ETF Discussion

22 Pages Posted: 5 Oct 2017

Date Written: August 7, 2017

Abstract

Submitted to the Central Bank of Ireland on August 7, 2017 in response to “Discussion Paper 6 – Exchange Traded Funds” released May 15, 2017.

The available operational metrics indicate exchange traded securities, ETFs, are not as efficient and effective as the Dow Jones Industrial Average Index group of 30 listed equity securities in converting market liquidity into actual liquidity to match settlement liquidity obligations.

The operational data available from the U.S. Securities and Exchange Commission (SEC)/ National Securities Clearing Corporation (NSCC) data omits fails-to-deliver data from ex-clearing, internalized, or “special securities transactions” operational processes. The SEC/NSCC data can only serve as a “canary in the coal mine.” The available operational data history across ETFs suggests a series of operational risk points for consideration which are highlighted in the paper.

Keywords: exchange traded funds, ETFs, liquidity, volatility, operational risk, concentration

JEL Classification: G11, G12, G14, G15

Suggested Citation

Sommers, Fred, ETF Discussion (August 7, 2017). Available at SSRN: https://ssrn.com/abstract=3047992 or http://dx.doi.org/10.2139/ssrn.3047992

Fred Sommers (Contact Author)

OpsRisk Limited ( email )

Toronto, Ontario
Canada

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