Synthetic ETFs – an efficient way to use modern financial technology to do something useful for investors or a sinister investment banking kinda plot to cream off extra revenue from naive investors who just want to track an index?
In Monday’s FTfm, former Eurizon chief executive Francis Candylaftis called for these evil instruments to be cast into the outer darkness. This sparked a thoughtful explanation by FT Alphaville of precisely where the problem might lie (hint – it’s about the bit where you need collateral), using db x-trackers’ own diagram of how it all works.
Then blogger Andrew Clavell picked up the theme, suggesting a much firmer regulatory hand on the collateral would solve the problem.
Does anyone else have any suggestions?
One meeting to watch out for today is the sustainable stock exchanges event in New York, hosted by several United Nations’ bodies including the the UN Principles for Responsible Investment.
The aim of the gathering is to take stock of how the world’s exchanges can work together with investors, regulators and companies to increase corporate transparency and encourage responsible long-term investing.
This will involve tackling environmental, social and corporate governance issues. Eiris, the Ethical Investment Research Services, says one of the key drivers will be to include ESG disclosure into listing rules and corporate governance standards.
Paul Abberley, chief executive of Aviva Investors London says little support from listing authorities “who play a crucial role in setting out what companies report to the market” has come so far.
Many present today will be hoping to discuss measures to encourage best practice among companies through sustainable indices. Some exchanges such as Johannesburg Stock Exchange Socially Responsible index or the Deutsche Borse Daxglobal Alternative Energy Index, and the Indonesian exchange have already done this but there is plenty of scope for others to follow.
Global stock exchanges are likely to hear some challenging calls to take action.