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Bloomberg Ignores the Evidence on Bond ETFs

By Mike McNamee

September 26, 2014

In response to “Pimco ETF Probe Spotlighting $270 Billion Market Vexing FSB,” we posted the following comment on Bloomberg News’ website:

As this story notes, ICI's empirical research shows that the vast majority of ETF market activity does not trigger activity in the underlying markets. It is not correct to assert that every bond ETF trade requires someone to buy or sell bonds. That should help allay concerns about any systemic effects of ETF trading.

More generally, however, the sweeping assertion that “trading in ETFs is fueling price swings that may become more severe in a downturn” is not substantiated in the story. There is no data—not even an anecdote—in the story demonstrating that ETF trading has driven prices in underlying bond markets. In fact, the vast majority of research on collective investments like ETFs shows just the opposite—fund investors tend to respond after prices have moved in the underlying markets, as we point out here and here.

We also have prepared a careful study demonstrating the statistical and analytic errors in the “taper tantrum” paper that this article cites at length.

Debates over financial stability need to be informed by data and research. At ICI, we're doing our part: check out www.ici.org/financialstability.

Mike McNamee is ICI’s chief public communications officer.

TOPICS: Bond FundBondsExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityFund RegulationInterest RateInternationalTrading

Why Regulated Funds Are a Relatively Stable Source of Foreign Investment for Emerging Economies

By Chris Plantier

September 26, 2014

The press and policymakers focus a great deal of attention on flows to U.S. and European regulated mutual funds and exchange-traded funds (ETFs), in part because these funds are perhaps the most easily observed and readily measured players in capital markets.

Read more…

TOPICS: EuropeFinancial MarketsFinancial StabilityFund RegulationICI GlobalInternationalMutual Fund

A Look Inside ETFs and ETF Trading

By Rochelle Antoniewicz and Jane Heinrichs

September 23, 2014

Investors in exchange-traded funds (ETFs) are trading shares with each other far more than they are turning to authorized participants to create or redeem shares.

Read more…

TOPICS: Exchange-Traded FundsFinancial MarketsFinancial StabilityMutual FundTrading

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