A coalition of leading asset managers is calling on exchanges to come up with standard classifications of exchange-traded products to help investors. Letters sent Thursday to the heads of Cboe, Nasdaq and the New York Stock Exchange asked them "to implement a solution that more accurately reflects the complexities, risks and structural features inherent in different types of ETPs."
Members of the industry-led coalition, including BlackRock, Charles Schwab Investment Management, Fidelity Investments, Invesco and State Street Global Advisors, manage 90% of the U.S. ETP market. The coalition has developed a naming convention to reflect the underlying strategies of the product: ETF for exchange-traded funds; ETN for exchange-traded notes; ETC for exchange-traded commodities; and ETI for exchange-traded instruments.
In September the SEC approved a new ETF rule without an ETP classification scheme but encouraged market participants to continue engaging with investors and exchanges on the issue.
"The investor engagement piece was probably the missing piece" at the time of the SEC rule-making, said Samara Cohen, co-head of iShares Global Markets and investments at BlackRock, in an interview. "The right system is the one most people will use in an industry that is increasingly becoming a Tower of Babel. It gets very complicated very quickly if you try to define everything," she said.
Nasdaq said in a statement that it "looks forward to working with the coalition and all our partners and clients on an industrywide effort to make our financial markets more transparent and accessible."
A Cboe Global Markets spokeswoman said in a statement that "Cboe Global Markets believes a greater general understanding and transparency of ETPs benefits investors. The proposed ETP classification structure merits thoughtful industry discussion, and Cboe welcomes a broad dialogue among all industry participants to discuss how we may collectively increase investor education and understanding."
