Deborah Fuhr: understanding the counterparty risks-continued

March 29, 2012--We have seen over the past two years a significant increase in regulatory concerns due to the rapid growth in exchange traded funds (ETFs) and other types of exchange traded products (ETPs).
Broadly, those concerns may be categorised under four headings. First, ETFs that use derivatives to replicate their index and especially so where the product provider and the derivative counterpart are part of the same corporate group. Second, the risks associated with securities lending, which is more typically confined to physically replicating funds, and third, the increased complexity of products and exposures, especially leveraged and inverse offerings.

Fourth, and to a significantly lesser emphasis, the risks associated with unregulated exchange traded products.

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Source: CityWire

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