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Tags: blackrock | regulation | inverse | notes

BlackRock Urges More Regulation After Inverse Notes Collapse

BlackRock Urges More Regulation After Inverse Notes Collapse
(Alexey-Novikov/Dreamstime)

Tuesday, 06 February 2018 07:14 AM EST

BlackRock Inc., the world’s biggest asset manager, called for regulation that would clearly spell out the risks associated with inverse and leveraged exchange-traded products after the collapse of two notes linked to volatility.

Inverse and leveraged exchange-traded products don’t perform like exchange-traded funds under stress and regulators should acknowledge the difference, BlackRock said in a statement on Tuesday. BlackRock “strongly supports” a classification system that would label these ETPs differently than “plain vanilla” ETFs, the firm said.

BlackRock, which manages more than $6 trillion, is also the biggest provider of exchange-traded funds and does not offer inverse and leveraged exchange-traded products. The firm for years has been calling for better regulation of leveraged products, with Chief Executive Officer Laurence D. Fink saying in 2014 that such offerings have a structural problem that has the potential to “blow up” the industry.

Two inverse exchange-traded products tied to the Cboe Volatility Index tumbled after volatility spiked, prompting a trading halt. The two products were short volatility, a bet against equity turbulence that traders have been piling into for years. Another exchange-traded note, the Next Notes S&P500 VIX Short-Term Futures Inverse Daily Excess Return Index ETN, will be redeemed at a 96 percent discount, Nomura Europe Finance said.

© Copyright 2024 Bloomberg News. All rights reserved.


InvestingAnalysis
BlackRock Inc., the world’s biggest asset manager, called for regulation that would clearly spell out the risks associated with inverse and leveraged exchange-traded products after the collapse of two notes linked to volatility.
blackrock, regulation, inverse, notes
205
2018-14-06
Tuesday, 06 February 2018 07:14 AM
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