at the end of January, according to consultancy ETFGI, the exchange-traded products family – of which ETFs account for the majority – totalled $2.85 trillion of assets and 11,895 listings, stretching 277 providers and 64 exchanges. Volumes have grown exponentially, and they are tipped to continue. A recent EY survey of issuers managing 86% of global ETF assets concluded that...