The Central Bank of Ireland ("Central Bank") published a discussion paper (the "Discussion Paper") on exchange traded funds ("ETFs") yesterday, which considers a wide range of topics of relevance to ETF providers, servicers and users. The primary purpose of the Discussion Paper is to facilitate engagement by the Central Bank with industry participants in relation to their views on key areas of importance to ETFs, and we understand that it should be seen as an information gathering exercise.
The Central Bank has advised that it has no set outcome in mind from the Discussion Paper and that no amendments to their existing rules or guidance in relation to the regulation of ETFs are being proposed directly on foot of the Discussion Paper. Equally, the Central Bank has highlighted that just because they have addressed a potential risk in the Discussion Paper, it should not be understood as meaning that they have concluded that this is a risk which requires regulatory action. These two elements are reflected in the open nature of the specific questions posed in the Discussion Paper and that respondents are also encouraged to offer their views on any of the other matters addressed in the Discussion Paper.
Areas Covered by the Discussion Paper
The Discussion Paper considers three overarching themes:
(1) Investor expectations, through looking at what it means to be an end investor in an ETF and whether such investors understand the investment they are making;
(2) Liquidity, through examining the functioning of the secondary market and the role of authorised participants and market makers in supporting the liquidity of the ETF shares themselves and also through looking at the possibility of ETFs affecting the liquidity of the markets in which they invest; and
(3) Increasing popularity, through questioning whether the growth in use and assets of ETFs and their adoption by new types of investors raise questions which should be considered by regulators and industry.
Responses to the Discussion Paper
The Central Bank has requested responses to the Discussion Paper by 11 August 2017.
Matheson intends to respond to the Discussion Paper and we would welcome any feedback which you would like to provide for inclusion in this response. We encourage you to respond to the Central Bank (either directly or as part of our response), as we believe that the Discussion Paper presents an excellent opportunity to contribute to the...