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IOSCO’s call for transparency and disclosure for ETFs and ETPs, as ETPs become the gold standard for the investment fund industry

Saturday 27th July '13

IOSCO (the INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS) issued its report this week regarding the guiding principles for ETFs and ETPs.

The nine guiding principles focus on the same key principles as the recent conclusions by ESMA and EBA looking into benchmarking after the recent LIBOR scandal – disclosure, transparency and conflicts of interest. In addition, there was also a focus on counterparty risk and collateral management techniques.
Boost ETP generally believes that, European ETFs and ETPs are the gold standard of the mutual fund industry. Because ETFs and ETPs are exchange traded and thus highly visible and accessible, there has been a focus on these products, even though ETFs and ETPs make up around 5% of the investment fund market. As a result, ETFs and ETPs are leading the way with transparency and disclosure.
Boost ETP wholeheartedly agrees with the release of IOSCO’s new principles which are consistent with Boost’s ETP structure and core beliefs:
  • Boost’s website and Prospectus clearly describes the indices it uses and how they work, the fees deducted from the Price on a daily basis, the counterparties it uses, the collateral management techniques and collateral holdings
  • Education. Boost aims to ensure that all its products can be easily understood by those considering the use of its ETPs, especially those which involve Leverage or Shorting strategies
  • Conflicts of Interest. By using independent counterparties, market makers, collateral manager, trustee, and indices, Boost minimises any potential conflicts of interest. 
Most of the current ETF and ETP operating models, such as the bank-owned ETF businesses, may have to change dramatically in order to meet the highest levels intended by the IOSCO principles.
Nik Bienkowski, Co-CEO of BOOST ETP, commented:
“Boost agrees with the new principles proposed by the world’s leading financial bodies and regulators for more transparency, disclosure and minimisation of conflicts of interest. This is difficult to do when an issuer is the provider of all services to its own ETFs and ETPs, which is the case for many of the European providers. By being independent, and a new entrant, Boost ETP has been able to innovate a highly practical and robust structure which ensures alignment with investors interests.

Boost recently launched a platform of short and leveraged ETPs on the London Stock Exchange. As a result of our transparency, independence and risk reduction techniques, investors are looking to transform the way they invest, by moving towards ETFs and ETPs. With the effects of RDR still to be felt, Boost predicts the next wave of ETP growth is just around the corner.”