Aussie ETFs simple compared to overseas

Australia’s young exchange-traded fund (ETF) market and stringent regulatory system are keeping Australia’s ETFs simple and straightforward in comparison to their overseas counterparts, according to head of iShares Australia, Mark Oliver.

Oliver said the majority of ETFs listed on the Australian Securities Exchange (ASX) were based on the traditional structure involving physical stocks, in comparison to more complex ETF structures such as derivatives-based, leveraged and inverse products trading in some overseas countries.

“It is encouraging that [the Australian Securities and Investments Commission], [the Reserve Bank of Australia] and ASX are applying close scrutiny to Australia’s ETF industry, with particular emphasis on transparency and liquidity, as more providers and different types of ETFs enter the market,” Oliver said.

“Being one of the younger ETF markets, Australia has the benefit of learning from overseas markets in terms of regulation-setting and product structures,” he said.

According to Oliver, these products have been trading on the ASX for a decade and almost all were built on the original and tested model.

However, he warned the investors would still need to do their homework, especially as more ETFs enter the market.

There are currently 50 ETFs trading on the ASX.